dynamic savings decisions in agricultural environments with incomplete markets we develop a methodology for examining savings behavior in rural areas of developing countries that explicitly incorporates the sequential decision process in agriculture the approach is used to examine the relative importance of alternative forms of savings in the presence and absence of formal financial intermediaries our results based on stage specific panel data from pakistan provide evidence that the presence of financial intermediaries importantly influences the use of formal savings and transfers for income smoothing we also find that there are significant biases in evaluations of the savings income relationship that are inattentive to the within year dynamics of agricultural production

shocking the eurozone abstract in this paper the monetary transmission mechanism within the european monetary union is investigated the impulse response functions and forecast error variance decompositions of a structural vector error correction model svecm are compared with those of a new keynesian theoretical model the identifying restrictions of the svecm are directly derived from the theoretical model two permanent shocks are identified one having only nominal and one having only real effects the three transitory shocks comprise a short term interest rate shock an aggregate demand shock and a money demand shock the main conclusions are that permanently reducing the inflation objective depresses output in the first year but has no real effects in the long run regarding output variability the results indicate that aggregate demand shocks are most important during the first year after which aggregate supply shocks dominate

evidence on the cross country transmission of monetary shocks the international transmission of monetary shocks between the us and canada is explored focusing on real variables such as consumption investment employment and the bilateral trade balance along with measures of us and canadian money the empirical analysis examines the impact of a monetary shock in one country on real activity in both countries the long run analysis provides evidence of cointegration among the variables and suggests that money plays an important role in the equilibrium relationships between the two countries variance decompositions and impulse response functions reveal interesting avenues of real transmission in the short run the short run analysis provides strong evidence that us monetary shocks affect real activity in both the usa and canada the analysis also indicates that canadian monetary disturbances affect canadian and us real activity and that many of these effects are similar in magnitude to the effects of us monetary shocks the importance of the nominal exchange rate

on the low frequency relationship between public deficits and inflation summary we estimate the low frequency relationship between fiscal deficits and inflation and pay special attention to its potential time variation by estimating a time varying vector autoregression model for us data from 1900 to 2011 we find the strongest relationship neither in times of crisis nor in times of high public deficits but from the mid 1960s up to 1980 employing a structural decomposition of the low frequency relationship and further narrative evidence we interpret our results such that the low frequency relationship between fiscal deficits and inflation is strongly related to the conduct of monetary policy and its interaction with fiscal policy after world war ii copyright 2015 john wiley sons ltd

interpreting the macroeconomic time series facts the effects of monetary policy existing theory and evidence on the effects of monetary policy are reviewed substantial room for disagreement among economists remains new evidence based on multivariate time series studies of several countries is presented while certain patterns in the data consistent with effective monetary policy are strikingly similar across countries others particularly the tendency of interest rate increases to predict high inflation are harder to reconcile with effective monetary policy

measuring state dependence in individual poverty histories when there is feedback to employment status and household composition this paper argues that the assumption of strict exogeneity which is usually invoked in estimating models of state dependence with unobserved heterogeneity is violated in the poverty context as important variables determining contemporaneous poverty status in particular employment status and household composition are likely to be influenced by past poverty outcomes therefore a model of state dependence is developed that explicitly allows for possible feedback effects from past poverty to future employment and household composition outcomes empirical results based on data from the german socio economic panel gsoep suggest that there are indeed such feedback effects and that failure to take them into account may lead to biased estimates of the state dependence effect copyright 2009 john wiley sons ltd

productivity shocks and real exchange rates abstract previous studies have concluded that productivity shocks have negligible effects on real exchange rate fluctuations this paper shows that when long run equilibrium relationships between real exchange rate levels and fundamental variables are taken into account relative productivity shocks account for most of the long run movements in the real exchange rates this can be interpreted as empirical support for the balassa 1964 journal of political economy 72 584 596 and samuelson 1964 review of economics and statistics 46 145 154 model where differences in relative productivity is the main source of long run deviations for purchasing power parity

on the failure of purchasing power parity for bilateral exchange rates after 1973 point estimates suggest mean reversion in real exchange rates however it still remains uncomfortable that models without any mean reversion are often compatible with data from the floating period studies with data over longer periods find mean reversion but at the cost of mixing in data from earlier exchange rate arrangements pooling the floating period data potentially mixes country pairs with and without mean reversion we examine tests for mean reversion for individual country pairs where greater power against close alternatives is gained through modeling other economic variables with the real exchange rate by increasing the power of the tests we find strong evidence of mean reversion

stochastic trends and economic fluctuations are business cycles mainly the result of permanent shocks to productivity this paper uses a long run restriction implied by a large class of real business cycle models identifying permanent productivity shocks as shocks to the common stochastic trend in output consumption and investment to provide new evidence on this question econometric tests indicate that this common stochastic trend cointegration implication is consistent with postwar u s data however in systems with nominal variables the estimates of this common stochastic trend indicate that permanent productivity shocks typically explain less than half of the business cycle variability in output consumption and investment copyright 1991 by american economic association

how well does sticky information explain the dynamics of inflation output and real wages abstract this paper finds that a model with sticky information is less successful than a standard model featuring nominal rigidities inflation indexation and habits in generating the dynamics triggered by technology shocks as estimated by a vector autoregression using u s macroeconomic data the real wage responses after a permanent increase in productivity clearly favor the standard model the sticky information model fails to replicate the observed inertial response in the real wage whereas the standard model relies on inflation indexation in wage setting to achieve a better fit the two models are however statistically equivalent after a shock in monetary policy

energy poverty in rural bangladesh energy poverty is a well established concept among energy and development specialists international development organizations frequently cite energy poverty alleviation as a necessary condition to reduce income poverty several approaches used to measure energy poverty over the past 20 years have defined the energy poverty line as the minimum quantity of physical energy needed to perform such basic tasks as cooking and lighting this paper uses a demand based approach to define the energy poverty line as the threshold point at which energy consumption begins to rise with increases in household income at or below this threshold point households consume a bare minimum level of energy and should be considered energy poor this approach was applied using cross sectional data from a comprehensive 2004 household survey representative of rural bangladesh the findings suggest that some 58 percent of rural households in bangladesh are energy poor versus 45 percent that are income poor the findings also suggest that policies to support rural electrification and greater use of improved biomass stoves might play a significant role in reducing energy poverty

the persistence of subjective poverty in urban ethiopia using panel data spanning 15 years this paper investigates the persistence and correlates of subjective and consumption poverty in urban ethiopia despite the decline in consumption poverty in recent years which has been linked to rapid economic growth subjective poverty has remained largely unchanged dynamic probit regression results show that households with a history of past poverty continue to perceive themselves as poor even if their material consumption improves our results also suggest that the relative economic position of households is a strong determinant of subjective poverty and having at least some type of employment reduces the likelihood that households will perceive themselves as poor even if they remain in objective poverty receiving remittances from abroad on the other hand does not reduce perceived poverty even if it raises material consumption we argue that any analysis to measure the impact of growth on welfare should encompass subjective measures as well

when did unsystematic monetary policy have an effect on inflation abstract an important stylized fact to emerge from var estimates is that exogenous monetary policy shocks also labelled unsystematic monetary policy have a delayed persistent hump shaped effect on inflation i argue that this empirical pattern is fragile in particular it disappears when one examines periods without large shifts in the level of inflation such as 1984 2005 an important consequence is that the hump shaped var estimated response of inflation is not appropriate to fit stylized models of the response of inflation around a stable steady state inflation level

curtailing the black box german banking groups in the transmission of monetary policy abstract the paper examines the role of portfolio decisions of german banking groups in the transmission of monetary policy a small econometric model is augmented with segregated bank balance sheet variables in order to study potentially different effects of tight money on these variables the results provide evidence for banks playing an active role in the transmission process and are beneficial for two fields of research the findings indicate sectoral differences of monetary policy in line with transmission models based on informational frictions in addition the results lend econometric support to the existence of close bank customer ties for certain banking groups in germany whereas large banks adjust their credit position markedly following a monetary shock the smaller savings banks and credit cooperatives seem to shield their customers from the brunt of a policy tightening

reconsidering monetary policy an empirical examination of the relationship between interest rates and nominal gdp growth in the u s u k germany and japan abstract the rate of interest the price of money is said to be a key policy tool economics has in general emphasised prices this theoretical bias results from the axiomatic deductive methodology centring on equilibrium without equilibrium quantity constraints are more important than prices in determining market outcomes in disequilibrium interest rates should be far less useful as policy variable and economics should be more concerned with quantities including resource constraints to investigate we test the received belief that lower interest rates result in higher growth and higher rates result in lower growth examining the relationship between 3 month and 10 year benchmark rates and nominal gdp growth over half a century in four of the five largest economies we find that interest rates follow gdp growth and are consistently positively correlated with growth if policy makers really aimed at setting rates consistent with a recovery they would need to raise them we conclude that conventional monetary policy as operated by central banks for the past half century is fundamentally flawed policy makers had better focus on the quantity variables that cause growth

multi country evidence on the behavior of purchasing power parity under the current float abstract using panel data for the united states and 22 other oecd countries for the current float this paper presents evidence that despite substantial short term perturbations purchasing power parity actually performed much better than commonly believed average rates of growth of real exchange rates over long horizons bear little relationship either to average rates of growth of nominal exchange rates or to average inflation differentials thus implying a close to one to one relation between average rates of growth of nominal exchange rates and average inflation differentials panel data variants of standard unit root tests suggest that the real exchange rates of these countries can be characterized as mean reverting

what moves and works broadening the consideration of energy poverty greater detail on the specific technological and planning challenges facing energy deprived developing economies is required to improve energy policy making and development assistance practice the current literature tends to highlight electricity services and to a lesser extent clean cooking this article calls for a closer look at mobility and mechanical power as essential energy services in addition to a refinement of the specific institutional arrangements needed to reduce energy poverty and deprivation this article augments and refines arguments made by morgan bazilian and his colleagues in their viewpoint more heat and light

a panel project on purchasing power parity mean reversion within and between countries abstract previous time series studies have shown evidence of mean reversion in real exchange rates deviations from purchasing power parity ppp appear to have half lives of approximately four years however the long samples required for statistical significance are unavailable for most currencies and are potentially inappropriate because of regime changes in this study we re examine deviations from ppp using a panel of 150 countries and 45 annual post wwii observations our panel shows strong evidence of mean reversion that is similar to that from long time series ppp deviations are eroded at a rate of approximately 15 annually i e their half life is around four years such findings can be masked in time series data but are relatively easy to find in cross sections

issues in measuring and modeling poverty economists have relied heavily on household incomes or expenditures normalized for differences in household specific prices and demographics in their research and policy advice related to poverty and inequality recognizing the conceptual and empirical problems that confound such measures does not mean that they should be ignored instead it indicates the need for supplementary measures to capture the missing items implementing a genuinely multidimensional approach will often make the welfare rankings of social states more difficult but that fact points to the nonrobustness of low dimensional rankings this may have its own policy ramifications with the possibility of correspondence between policy instruments and welfare objectives the model types used to understand the poverty and inequity determination processes will be affected not only will there be more dependent variables to consider but variables will have potentially complex relationships these relationships will often be hard to empirically disentangle despite richer integrated and longitudinal data sets such data open rich and relevant agenda for research into the dynamics of poverty along multiple dimensions a simultaneous attack on these issues from all three fronts measurement modeling and data offers hope of establishing a credible empirical foundation for public action in fighting poverty

long run purchasing power parity during the recent float abstract this paper examines the relevance of long run purchasing power parity ppp which allows for measurement errors during the recent floating exchange rate period previous empirical studies generally fail to find support for long run ppp over this period in this paper in this paper the cointegration property of exchange rates and prices is examined using maximum likelihood procedure and we find significant evidence favorable to long run ppp further tests for symmetry and proportionality indicate that these two conditions are not generally with the data the results support the hypothesis of long run ppp with measurement errors in prices

re examining long run purchasing power parity abstract our results complement the recent findings of real exchange rates as stationary processes applying a battery of unit root tests can be problematic since the tests are sensitive to the specifics of the time series process the novelty of our approach is in emphasizing the information content of the data to distinguish between the competing processes stationary and non stationary arima processes are fitted to the us uk real exchange rate series covering 134 years artificial data are generated and the small sample distributions of the chosen test statistics are computed under each of the two hypotheses the values of the actual sample statistics seem to come rather from the stationary than from the non stationary process

on the measurement of poverty official statistics in the united states and the united kingdom show a rise in poverty between the 1970 s and the 1980 s but scepticism has been expressed with regard to these findings in particular the methods employed in the measurement of poverty have been the subject of criticism this paper re examines three basic issues in measuring poverty the choice of the poverty line the index of poverty and the relation between poverty and inequality one general theme running through the paper is that there is a diversity of judgments which enter the measurement of poverty and that it is necessary to recognize these explicitly in the procedures adopted there is likely to be disagreement about the choice of poverty line affecting both its level and its structure in this situation we may only be able to make comparisons and not to measure differences and the comparisons may lead only to a partial rather than a complete ordering the first section of the paper discusses the stochastic dominance conditions which allow such comparisons illustrating their application by reference to data for the united states the choice of poverty measure has been the subject of an extensive literature and a variety of measures have been proposed in the second section of the paper a different approach is suggested considering a class of measures satisfying certain general properties and seeking conditions under which all members of the class which includes many of those proposed give the same ranking those sceptical about measures of poverty often assert that poverty and inequality are being confounded the third section of the paper distinguishes four different viewpoints and relates them to theories of justice and views of social welfare

stochastic trends and economic fluctuations in a small open economy in this paper we describe how restricted vector autoregressions can be employed to examine the sources of macroeconomic fluctuations we show how cointegration restrictions can be used to identify a var system with common stochastic trends subject to transitory and permanent changes in average growth and how we may investigate the system s responses to permanent shocks i e to innovations to the trends theoretical cointegration vectors are derived from a small open economy growth model for terms of trade real gdp real consumption and real investments applying these methods to swedish annual data 1875 1986 we find that permanent real supply shocks account for most of the fluctuations in gdp even in the short run

when do long run identifying restrictions give reliable results many recent articles have identified behavioral disturbances in vector autoregressions by imposing restrictions on the long run effects of shocks this article demonstrates that this approach will be unreliable unless the underlying economy satisfies three types of strong restrictions although many aspects of these issues have been raised before this article draws out and illustrates the implications for inferences under the long run scheme furthermore it provides strategies for dealing with the problems

is the us dollar a suitable anchor for the newly proposed gcc currency responses of inflation and non oil output growth from the gulf cooperation council gcc countries to monetary policy shocks from the united states us were estimated to determine whether there is evidence to support the us dollar as the anchor for the proposed unified currency a structural vector autoregression identified with short run restrictions was employed for each country with fed funds rate as the us monetary policy instrument non oil output growth and inflation the main results suggest that for inflation the gcc countries show synchronised responses to monetary policy shocks from the us which are similar to inflation in the us and for non oil output growth there is no clear indication that us monetary policy can be as effective for the gcc countries as it is domestically consequently importing us monetary policy via a dollar peg may guarantee only stable inflation for the gcc countries not necessarily stable non oil output growth if the non oil output response is made conscientiously and there are concerns over the dollar s ability to perform its role as a store of value a basket peg with both the us dollar and the euro may be a sound alternative as confirmed by the variance decomposition analysis of our augmented svar with a proxy for the european short term interest rate

the response of exchange rates to permanent and transitory shocks under floating exchange rates abstract using the joint behavior of inflation and real exchange rates we develop an empirical model to uncover the sources of the fluctuations in the real dollar exchange rates of four major industrial countries under the current float this model allows us to construct two time series for each country pair one representing the permanent component of each real exchange rate and the other the purely transitory component over the period as a whole transitory shocks played a relatively small but statistically significant role real dollar exchange rates therefore did not simply evolve in response to permanent shocks instead there are instances in which temporary shocks made a substantial contribution we conclude that the random walk model though an approximate statistical description of real exchange rate behavior is a poor guide to model structure jel f31

the dynamic eects of monetary policy a structural factor model approach we use the structural factor model proposed by forni giannone lippi and reichlin 2007 to study the eects of monetary policy the advantage with respect to the traditional vector autoregression model is that we can exploit information from a large data set made up of 112 us monthly macroeconomic series monetary policy shocks are identified using a standard recursive scheme in which the impact eects

on measuring energy poverty in indian households summary the relationship between energy and poverty is obvious and goes both ways recognizing this this paper provides a short overview of different approaches to measuring energy poverty it then presents a novel two dimensional measure of energy poverty and energy distribution that combines the elements of access to different energy types and quantity of energy consumed an assessment of the extent of energy poverty and changes in energy distribution pattern are analyzed by applying this measure to indian household survey data for 1983 2000 the analysis shows a significant reduction in the level of energy poverty and a rapidly developing subcontinent the new measure is a good complement to conventional monetary measures and is general enough to be applied to other developing countries

are real exchange rates nonstationary evidence from a panel data test it is well documented that real exchange rates between the united states and many industrialized countries in the post bretton woods period are integrated this result implies that purchasing power parity ppp does not hold even as a long run relationship this paper demonstrates that the failure to reject the unit root hypothesis may result from the low power of existing univariate test procedures i test for unit roots in real exchange rates by employing a more powerful panel based procedure using both cpi and wpi real dollar exchange rate data i strongly reject the null hypothesis of a unit root my results provide overwhelming support for the long run ppp under the current float copyright 1996 by ohio state university press

monetary policy and price responsiveness to aggregate shocks under rational inattention this paper presents a general equilibrium model that is consistent with recent empirical evidence showing that the u s price level and inflation are much more responsive to aggregate technology shocks than to monetary policy shocks the model of this paper builds on recent work by mackowiak and wiederholt 2009 who show that models of endogenous attention allocation deliver prices to be more responsive to more volatile shocks as everything else being equal firms pay relatively more attention to more volatile shocks in fact according to the u s data aggregate technology shocks are more volatile than monetary policy shocks inducing in this paper firms to pay more attention to the former than to the latter however most important this work adds to the literature by showing that the ability of the model of this paper to account for observed price dynamics crucially depends on monetary policy in particular this paper shows how interest rate feedback rules affect the incentives faced by firms in allocating attention a policy rate responding more actively to expected inflation and output fluctuations induces firms to pay relatively more attention to more volatile shocks this new mechanism of transmission of monetary policy helps rationalizing the observed behavior of prices in response to technology and monetary policy shocks and implies novel predictions about the impact of changes in taylor rules coefficients on economic fluctuations

dynamic effects of credit shocks in a data rich environment we examine the dynamic effects of credit shocks using a large dataset of u s economic and financial indicators in a structural factor model an identified credit shock resulting in an unanticipate

the persistence of energy poverty a dynamic probit analysis abstract this paper contributes to the growing literature on energy poverty in developing countries we use a dynamic probit estimator on three rounds of panel data from urban ethiopia to estimate a model of the probability of being energy poor and to investigate the persistence of energy poverty we also study the impact of energy price inflation which ethiopia experienced during 2007 2009 on energy use and energy poverty we find strong evidence of state dependence in energy poverty a household that is energy poor in one round is up to 16 more likely to be energy poor in the subsequent round dynamic probit regression results also suggest that an increase in the price of kerosene the most important fuel for the urban poor drives households into energy poverty a fractional response estimator for panel data which estimates the impact of energy prices on the proportion of energy obtained from clean sources also supports the finding on the adverse impact of energy price inflation households responded to the significant rise in the price of kerosene by consuming a large amount of charcoal which has been documented to have serious environmental climate and health consequences our results have significant implications for policies formulated to reduce energy poverty conserve biomass resources and promote energy transition in developing countries

an alternative explanation of the price puzzle abstract this paper proposes an explanation for the frequent appearance of a price puzzle in vars designed for monetary policy analysis it assumes that the data are generated by a model in which output and output gap are not equivalent while an econometrician follows the common practice of including only output in the var the omission of the output gap is shown to spuriously produce a price puzzle and several other incorrect conclusions in a class of commonly used models this can happen even if the model admits a triangular identification and if the forecasts produced by the misspecified var are optimal when the model is tested on us data all predictions are supported a commodity price index is not needed to solve the puzzle

the common trend and transitory dynamics in real exchange rate fluctuations this study examines the behaviour of both common trend ct and transitory components of real exchange rate rer fluctuations under the current float the ct component is in most cases found to be sizeable albeit its relative importance can vary considerably across major currencies and its estimate can be sensitive to whether or not long run purchasing power parity ppp is imposed on the data further analysis suggests that both ct and transitory innovations are linked much more to interest rate changes than to productivity changes accordingly it is interest rate not productivity disturbances that drive the highly persistent rer

the price puzzle in the monetary transmission vars with long run restrictions abstract this study addresses the price puzzle a positive response of prices to monetary tightening in var models by using long run instead of the usual short run restrictions on the us data including output prices and interest rate we find that monetary tightening had a negative effect on prices

monetary policy housing rents and inflation dynamics in this paper we study the effect of monetary policy shocks on housing rents our main finding is that in contrast to house prices housing rents increase in response to contractionary monetary policy shocks we also find that after a contractionary monetary policy shock rental vacancies and the homeownership rate decline this combination of results suggests that monetary policy may affect housing tenure decisions own versus rent in addition we show that with the exception of the shelter component all other main components of the consumer price index cpi either decline in response to a contractionary monetary policy shock or are not responsive these findings motivated us to study the statistical properties of alternative measures of inflation that exclude the shelter component we find that measures of inflation that exclude shelter have most of the statistical properties of the widely used measures of inflation such as the cpi and the price index for personal consumption expenditures but have higher standard deviations and react more to monetary policy shocks finally we show that the response of housing rents accounts for a large proportion of the price puzzle found in the literature

monetary shocks in the g 6 countries is there a puzzle les auteurs cherchent a clarifier la dynamique du mecanisme de transmission de la politique monetaire l identification des chocs de politique monetaire est au coeur de ce genre d analyse divers chercheurs ont reussi recemment a isoler de tels chocs en imposant des restrictions de suridentification a des modeles vectoriels autoregressifs var

unbiased estimation of the half life to ppp convergence in panel data three potential sources of bias introduce complications for panel data estimation of the half life of purchasing power parity deviations they are bias induced by inappropriate cross sectional aggregation of heterogeneous coefficients small sample estimation bias of dynamic lag coefficients and bias induced by time aggregation of commodity prices all of these biases have been addressed individually in the literature in this paper we address all three biases in arriving at our estimates using an annual panel data set of cpi based real exchange rates for 21 oecd countries from 1973 to 1998 we obtain a point estimate of the unbiased half life of 3 0 years with a 95 confidence interval of 2 3 4 2 years

some empirical evidence on the effects of shocks to monetary policy on exchange rates this paper investigates the effects of shocks to u s monetary policy on exchange rates we consider three measures of these shocks orthogonalized shocks to the federal funds rate orthogonalized shocks to the ratio of nonborrowed to total reserves and changes in the romer and romer index of monetary policy in sharp contrast to the literature we find substantial evidence of a link between monetary policy and exchange rates specifically according to our results a contractionary shock to u s monetary policy leads to i persistent significant appreciations in u s nominal and real exchange rates and ii significant persistent deviations from uncovered interest rate parity in favor of u s interest rates

credit market constraints consumption smoothing and the accumulation of durable production assets in low income countries investments in bullocks in india in this paper we formulate and estimate a finite horizon structural dynamic model of agricultural investment behavior that incorporates the major features of low income agricultural environments income uncertainty constraints on borrowing and rental markets and the use of investment assets to generate income and smooth consumption the model is fit to longitudinal indian household data on farm profits bullock stocks and pump sets the estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks agricultural profits and welfare associated with complete markets and bullock liquidity and with second best policies that provide assured sources of income to farmers and weather insurance

potential information and target variables for uk monetary policy the relationship between traditional monetary policy goal variables nominal gdp real gpd and the inflation rate and a number of financial market variables is investigated the question examined is which if any of these financial market variables monetary aggregates interest rates and interest rate spreads are potentially useful as either information variables or intermediate targets while the implications concerning the usefulness of the financial variables considered are pessimistic concerning nominal gdp more robust relationships are found for real gdp and inflation the latter finding is of interest given the current uk monetary policy strategy of inflation targeting our results are however more supportive of the usefulness of several financial variables as information variables than as intermediate targets

purchasing power parity and unit root tests using panel data abstract this paper reports the results of unit root tests for real exchange rates using a panel framework this panel approach provides greatly improved power compared to conventional univariate time series unit root tests we obtain evidence supporting ppp over the recent flexible exchange rate period for g 6 and oecd countries we show explicitly that failure to find such evidence in previous research was due to the low power of the tests

the purchasing power parity persistence paradigm abstract rogoff journal of economic literature 1996 34 647 668 describes the remarkable consensus of 3 5 year half lives of purchasing power parity deviations among studies using long horizon data these studies however focus on rejections of unit roots in real exchange rates and do not use appropriate techniques to measure persistence our half life estimates explicitly account for serial correlation sampling uncertainty and most importantly small sample bias calculating confidence intervals as well as point estimates for long horizon and post 1973 data we find that even though most of the point estimates lie within the 3 5 year range univariate methods provide virtually no information regarding the size of the half lives

sources of fluctuations in real and nominal exchange rates this paper attempts to distinguish empirically real versus nominal sources of fluctuations in real and nominal exchange rates the distinction is obtained by imposing the following restriction on the bivariate vector autoregression of real and nominal exchange rates over the current flexible rate period nominal shocks are required to have no permanent effect on the level of the real exchange rate given this identification scheme the author analyzes the dynamic effects and relative importance of real and nominal shocks with regards to exchange rates the findings indicate that real shocks dominate nominal shocks for both exchange rate series over short and long frequencies copyright 1992 by mit press

accounting for real and nominal exchange rate movements in the post bretton woods period abstract using the technique developed by blanchard and quah we decompose real and nominal exchange rate movements into the components induced by real and nominal factors nominal shocks have had a minor effect on the real and nominal bilateral exchange rates between the us and canada japan and germany there is little evidence of exchange rate overshooting real demand rather than supply shocks have been responsible for volatile exchange rate movements structural models of exchange rate determination need to consider such shocks as an important fundamental determinant

search for a monetary propagation mechanism abstract this paper examines a monetary propagation mechanism in an economy where exchanges in goods and labor markets involve costly search it is shown that an increase in the money growth rate increases steady state employment and output when the money growth rate is low but reduces steady state employment and output when the money growth rate is already high the model produces persistent hump shaped responses in employment and output to money growth shocks even when the shocks have no persistence the model also generates desirable features in job vacancy sales inventory and the velocity of money all these features emerge here in an economy with perfectly flexible prices and wages journal of economic literatureclassification numbers e40 e30

models and their uses it is argued that economists ought to recognize that modeling in different styles will be appropriate for different purposes or different stages in the development of an area of economics as an example the paper displays simulations of a stochastic general equilibrium model which shed light on the interpretation of widely discussed small macroeconomic vector autoregressive models connecting monetary variables to output and prices this abstract was borrowed from another version of this item

exchange rate stabilization in the erm identifying european monetary policy reactions abstract we develop the structural var models for european countries france denmark and germany during the erm period to examine the monetary policy reactions especially the within erm exchange rate stabilization in addition to analyzing the impulse responses and variance decomposition we present the full monetary reaction function in an interpretable manner without introducing additional assumptions the results suggest some asymmetry in exchange rate stabilization non german exchange rate stabilization is stronger than german exchange rate stabilization but do not support the hypothesis that german monetary policy was independent of the erm

indeterminacy change points and the price puzzle in an estimated dsge model abstract we extend lubik and schorfheide s 2004 testing for indeterminacy an application to u s monetary policy american economic review 94 190 217 likelihood based estimation of dynamic stochastic general equilibrium dsge models under indeterminacy to encompass a sample period the includes both determinacy and indeterminacy by implementing a change point methodology chib s 1998 estimation and comparison of multiple change point models journal of econometrics 86 221 241 by letting the data provide estimates of the dates of the determinacy regimes and allowing the estimates of structural parameters to be the same across regimes we obtain more precise estimates of the differences in characteristics such as the impulse responses across the regimes the most striking finding about the indeterminacy regime which is estimated to coincide with the great inflation of the 1970s is that it exhibits the price puzzle in that the inflation rate rises immediately and in a sustained manner following a positive interest rate shock thus the price puzzle might have been a genuine phenomenon under indeterminacy rather than a false finding to be excised through specification search and parameter restrictions

has monetary policy become more effective we investigate the implications of changes in the structure of the u s economy for monetary policy effectiveness estimating a vector autoregression over the pre and post 1980 periods we provide evidence of a reduced effect of monetary policy shocks in the latter period we estimate a structural model that replicates well the economy s response in both periods and perform counterfactual experiments to determine the source of the change in the monetary transmission mechanism and in the economy s volatility we find that by responding more strongly to inflation expectations monetary policy has stabilized the economy more effectively in the post 1980 period

long run purchasing power parity with short run data evidence with a null hypothesis of stationarity abstract we investigate long run purchasing power parity with data from the current floating exchange rate period by using tests where stationarity and cointegration are the null rather than the alternative hypotheses in most cases we cannot reject either the null hypothesis of stationarity of the real exchange rate or the null of cointegration between the nominal exchange rate and the domestic and foreign price levels this constitutes evidence of long run purchasing power parity because using the same tests we can reject the null of stationarity for the nominal exchange rate confirmation of the results is provided by a monte carlo study

sources of real exchange rate fluctuations in the nordic countries in an attempt to move beyond the purchasing power parity hypothesis this paper addresses two issues the first concerns the causes of movements in real exchange rates in contrast to the typical result supply shocks are found to dominate the long run variance decompositions for each of the four nordic countries under study this suggests that productivity developments are the most important determinant of long run movements in real exchange rates a second topic is the relative importance of stationary and non stationary components of real exchange rates also in contrast to previous findings transitory shocks are more important than permanent shocks for three of the four countries

monetary policy shocks and foreign investment income evidence from a large bayesian var abstract this paper assesses the transmission of monetary policy in a large bayesian vector autoregression based on the approach proposed by banbura et al 2010 the paper analyzes the impact of monetary policy shocks in the united states and canada not only on a range of domestic aggregates trade flows and exchange rates but also foreign investment income the analysis provides three main results first a surprise monetary policy contraction has a statistically important impact on both gross and net foreign investment income flows in both countries against the background of growing foreign wealth and investment income this result provides preliminary evidence that foreign balance sheet channels might play an increasingly significant role for monetary transmission second the impact of monetary policy on foreign investment income flows differs considerably across asset categories and over time suggesting that the investment instruments and the currency denomination of a country s foreign assets and liabilities are potentially relevant for the way in which monetary policy affects the domestic economy finally the results support existing evidence on the effectiveness of large vector autoregressions and the bayesian shrinkage approach in eliminating price and exchange rate puzzles

household level consumption in urban ethiopia the effects of a large food price shock summary we use survey data to investigate how urban households in ethiopia coped with the food price shock in 2008 qualitative data indicate that the high food price inflation was by far the most adverse economic shock between 2004 and 2008 and that a significant proportion of households had to adjust food consumption in response regression results indicate that households with low asset levels and casual workers were particularly adversely affected by high food prices we interpret the results as pointing to the importance of growth in the formal sector so as to generate more well paid and stable jobs

regulator flexibility and the administrative allocation licensing of 3g spectrum globally most nations assign radio spectrum to provide 3g mobile services during the period 1999 2007 while there is consensus among most economists that auctions are the preferred assignment mechanism the assignment mode is split more or less equally in terms of the number of licences issued between administrative allocations and auctions with auction procedures tending to raise more revenue for governments cartelier 2003 the question that naturally arises is why are administrative allocations so popular a method to assign spectrum mcmillan 1995 conjectures that administrative allocations provide additional flexibility accordingly this study examines the performance of 3g assignments in terms of an econometric analysis of a unique sample of national 3g spectrum administrative allocations these outcomes are modelled as depending on spectrum package attributes and post award network deployment requirements

searching for stationarity purchasing power parity under the current float abstract using panel data methods we investigate long run purchasing power parity by testing for unit roots in real exchange rates of industrial countries under the current float the evidence against the unit root hypothesis is stronger for larger than for smaller panels for monthly than for quarterly data and when the german mark rather than the united states dollar is used as the base currency while we find that accounting for serial correlation considerably weakens the evidence against the unit root null the results as a whole are consistent with long run purchasing power parity

measuring energy poverty focusing on what matters abstract the provision of modern energy services is recognised as a critical foundation for sustainable development and is central to the everyday lives of people effective policies to dramatically expand modern energy access need to be grounded in a robust information base metrics that can be used for comparative purposes and to track progress towards targets therefore represent an essential support tool this paper reviews the relevant literature and discusses the adequacy and applicability of existing instruments to measure energy poverty drawing on those insights it proposes a new composite index to measure energy poverty both the associated methodology and initial results for several african countries are discussed whereas most existing indicators and composite indices focus on assessing the access to energy or the degree of development related to energy our new index the multidimensional energy poverty index mepi focuses on the deprivation of access to modern energy services it captures both the incidence and intensity of energy poverty and provides a new tool to support policy making

parity reversion in real exchange rates during the post bretton woods period abstract a common view among recent studies on purchasing power parity is that the post bretton woods period is far too short to reveal any significant parity reversion in individual series of real exchange rates is this really so the answer this study shows depends very much on the statistical test being used two efficient univariate unit root tests are applied to uncover parity reversion these tests require much shorter sample sizes than conventional tests to attain the same statistical power empirical results show that parity reversion can be unveiled over the modern float if an efficient unit root test is applied

monetary policy and investment dynamics evidence from disaggregate data we use disaggregated data on the components of private fixed investment pfi to estimate industry level responses of real investment and capital prices to unanticipated monetary policy the response functions derive from a restricted large scale var estimated over 1959 2007 our results point to significant cross sector heterogeneity in the behavior of pfi prices and quantities for assets belonging to the equipment category of fixed investment we find that quantities rather than prices absorb most of the fallout from a policy shock by contrast the price effects tend to be higher and the output effects lower for nonresidential structures

international evidence on the sources of macroeconomic fluctuations abstract this paper examines the causes of macroeconomic fluctuations in five economies germany japan sweden the united kingdom and the united states using a bivariate var model for output and inflation the results demonstrate that both demand and supply shocks are important sources of business cycle fluctuations moreover at the business cycle frequency there are strong similarities between germany the united kingdom and the united states where more than 50 percent of the forecast error variance in both output and inflation are due to supply shocks on the other hand in japan and sweden over 90 percent of the error variance in output and less than 20 percent of the error variance of inflation are due to supply shocks

the identification of monetary policy disturbances explaining the liquidity puzzle abstract this paper examines recent work on the identification of monetary policy disturbances its main finding is that the empirical anomalies found in the literature reflect a failure to properly address the federal reserve s policy of accommodating reserve demand shocks a new method of identifying monetary policy using nonborrowed reserves is proposed using this specification policy has a strong persistent liquidity effect regardless of subsample policy granger causes output even in the presence of interest rates explaining approximately 49 of the variance in output at a two year horizon and the residual explanatory power of interest rates for output is negligible

simple solutions to the initial conditions problem in dynamic nonlinear panel data models with unobserved heterogeneity i study a simple widely applicable approach to handling the initial conditions problem in dynamic nonlinear unobserved effects models rather than attempting to obtain the joint distribution of all outcomes of the endogenous variables i propose finding the distribution conditional on the initial value and the observed history of strictly exogenous explanatory variables the approach is flexible and results in simple estimation strategies for at least three leading dynamic nonlinear models probit tobit and poisson regression i treat the general problem of estimating average partial effects and show that simple estimators exist for important special cases copyright 2005 john wiley sons ltd

counting and multidimensional poverty measurement this paper proposes a new methodology for multidimensional poverty measurement consisting of an identification method k that extends the traditional intersection and union approaches and a class of poverty measures m our identification step employs two forms of cutoff one within each dimension to determine whether a person is deprived in that dimension and a second across dimensions that identifies the poor by counting the dimensions in which a person is deprived the aggregation step employs the fgt measures appropriately adjusted to account for multidimensionality the axioms are presented as joint restrictions on identification and the measures and the methodology satisfies a range of desirable properties including decomposability the identification method is particularly well suited for use with ordinal data as is the first of our measures the adjusted headcount ratio we present some dominance results and an interpretation of the adjusted headcount ratio as a measure of unfreedom examples from the us and indonesia illustrate our methodology

ppp strikes back aggregation and the real exchange rate we show the importance of a dynamic aggregation bias in accounting for the ppp puzzle we prove that the aggregate real exchange rate is persistent because its components have heterogeneous dynamics established time series and panel methods fail to control for this using eurostat data we find that when heterogeneity is taken into account the estimated persistence of real exchange rates falls dramatically its half life for instance may fall to as low as eleven months significantly below the consensus view of three to five years

the effects of monetary policy using structural factor analysis the traditional vector autoregression var method is widely used to trace out the effects of monetary policy innovations on the economy however this method suffers from the curse of dimensionality so that in practice vars are estimated on a limited number of variables leading to a potential missing information problem in this article we use the method of structural factor analysis to evaluate the effects of monetary policy on key macroeconomic variables in a data rich environment this methodology allows us to extract information on monetary policy and its impact on the economy from a much larger data set than is possible with the traditional var method we propose two structural factor models one is the structural factor augmented vector autoregressive sfavar model and the other is the structural factor vector autoregressive sfvar model compared to the traditional var both models incorporate information from hundreds of data series series that can be and are monitored by the central bank in

the euro area bond free float and the implications for qe this paper examines how shocks to government bond duration risk held by price sensitive investors affect the euro area term structure of interest rates and the wider macroeconomy we construct a new measure of the bond free float which adjusts total debt for foreign official holdings and weights by residual maturity using a small macrofinance bayesian vector autoregression var model we estimate that the first round of asset purchases under the european central bank s ecb public sector purchase program reduced euro area 10 year bond yields by around 30 bps in 2015 the positive impact on the output gap and inflation in 2016 was about 0 2 and 0 3 ppt respectively

technology shocks and monetary policy assessing the fed s performance abstract the purpose of the present paper is twofold first we characterize the fed s systematic response to technology shocks and its implications for u s output hours and inflation second we evaluate the extent to which those responses can be accounted for by a simple monetary policy rule including the optimal one in the context of a standard business cycle model with sticky prices our main results can be described as follows first we detect significant differences across periods in the response of the economy as well as the fed s to a technology shock second the fed s response to a technology shock in the volcker greenspan period is consistent with an optimal monetary policy rule third in the pre volcker period the fed s policy tended to overstabilize output at the cost of generating excessive inflation volatility our evidence reinforces recent results in the literature suggesting an improvement in the fed s performance

commodity price volatility with endogenous natural resources abstract natural resource reserves are exogenous in models of small commodity exporters changes in the stock of reserves play no role in the macroeconomy including in business cycle volatility trade dynamics or exchange rate volatility we consider richer supply dynamics and model exploration and depletion we show that an endogenous supply of reserves is important for capturing the stylised facts associated with commodity price shocks including a commodity currency the crowding out of non commodity activity dutch disease and a volatile business cycle we also consider how exploration and depletion affect the ranking of optimal monetary and taxation policies when natural resource reserves are held fixed monetary policy is an efficient tool for stabilising the effects of commodity price shocks however when exploration and depletion are accounted for using interest rates to stabilise the effects of commodity price changes becomes inefficient using taxes on the resource sector specifically an ad valorem royalty remains efficient

startup costs and the decision to switch from firewood to gas fuel firewood remains a key source of energy for households in developing countries contributing to forest degradation and deforestation the adoption of alternative fuels may be hindered by high startup costs and this problem may be compounded by restrictions in credit availability we use survey data to examine how credit access affects firewood consumption in guatemala our results suggest that access to credit plays a statistically significant role in determining firewood consumption through its effect on the ability to purchase a gas stove however simulations suggest that these effects are small and that subsidizing stoves would be amore promising policy for reducing firewood consumption

long run purchasing power parity is it for real in this paper we re examine the purchasing power parity concept using data from the recent experience with floating exchange rates in particular we utilise the recently developed multivariate cointegration methodology to test for a long run relationship between exchange rates and relative prices and also to test for the proportionality of the exchange rate with respect to relative prices in contrast to much other research we demonstrate that there is a long run relationship between a number of bilateral u s dollar exchange rates and their corresponding relative prices the proportionality of the exchange rate to relative prices does not however receive support from the data this finding may be attributable to the use of measured price series rather than the true series

impulse response analysis of cointegrated systems abstract impulse response or dynamic multiplier analysis of vector autoregressive systems with cointegrated variables is considered the asymptotic distribution of the responses estimated with johansen s 1988 maximum likelihood procedure is derived the results are illustrated with an analysis of a west german money demand system the investigation shows that a direct interpretation of the cointegration relations may be difficult or misleading thereby the virtue of impulse response analysis for applied work is illustrated

nonlinearities and price puzzle in brazil what is called a price puzzle is a positive and persistent response of ination to a unit shock in the interest rate s innovation using a var to analyse monetary policy in brazil this paper comes to the conclusion that when nonlinearities in the data were considered most of this e ect vanishes this is done rstly by checking if the series are unit root processes or nonlinear trend stationary after that a nonparametric co trending analysis was applied the test result favored a common nonlinear trend between ination and the interest rate which seems to a ect the system innovation analysis inducing most of the price puzzle e ect

how to solve the price puzzle a meta analysis the short run increase in prices following an unexpected tightening of monetary policy constitutes a frequently reported puzzle yet the puzzle is surprisingly easy to explain away when all published models are quantitatively reviewed we collect about 1 000 point estimates of impulse responses from 70 articles using vector autoregressive models and present a simple method of research synthesis for graphical results our ndings indicate publication selection in favor of the intuitive response of prices to a tightening the estimates depend systematically on study design when misspecications are

do exchange rate shocks have asymmetric effects on reserve accumulation evidence from emerging markets it is generally argued that central banks in emerging market countries motivated by a desire to defend export competitiveness tend to intervene in foreign exchange markets to limit currency appreciations rather than depreciations using panel data from 13 emerging market countries for the period 1998 m1 to 2016 m12 we find that exchange rate shocks play an important role in determining the accumulation of international reserves moreover we find evidence that central banks in emerging markets tend to follow a leaning against the depreciation wind policy rather than the appreciation wind i e we provide evidence of a fear of depreciation

interest rates and the channels of monetary transmission some sectoral estimates abstract we estimate a small sectoral var model of the uk macroeconomy this model is then used to simulate the effects of an exogenous monetary policy shock upon asset prices bank balance sheet variables and final target variables activity and prices for the personal and corporate sectors significant sectoral differences are found among the channels of monetary transmission in addition the use of sectoral data facilitates the identification of distinct money and credit channels in the transmission of monetary policy these results contrast with the ambiguous findings on the roles of money and credit in the literature to date

intermediate monetary targets and macroeconomic fluctuations it is investigated whether the choice of intermediate target has altered macroeconomic fluctuations and whether the observed changes are consistent with predictions from economic theory since implications from the theoretical literature focus on the effects of structural disturbances an empirical analysis must identify these effects the structural vector autoregressive var technique estimates structural disturbances using restrictions from standard macroeconomic theory based on descriptions of actual targeting procedures by insiders to federal reserve policy decisions the intermediate target for the united states is identified as the interest rate from 1951 to 1969 and money from 1970 to 1986 var models are estimated over each subsample to assess whether the estimated structural disturbances cause endogenous variables to behave as economic theory predicts tests are also performed to assess whether or not the targeting rule affects the variance of endogenous variables attributable to structural sh

a structured var for denmark under changing monetary regimes using recently developed statistical tools for analyzing cointegrated 1 2 data this article models money income prices and interest rates in denmark the final model describes the dynamic adjustment to short run changes of the process to deviations from long run steady states and to several political interventions it provides new insights about the effects of the liberalization of trade and capital in a small open european economy

the effect of monetary policy shocks on macroeconomic variables evidence from the eurozone this paper investigates how european central bank ecb monetary policy shocks impact industrial production output and inflation prices i gather a novel dataset of macroeconomic forecasts and using a narrative approach i construct a new measure of monetary policy shocks industrial production responds to an unpredictable positive monetary policy shock of 100 basis points with a decline of over 0 5 on the contrary inflation responds weakly with a very modest decrease of 0 05

house prices and stock prices different roles in the us monetary transmission mechanism we analyze the role of house prices and stock prices in the monetary policy transmission mechanism in the us using a structural vector autoregressive model if we allow the interest rate and asset prices to react simultaneously to news we find different roles for house prices and stock prices in the monetary transmission mechanism following a contractionary monetary policy shock stock prices fall immediately while the response in house prices is more gradual regarding the systematic response in monetary policy stock prices play a more important role than house prices as a consequence house prices contribute more than stock prices to fluctuations in gross domestic product and inflation