from shadow to green linking environmental fiscal reforms and the informal economy in the past few decades many papers have analysed in some depth different environmental tax reforms and the double dividend hypothesis i e the possibility of improving not only the environment but also the economy through the reduction of distortions in the tax system recently more stress has been placed on testing empirically what effects a reduction in labour taxes may have on unemployment when accompanied by a carbon or other environmental tax however such studies have not modelled the effects of the presence of a shadow economy even though informal markets account for a significant and growing part of gdp in many developed economies this paper analyses this link using an applied general equilibrium model for the case of spain which has one of the highest unemployment rates in the world and one of the biggest informal economies of any wealthy country we conclude that our analysis strengthens the case for an environmental tax reform in spain if revenues from a co2 tax are recycled via a labour tax reduction

pigou meets mirrlees on the irrelevance of tax distortions for the second best pigouvian tax this paper extends the mirrlees 1971 model of optimal income redistribution with optimal corrective taxes to internalize consumption externalities using general utility structures and exploring both linear and non linear taxes it is demonstrated that the optimal second best tax on an externality generating good should not be corrected for the marginal cost of public funds since it equals one in the optimal tax system in the optimum distortions of income taxes are equal to marginal redistributional gains if the government does not have access to a non distortionary marginal source of finance the marginal cost of public funds can be either larger or smaller than one depending on subjective preferences for income redistribution the optimal second best corrective tax is then either higher or lower than the pigouvian level the findings in this paper generalize and amend prior results based on representative agent models shedding new light on the weak double dividend hypothesis and on the welfare gains of recycling revenue from environmental taxes

governance of competitive transmission investment in weak institutional systems despite progress in economic analysis in recent years transmission investment governance still poses policy design challenges in competitive electricity systems the degree of regulatory intervention in allocating investment costs is a central issue scholars tend to agree that centralized solutions are almost inevitable mainly due to free riding and coordination problems in systems with weak institutional endowments and pressures of distributive politics however there is an increased likelihood of regulators acting opportunistically or imposing arbitrary changes to the cost allocation rules which makes centralized solutions less desirable we provide some examples from argentina el salvador and peru and suggest that a two tier governance scheme composed of a self governing forum of transmission stakeholders with regulation as a subsidiary measure may be a more adequate design to restraint undue government interference the expected outcome is twofold a better match with users preferences and a restraint to government opportunism and arbitrariness measuring the robustness of this scheme in minimizing the risks for either too much or too little investment will certainly require further research

institutions and commitment the thrust of this paper is that to understand the roles institutions play in society a deep analysis of opportunism and its implications is necessary for that purpose a transactions costs cum positive political theory approach is developed with a focus on the role of institutions and their implications for regulatory commitment a major issue is restraining political opportunism countries that have succeeded in developing a healthy private sector are those that have developed institutions that restrain governmental decision making but such restraining is itself a political choice countries with electoral and legislative systems that bring about decentralized government have stronger chances of developing equilibria where government discretion is restrained copyright 1996 by oxford university press

measuring the liquidity effect this paper measures the effect on the federal funds rate of an open market operation the paper deals with simultaneous equations bias by developing a proxy for the errors the federal reserve makes in forecasting the extent to which treasury operations will add or drain reserves available to private banks these errors induce fluctuations in bank reserves which have measurable consequences for the federal funds rate the paper estimates that a reduction in nonborrowed reserves of 30 million if sustained for an entire fourteen day reserve maintenance period will cause the federal funds rate to rise by ten basis points copyright 1997 by american economic association

money supply announcements and interest rates another view in this paper i use a new approach to analyze the impact of money supply announcements on the bond market before 1980 the only available work on this subject consisted of a few unpublished papers by conrad 1978 sivesind 1978 and urich 1979 1 more recently published papers by grossman 1981 and urich and wachtel 1981 have appeared roley 1982 extends the grossman study to incorporate data after the federal reserve policy statement of october 6 1979 both grossman and urich and wachtel are primarily concerned with the question of money market efficiency using survey data made available by money market services of san francisco and data on treasury bill yields each finds that the market responds quickly to unanticipated changes in the money supply but that anticipated changes have no effect on interest rates in addition grossman finds that when he adds other variables such as past changes in the money

why interest rates react to money announcements an explanation from the foreign exchange market abstract when the fed announces a money supply greater than had been expected interest rates rise why one explanation is that the market raises its estimate of the future rates of money growth and inflation and bids up nominal interest rates we offer contrary evidence on such days the dollar appreciates not depreciates an alternative explanation is that the market perceives the change in the money stock as a transitory fluctuation that the fed will reverse in the future the anticipated future tightening raises today s real interest rate causes a capital inflow and appreciates the dollar the result in fact observed

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

does the federal reserve affect asset prices abstract the federal reserve is probably one of the institutions most closely monitored by investors this indicates that investors believe the actions of the fed have implications for asset prices to this date the trading activities of the fed in the financial markets have not been examined to see how the fed influences asset prices using daily data on open market operations omos and asset prices this study fills this void one finding of the paper is that omos granger cause both short and long term interest rates furthermore the sign of the relationship confirms the existence of the liquidity effect given that its trades represent a small portion of the market volume how the fed influences bond prices is a puzzle the only reasonable explanation is that the fed s trades have high information content judging by the impulse response paths the reaction of interest rates to open market operations is fast additionally it appears that monetary policy has a lasting impact on interest rates

why interest rates rise when an unexpectedly large money stock is announced ment of an unexpectedly large growth in the money supply will lead to an immediate increase in interest rates this announcement effect is often taken as confirmation of the monetarist view that the way to bring down interest rates even in the short run is to reduce the rate of money growth in this paper we provide an alternative explanation of the announcement effect that is consistent with the keynesian view that in the short run the way to bring down interest rates is to expand the money supply we do not address the issue of inflationary expectations in a formal way though in the long run we would expect the well known fisher effect to hold looking closely at the announcement effect it is clear that whatever may be the true short run relationship between money growth and interest rates it cannot be inferred from a simple correlation of announcements of changes in the money stock with the resulting changes in interest rates this is because of several properties of the announcement phenomenon that we capture in the model

the vanishing liquidity effect of money on interest analysis and implications for policy this paper seeks to re examine the effects of money on interest rates the earlier literature on this topic determined fairly well the pattern of response of interest rates to changes in money growth the notable studies of cagan 1972 cagan and gandolfi 1969 and gibson 1970 served to establish the professions stylized pattern as presented in section i section ii presents new evidence on the subject and finds that the old empirical generalizations no longer hold specifically the results suggest that the initial liquidity effect of faster money growth is likely to be offset within the month following the monetary policy change sections iii and iv investigate the reasons for the changing pattern of monetary effects on interest rates and discuss the policy implications of the new pattern

development of the electricity environmental policy cge model gtap e powers a case of the carbon tax in south africa abstract a new carbon price mechanism with full emission coverage is developed within the framework of a global computable general equilibrium model gtap e powers to enhance the capacity and accuracy for climate change and energy policy assessment the model developed is then used to examine the potential impacts of the carbon tax in south africa results show that incorporation of non co2 emissions in the model significantly alters the results of which the economy of south africa experiences higher costs compared to the case that only has co2 emissions when more sectors are included in the policy it also puts higher costs on the economy as higher levels of emissions are subject to the carbon tax results also show that south africa only experiences small tradeoffs from introducing the carbon tax in all scenarios that is with a tax rate of 9 15 the country is able to reduce its emission levels by 12 25 15 6 at the costs of real gdp reduction by 1 17 1 59 fossil based industrial sectors are particularly worst off while clean and renewable energy sectors strongly expand their production the results indicate that south africa is likely to move to a low carbon and sustainable economy with such a policy

the impacts of carbon pricing on coastal megacities a cge analysis of singapore abstract pricing carbon is a widely used policy instrument for climate change mitigation quantitative analysis of carbon pricing are mainly conducted at the regional and national level rarely at the city level due to data availability as a representative of coastal megacities that are vulnerable to both climate change and climate policies singapore has announced to impose carbon tax on large direct emitters as a complementary mitigation option to technical measures a city level computable general equilibrium cge model is developed to simulate potential impacts of carbon pricing on the city including paying border carbon adjustment bca on exports or introducing a domestic carbon tax different sector coverages and carbon tax revenue recycling schemes are investigated for domestic carbon tax the simulation results show that a domestic carbon tax is a more cost effective option than paying bca given an identical carbon price at s 10 t co 2 gdp total exports and household consumption would decline less and average abatement cost is much smaller in the carbon tax scenarios compared to the bca scenario in terms of absolute emissions reduction a carbon tax that covers energy manufacturing and land transport sectors would be preferred making emissions around 2 7 lower than 2010 baseline level

exploring the impacts of a carbon tax on the chinese economy using a cge model with a detailed disaggregation of energy sectors abstract this paper applies a computable general equilibrium model to investigate the impacts of a carbon tax on china s economy and carbon emissions based on china s 2010 input output table to obtain robust simulation results we further disaggregate the energy sectors into eight departments according to energy use characteristics the empirical results indicate that a moderate carbon tax would significantly reduce carbon emissions and fossil fuel energy consumption and slightly reduce the pace of economic growth however a large carbon tax has a significantly negative impact on china s economy and social welfare moreover a large carbon tax would entail marked price changes in china of the fossil fuels in use reducing coal consumption would have the greatest impact on reducing carbon emissions and the ad valorem duty rate for coal would be the highest after levying a carbon tax because it has the highest carbon emission coefficient therefore china should strive to promote clean coal technology which may be crucial to reducing carbon emissions moreover levying a carbon tax would improve the use of clean energy which would be an effective means of reducing carbon emissions therefore the chinese government should formulate the regulations for and pass a carbon tax as early as possible to achieve its carbon emission abatement target and further contribute to mitigating climate change

the response of short term interest rates to weekly money announcements each friday at 4 10 p m est the federal reserve announces its estimate of the narrowly defined money stock for the statement week ending nine days previously these money announcements have become one of the main events in financial markcts if for no other reason than the fact that significant movements in interest rates have been associated with large unanticipated changes in the money stock moreover since the late 1970s interest rate fluctuations in response to money stock announcements have dramatically increased over the 1l 2 hour intervals spanning the weekly announcements for example the variance of the change in the threemonth treasury bill yield in the three years since october 1979 is more than thirty times larger than that of the previous two year period l two factors may account for a large portion of the increased volatility of shortterm interest rates first on october 6 1979 the federal reserve adopted a reserve aggregate approach to monetary control replacing a procedure that emphasized stability of short term yields second despite the greater emphasis placed on monetary control the variance of weekly announced changes in the money stock has risen by about 70 percent since late 1979 in turn if greater volatility of announced changes makes future changes more difficult to predict the volatility of unanticipated weekly changes in money would have also increased 2 thus if financial markets are efficient and if weekly money announcements contain relevant information larger unanticipated changes in money may have caused larger fluctuations in interest rates

optimal carbon taxes for china and implications for power generation welfare and the environment abstract china is expected to constitute about half of the world s emissions between 2010 and 2040 as concerns about climate change intensify the chinese government is poised to commit to a low carbon economy these conditions make china a suitable case in which to study how emission policies impact on energy supply welfare and the environment to achieve this purpose we incorporate abatement technologies into the gtap computable general equilibrium model and show that optimal taxes range between 0 03 for services and 2 02 for manufacturing in most cases simulated tax rates are by far higher than pollution taxes stipulated in the new chinese environmental tax law furthermore despite a decline in output of many sectors including the electricity sector overall welfare gains exist from introducing carbon taxes moreover these taxes reduce environmental pollution by approximately 62 5 in general carbon taxes are insufficient for mitigation in china and due to a coal dominant energy structure implementing these taxes leads to a decline in power generation hence the chinese aggressive investment strategy for renewable electricity technologies as stipulated in its 13th five year plan is understandable

achieving co2 reductions in colombia effects of carbon taxes and abatement targets in this paper we investigate co2 emission scenarios for colombia and the effects of implementing carbon taxes and abatement targets on the energy system by comparing baseline and policy scenario results from two integrated assessment partial equilibrium models tiam ecn and gcam and two general equilibrium models phoenix and meg4c we provide an indication of future developments and dynamics in the colombian energy system currently the carbon intensity of the energy system in colombia is low compared to other countries in latin america however this trend may change given the projected rapid growth of the economy and the potential increase in the use of carbon based technologies climate policy in colombia is under development and has yet to consider economic instruments such as taxes and abatement targets this paper shows how taxes or abatement targets can achieve significant co2 reductions in colombia though abatement may be achieved through different pathways taxes and targets promote the entry of cleaner energy sources into the market and reduce final energy demand through energy efficiency improvements and other demand side responses the electric power sector plays an important role in achieving co2 emission reductions in colombia through the increase of hydropower the introduction of wind technologies and the deployment of biomass coal and natural gas with co2 capture and storage ccs uncertainty over the prevailing mitigation pathway reinforces the importance of climate policy to guide sectors toward low carbon technologies this paper also assesses the economy wide implications of mitigation policies such as potential losses in gdp and consumption an assessment of the legal institutional social and environmental barriers to economy wide mitigation policies is critical yet beyond the scope of this paper

effects of a carbon price in the u s on economic sectors resource use and emissions an input output approach abstract despite differences in their implementation most carbon policies aim to have similar outcomes effectively raising the price of carbon intensive products relative to non carbon intensive products while it is possible to predict the simple broad scale economic impacts of raising the price of carbon intensive products the demand for non carbon intensive products will increase understanding the economic and environmental impacts of carbon policies throughout the life cycle of both types of products is more difficult using the example of a carbon tax this study proposes a methodology that integrates short term policy induced consumer demand changes into the input output framework to analyze the environmental and economic repercussions of a policy environmental repercussions include the direct and the indirect impacts on emissions materials flow in the economy and the reliance on various ecosystem goods and services the approach combines economic data with data about physical flow of fossil fuels between sectors consumption of natural resources and emissions from each sector it applies several input output modeling equations sequentially and uses various levels of aggregation disaggregation it is illustrated with the data for the 2002 u s economy and physical flows the framework provides insight into the short term complex interactions between carbon price and its economic and environmental effects

the term structure with semi credible targeting the federal reserve sets targets for interest rates which it enforces through direct market intervention these targets are changed periodically in this paper we develop a term structure model in which the short rate is subject to a control which keeps it close to a target which changes from time to time the probability of target changes is not constant in the model but changes as a function of observables the model performs well at explaining the shifts in the yield curve that accompany target changes in u s financial markets the federal reserve bank the fed is a unique player usually we assume that market participants are price takers in financial markets however there is evidence that this is not true of the fed in fact the fed sets targets for short term rates which it attempts to maintain by market intervention injecting or withdrawing funds from the market to keep the rates near their targets targets are changed from time to time and market participants know when such a target change occurs they may in fact have some limited ability to forecast such target changes several recent papers have provided evidence that models which allow the short rate to revert toward a mean which is itself a random process perform

extending the bargaining power model explaining bargaining outcomes among nations mnes and ngos participants in international bargaining include different types nation states mnes ngos and multilateral organizations and different numbers of these actors our theoretical contribution is to extend the bargaining power paradigm with a framework that models bargaining in this complex environment as a network the configuration of supports and constraints among all participating actors in the bargaining environment is captured in the structure of the network antecedents of an actor s bargaining influence in the network include the actor s basis of power network position bargaining outcome preferences and motivation to influence bargaining the network bargaining power nbp model uses network theory to build upon and integrate insights from previous literature in a way that allows us to simultaneously apply these different insights to explain bargaining outcomes these insights include effects of coalitions strategies of less powerful actors leveraging more powerful allies integration of international and domestic politics and applicability to mne related issues beyond fdi finally we illustrate nbp in a scenario of privatized utilities in the dominican republic in which the bargaining power outcome predicted by nbp differs from that of the canonical bargaining power perspective

monetary policy and long term interest rates an efficient markets approach abstract this paper is an application of efficient markets theory to analyze empirically the relationship of money supply growth and long term interest rates this approach has the advantage over calier research on this subject in that it imposes a theoretical structure on this relationship that flows easier interpretation of the empirical results as well as more powerful statistical tests on the interest of ascertaining the robustness of the results many different empirical tests are carried out in this paper and they uniformly do not support the preposition that increases in the money supply are correlated with declines in long rates

a social cost of carbon for almost every country this paper uses imputed national climate change impact functions to estimate national social costs of carbon which are largest in poor countries with large populations the national social costs of carbon of faster growing economies are less sensitive to the pure rate of time preference and more sensitive to the rate of risk aversion the pattern of national social costs of carbon is not sensitive to the assumed impact function climate sensitivity and scenario although the global social cost of carbon is income convergence raises the national social costs of carbon of poorer countries and lowers them for richer countries both global and national social costs of carbon are most sensitive to the income elasticity of climate change impacts a parameter about which we know little

the effects of inflation and money supply announcements on interest rates this paper examines the impact of the money supply and inflation rate announcements on interest rates survey data on expectations of the money supply and consumer and producer price indexes are used to distinguish anticipated and unanticipated components of the announcements this distinction is used to test for the efficiency of the financial market response to the announcements of new information the results indicate that the unanticipated components of the announced changes in the producers price index and in the money supply have an immediate positive effect on short term interest rates the consumer price index announcement has no apparent effect there is no evidence of a delayed announcement effect however there is some indication of a liquidity effect of the money supply change on interest rates this takes place when reserves are changing and several weeks prior to the information announcement the effect of money supply announcements on interest rates has attracted considerable attention in both the academic literature and the financial press in the last few years it has been firmly established that unanticipated increases in the money supply lead to immediate increases in interest rates however there are several competing explanations for this phenomenon in the literature in this paper we present some additional empirical evidence which helps to distinguish between two of these hypotheses the policy anticipations and inflationary expectations hypotheses by examining the effect of money supply and inflation announcements on interest rates the positive effect on interest rates of announcements of unanticipated increases in the money supply was demonstrated by urich and wachtel 9 grossman 3 and roley 5 the announcement effect was interpreted in our earlier paper as a policy anticipations effect and has been interpreted by others e g cornell 1 as an inflationary expectations effect since both effects are in the same direction it is difficult to distinguish between them without additional evidence the policy anticipations effect is simply that an unanticipated increase in the money supply causes financial market participants to expect that the federal reserve will tighten the monetary reins in order to offset the increase in anticipation of future tightening there is a tendency for interest rates to increase the inflationary expectations effect is that an unanticipated increase

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

money creation and the shadow banking system many explanations for the rapid growth of the shadow banking system in the mid2000s focus on money demand this paper asks whether the short term liabilities of the shadow banking system behave like money we rst present a simple model where households demand money services which are supplied by three types of claims deposits treasury bills and asset backed commercial paper abcp the model provides predictions for the price and quantity dynamics of these claims as well as the behavior of the banking system in terms of issuance and the monetary authority in terms of open market operations consistent with the model the empirical evidence suggests that the shadow banking system does respond to money demand

the effect of changes in the federal funds rate target on market interest rates in the 1970s abstract this paper examines the influence of monetary policy on interest rates by estimating the effect of changes in the federal funds rate target the federal reserve s policy instrument on market interest rates in the 1970s we find that changes in the target caused large movements in short term rates and smaller but significant movements in intermediate and long term rates we hypothesize that the similarity of the reactions of three six and twelve month rates to changes in the target offers a possible explanation for the lack of support for the expectations theory from studies that have tested the theory using these rates

economic and environmental effects of a co2 tax in latin american countries abstract the environmental extension from the leontief pricing model is used to simulate the economic and environmental effects of setting different co2 tax rates in three latin american countries brazil mexico and chile it considers a regulatory scenario in which the tax is applied only to emissions from the electricity sector and another scenario in which tax is applied to emissions from all economic sectors the results show that the effects of a co2 tax on sectoral prices and emissions in each country are very different for the same tax rate but these effects are similar in each country when comparing both regulatory scenarios this is explained by the composition carbonization of the electric generation and energy matrix of each of the countries which significantly affects the effectiveness of co2 taxes to reduce emissions in addition the economic sectors most affected by the different regulatory scenarios are similar in all countries

money supply announcements interest rates and foreign exchange abstract this paper presents a test of the joint hypothesis that money supply announcements affect the real interest rate and that changes in the real interest rate affect the exchange rate in the short run the test results are consistent with the joint hypothesis for example it is found that announcement of an unexpected jump in the money supply is accompanied by an increase in interest rates and an appreciation of the dollar if the rise in interest rates was entirely due to higher inflationary expectations the dollar should not appreciate

the liquidity effect in the federal funds market evidence at the monthly frequency in this paper we argue that much of the research into the link between money and interest rates suffers from misspecification the measure of money and the measure of interest rates are not always well matched in examining the transmission of monetary policy we show that using an appropriate measure of money federal reserve balances and the appropriate interest rate the federal funds rate a clear liquidity effect exists furthermore we explain how a lack of a clear institutional understanding may have contributed to the finding of a liquidity puzzle in the past

in search of the liquidity effect abstract a short run negative relationship between monetary aggregates and interest rates the liquidity effect is central to discussions of monetary policy this paper searches for this empirical relationship we investigate whether the characterization of the liquidity effect is sensitive to i changes in sample period ii conditioning the correlations on past information iii assuming money growth is exogenous and iv treating monetary changes as anticipated or unanticipated the correlations change substantially in each case we conclude that the traditional analysis and modern models which rely completely on demand side behavior cannot explain the observed correlations a successful characterization of the liquidity effect requires identification of both private and policy behavior

wind coal and the cost of environmental externalities abstract we compare the cost of generating electricity with coal and wind in chile on average we estimate that the levelized cost of coal including externalities is 84 mwh it is efficient to abate air pollutants so x no x and pm 2 5 but not co 2 with abatement the cost wrought by environmental externalities equals 23 mwh or 27 of total cost depending on the price of coal the levelized cost may vary between 72 and 99 mwh the levelized cost of wind is 144 mwh with capacity factor of 24 this cost includes backup capacity to maintain lolp which equals 13 mwh or 9 of total cost the levelized cost of wind varies between 107 mwh with capacity factors of 35 to 217 mwh with capacity factors of 15 wind is competitive only with capacity factors around 35 and very high coal prices alternatively a carbon price of 73 tco 2 268 tc would make coal and wind equally costly but this value implies a marginal damage at the 98th percentile of the distribution deduced from tol s 2011 estimates rather far from the mean 16 tco 2 59 tc

market response to the weekly money supply announcements in the 1970s the hypothesis that the weekly announcement of the money supply affects interest rates is examined the announcement effect is interpreted as a policy anticipation effect that is an unanticipated increase in the money supply leads to an increase in interest rates in anticipation of future tightening by the federal reserve estimates of this effect with proxies for the unanticipated change constructed from a survey of money supply forecasts and an arima model indicate that a financial markets respond very quickly to the announcement and b the response was largest when policymakers emphasized the importance of the monetary aggregates financial market participants are careful observers of the weekly money supply announcement and generally agree that the announcement often leads to changes in interest rates this occurs because the announcement leads market participants to revise their expectations both of future federal reserve policy actions and of future economic conditions in this paper we examine the response of yields on treasury bills to the announcement of the money supply and the extent to which that response has varied in the last ten years money supply announcements may affect market interest rates in three ways first actual expansion of the money supply leads to lower interest rates through a liquidity effect however rapid monetary growth which is not anticipated leads market participants to expect the federal reserve to counteract such growth in the future as a consequence there may be a policy anticipation effect which causes higher interest rates in anticipation of future tightening furthermore prolonged rapid monetary growth also creates inflation and inflationary expectations which lead to higher interest rates thus there may exist a third effect the inflationary expectations effect which also leads to higher interest rates our interest in this paper is in the immediate market response to the weekly announcement of the money supply which as we argue below is most likely to be a policy anticipation effect the policy anticipation effect is best described by example suppose that the announced change in the money supply exceeds that which was expected by

the effect of money shocks on interest rates in the presence of conditional heteroskedasticity most current empirical work finds no evidence that money shocks lower interest rates we show that these nonresults are mainly due to a failure to model the conditional heteroskedasticity of interest rates autoregressive conditional heteroskedasticity arch models find a significant liquidity effect where ordinary least squares ols models do not the existence of a liquidity effect is found using different models and sample periods when arch models are used in estimation but never when ols is employed

effects of the internalization of the social cost of global and local air pollutants in chile abstract in 2017 environmental taxes on global pollutants co2 and local air pollutants so2 nox and pm began to be collected to reduce emissions in chile however large emitting sources only are subject to environmental taxes and the tax rates are much lower than the social cost of these pollutants which does not allow to fully internalize the generated damages for the above this study uses the environmental extension of the leontief price model and microsimulations to estimate the economic environmental distributive and poverty short term effects associated with the application of pigouvian taxes on all emissions generated by productive activities the results show that currently there are too many resources allocated to activities that generate strong negative externalities mainly in the electricity and transport sectors specifically the emissions are reduced almost 10 times more than in the current tax scenario if environmental taxes equal to social costs are applied but relevant negative indirect effects are generated that make the practical application of a tax of these characteristics unrealistic for example there is a fall between 1 2 and 2 9 in employment slightly worsening the income distribution and increases the poverty rate between 0 9 and 2 3 percentage points

how to set the proper level of carbon tax in the context of chinese construction sector a cge analysis abstract under global warming and severe environmental problems the paris agreement urges china to accelerate the pace of the low carbon economy improving the energy efficiency of the construction sector may be an important way to reduce co2 emissions as a reasonable energy policy instrument a carbon tax can effectively improve energy efficiency and reduce co2 emissions in this study a dynamic computable general equilibrium model is developed to explore the possible impacts of different carbon tax conditions on the energy consumption of the construction sector and the macroeconomy of china results show that the appropriate carbon tax is 60 rmb t which cannot only achieve the emission reduction target but also minimize the negative impact on the macroeconomy however the proper level of the carbon tax varies by building stage under the proper carbon tax level the peak of carbon emissions could be reached in 2025 the main purpose of this paper is to provide a theoretical basis for the government in formulating different energy policies

the politics of regulation in the turkish electricity market abstract turkey began reforming the electricity market in 2001 the regulatory reform aimed to liberalize the market however the institutional and political structure was not ready for creating an efficiently working competition the independent regulator did not have both experience and will to direct the industry to a more competitive environment currently the reform has slowed down and political preferences drive the industry this paper studies the reasons for the slowdown in the reform efforts by focusing on the relationships between the government judiciary and the independent regulator we conclude that strategic behaviors of players in the market including the judiciary the government and the regulator have made the introduction of competition to the market more costly

a computational model of banks optimal reserve management policy abstract this paper uses numerical methods to model the demand for excess reserves by a representative bank in a framework that includes many realistic features of the current reserve market structure in the united states in particular the model incorporates a 14 day maintenance period and an accurate representation of carryover provisions we use the model to evaluate the effect of various changes to the operating environment increased uncertainty modified penalties and changes to policy paying interest on reserves

market perceptions of federal reserve policy and the weekly monetary announcements abstract in october 1979 the federal reserve altered its operating procedures emphasizing control of the growth rate of the money stock was the fed able to gain credibility in the market the paper investigates this question by examining the reactions of spot and expected future exchange rates foreign interest rates and long run domestic forward interest rates to the weekly federal reserve announcements of m l both before and after october 1979 the empirical evidence points out that the fed did gain credibility but was unable to establish full credibility the market reactions are consistent with the hypothesis that market participants attached a positive probability to the event that the fed may at some point in the future abandon its money stock targets

the effectiveness of non standard monetary policy in addressing liquidity risk during the financial crisis the experiences of the federal reserve and the european central bank abstract a number of studies sought to measure the effects of non standard policy on bank funding markets this paper carries those estimates a step further by looking at the effects of bank funding market stress on the volume of bank lending by separately modeling loan supply and demand we determine how non standard central bank measures affected bank lending by reducing stress in bank funding markets our results suggest that non standard policy measures lowered bank funding volatility in the us and the euro area lower bank funding volatility in turn increased loan supply in both regions contributing to sustained lending activity

deregulating with no regulator is the german electricity transmission regime institutionally correct abstract from 1998 to 2005 the german transmission grid has been put under a self regulated arrangement it seems hard to believe that transmission lines can be opened to third party access only with a negotiated access regime and no regulator supervision it seems contradictory with the notion of ex post contractual hazards promoted by v goldberg and o williamson if a weak institutional arrangement is implemented one might assume that it has to be harmful to network and market access if it is not to be inefficient why and how could it work when looking at rules and prices for accessing the transmission network and the corresponding wholesale markets in germany the club arrangement for transmission opening does not appear so harmful accordingly we have to reconsider the ex ante and ex post institutional mechanism of such a club arrangement ex ante we first reconsider skills and strengths of industrial consumers and german business associations in defining and assessing rules of transmission access we underline that incomplete vertical and horizontal integration of german electricity companies impeded extensive cartel collusion ex post we first look at a strong competition authority backing then we discover that ex ante and ex post dimensions are much more mixed and reinforced in an open cumulative pro competition process framed by the competition authority

distributional effects of carbon taxes the case of mexico abstract in this study i develop an analytical general equilibrium model to assess the distributional effects across income groups of a carbon tax assuming that the revenue from the carbon tax is recycled in two different ways as a manufacturing tax cut and a food subsidy i use this analytical model to provide intuition about the main distributional components the model is calibrated with data from mexico to obtain unambiguous price and quantity changes i find that the distribution of the costs is driven by the way the revenue is recycled in particular the costs are distributed regressively when the revenue is recycled as a manufacturing tax cut and progressively when it is recycled as a food subsidy providing a food subsidy also generates higher welfare and lower carbon emissions than the manufacturing tax cut to compare and test the robustness of the numerical findings for mexico i calibrate the model with data for a developed country specifically the u s a despite differences in the magnitude of the changes in some variables the general findings mentioned above also hold for u s a data these results suggest that as found for the u s a in recent studies carbon taxes are not necessarily regressive rather the way revenue is recycled is a major determinant of how the carbon tax costs are distributed

tax evasion and optimal environmental taxes abstract this paper introduces a new argument to the debate about the role of environmental taxes in modern tax systems some environmental taxes particularly taxes on gasoline or electricity are more difficult to evade than taxes on labor or income when the tax base is shifted in a revenue neutral manner toward these environmental taxes the result is a net reduction in the amount of tax evasion using a carbon tax as a motivating example the tax evasion effect is shown to sharply reduce the welfare cost of controlling emissions a simple computable general equilibrium model suggests that the impact of considering tax evasion can be large costs are lowered by 28 in the united states by 89 in china and by 97 in india in countries with high levels of pre existing tax evasion a carbon tax will pay for itself through improvements in the efficiency of the tax system

unanticipated money and interest rates evidence on the relationship between unanticipated money and interestrates has been provided by two types of studies first several researchers have investigated the relationship using quarterly data second a number of researchers have examined the effect of money announcement surprises on interest rates in both instances the correlation between money surprises and interest rates has usually been found to be non negative this paper first provides an interpretation of the correlation between unanticipated money and interest rates in terms of federal reserve policy objectives and operating procedures then the correlation of unanticipated money and both short and long term interest rates is examined over weekly intervals combining several aspects of the previous quarterly and announcement studies in addition the distinction between unpredicted and unperceived money also is considered this abstract was borrowed from another version of this item

monetary policy implementation and the federal funds rate this paper investigates how the implementation of monetary policy affects the dynamics and the volatility of the federal funds rate since the early 1980s the most important changes in the fed s conduct of monetary policy refer to the role of the federal funds rate target and the reserve requirement system we show that the improved communication and transparency regarding the federal funds rate target has significantly increased the fed s influence on the federal funds rate since 1994 by contrast the declining role of required reserves in the u s has contributed to higher federal funds rate volatility our results suggest that the planned introduction of remunerated reserves will further enhance the controllability of the federal funds rate

monetary transmission mechanisms in a small open economy a bayesian structural var approach abstract this paper develops a bayesian structural var model for canada in order to estimate the effects of monetary policy shocks using the overnight rate target as the policy instrument i allow the policy variable and other home and foreign variables to interact with each other contemporaneously the key finding is that monetary policy affects the real economy through both the market interest rate and the exchange rate i also find that the bank of canada responds to any home and foreign variables that embodies information about future inflation and that external shocks are an important source of output fluctuations

identifying monetary policy shocks via changes in volatility a central issue of monetary policy analysis is the speciflcation of monetary policy shocks in a structural vector autoregressive setting there has been some controversy about which restrictions to use for identifying the shocks because standard theories do not provide enough information to fully identify monetary policy shocks in fact to compare difierent theories it would even be desirable to have over identifying restrictions which would make statistical tests of difierent theories possible it is pointed out that some progress towards over identifying monetary policy shocks can be made by using speciflc data properties in particular it is shown that changes in the volatility of the shocks can be used for identiflcation based on monthly us data from 1965 1996 difierent theories are tested and it is found that as sociating monetary policy shocks with shocks to nonborrowed reserves leads to a particularly strong rejection of the model whereas assuming that the fed accommodates demand shocks to total reserves cannot be rejected

the federal reserve s balance sheet and overnight interest rates empirical modeling of exit strategies abstract this paper provides a comprehensive study of the interplay between the federal reserve s balance sheet and overnight interest rates we model both the supply of and the demand for excess reserves treating outright securities holdings of the federal reserve as a policy tool we estimate the effects of unconventional monetary policy on overnight funding rates further we offer the first empirical assessment of the fomc s principles of the exit strategy assuming a path for removing monetary policy accommodation that is consistent with the fomc s exit principles we project that the federal funds rate increases to 70 basis points by 2016 settling in a corridor bracketed by the discount rate and the interest rate on excess reserves as excess reserves of depository institutions decline to near zero

the liquidity effect for open market operations abstract the liquidity effect is the negative relationship between the supply of federal funds and the overnight federal funds rate deviations of the federal funds rate from its target can be interpreted as demand innovations for federal funds permanent adjustments to demand are modeled as an unobserved component and estimated using the kalman filter to identify liquidity effects the demand based approach for identifying the liquidity effect contrasts previous work which concentrates on errors forecasting the supply of federal funds this paper finds a liquidity effect several times larger than that from previous studies indicating the market for federal funds is less liquid than previously thought the effect of a 1 billion increase in open market operations over a 1 week period is a decrease of the federal funds rate by about 12 basis points

the impact of money on short term interest rates this study reviews empirical evidence from four research methods related to the impact of money on short term nominal rates the studies consistently fail to find evidence supporting the much hypothesized short term negative relationship between money and nominal rates since at least april 1975 reasons for the absence of a negative relationship include the tendency of financial markets to anticipate corrective action by the fed whenever ml deviates from targeted growth ranges and a rapid adjustment of inflationary expectations to changes in money growth

monetary policy implementation and overnight rate persistence overnight money market rates are the predominant operational target of monetary policy as a consequence central banks have redesigned the implementation of monetary policy to keep the deviations of the overnight rate from the key policy rate small and short lived this paper uses fractional integration techniques to explore how the operational framework of four major central banks afiects the persistence of overnight rates our results suggest that a well communicated and transparent interest rate target of the central bank is a particularly important condition for a low degree of overnight rate persistence

commodity prices money surprises and fed credibilit strict monetarist theory in an extreme form holds that excessive money growth or the expectation of future money growth shows up immediately in the rapid inflation of goods prices however it is widely argued that for most goods prices are in fact sticky in the short run and reflect money growth only in the long run if one seeks a sensitive market measure of the perceived looseiless or tightness of monetary policy one must look elsewhere than at the general price level interest rates being determined in quickly adjusting financial markets are free to respond immediately to expectations regarding monetary policy in 1981 and 1982 every friday at 4 10 p m eastern standard time the federal reserve board would announce the money stock for the week ending nine days previously if the announced money stock was different from what the market had been expecting interest rates generally jumped in the same direction clearly they were responding to revisions of the expected future path of the money stock but nominal interest rates are an ambiguous indicator of expectations on the one hand an announced increase in the money stock may be received by the market as indicating a higher

the information content of weekly money supply announcements this paper analyzes the information content of weekly money supply announcements and the use of this information in the market determination of interest rates a short term rational expectations model of the financial market is constructed which incorporates the reaction of the federal reserve to deviations from target money supply and provides a context for analyzing the impact of announcements in the model the federal reserve attempts to maintain target growth rates in the money supply by compensating for past deviations from target announcements which contain an unanticipated movement in the money supply lead the public to expect that the federal reserve will change the rate of growth in the short run to compensate the revision of expectations about future short term money supply leads the public to revise their expectations about short term interest rates the implications of the model are empirically tested using data from a survey of expected changes in the money supply and u s treasury bill data the results support the implications of the model that is weekly money supply announcements do contain new information for the market determination of interest rates and it is only the unanticipated component of the announcement which is important

domestic regulation and the wto the case of water services in developing countries n recent years the interface between domestic regulation and trade liberalisa tion in services has received increasing attention in public policy debate inboth developed and developing countries trade in services to a much greaterextent than trade in goods is affected by a variety of domestic regulations whichmay in uence the effects of trade and investment liberalisation mattoo andsauve 2002 and 2003 many services particularly those provided by utilities ornetwork industries are characterised by various forms of market imperfection and regulation is needed in order to ensure a certain level of quality of service toprotect consumers or to protect the environment understandably governmentshave been concerned to retain national autonomy in regulation policy and havebeen wary of agreeing to commit themselves to common international rules inthis area as part of the uruguay round the general agreement on trade in services gats entered into force on 1 january 1995 with a set of binding rules anddisciplines to promote liberalisation of services trade and investment ows thewto ministerial declaration at doha in november 2001 agreed to negotiationson the reduction or elimination of tariff and non tariff barriers for environmentalgoods and services as part of the negotiations on trade in services within thegats framework wto 2001

adaptability of competitive electricity reforms a modular analysis abstract among the competitive electricity reforms that have been implemented in europe and the us for the last 18 years none has survived over several years without major changes their changing nature raises the question of their adaptability two characteristics of reforms play a key role on their adaptation properties firstly they are modular objects in the sense of baldwin c 2008 where do transactions come from modularity transactions and the boundaries of firms industrial and corporate change 17 1 155 195 secondly they are produced in an institutional process which leads to incomplete rules and designs pistor k xu c 2003 incomplete law international law and politics 35 931 1013 we propose a typology of adaptations based on the framework proposed by williamson o e 1991 comparative economic organization the analysis of discrete structural alternatives administrative science quarterly 36 2 269 296 for contracts 1 in case of small disturbances adaptations are realized quasi automatically by autonomous decisions of the institutions governing the implementation of reforms 2 in case of middle range disturbances adaption is made by coasian bargaining 3 finally in case of strong disturbances or when bargaining is not feasible the adaptation of reforms is in the hands of legislative and executive institutions north d c 2005 le processus du developpement economique editions d organisation these institutions can reform the reforms joskow p l 2006 introduction to electricity sector liberalization lessons learned from cross country studies in sioshansi f p ed electricity market reform an international perspective elsevier amsterdam pp 1 32 hogan w w 2002 electricity market restructuring reforms of reforms journal of regulatory economics 21 103 132 the role of these types of adaptations in each electricity reform is a consequence of the allocation of rights to the regulator to stakeholders and to legislative and executive institutions

is the agricultural industry spared from the influence of the australian carbon tax the australian agricultural sector provides food security for the nation and affects the livelihood of farmers and the development of rural communities this sector has been uneasy about the australian carbon tax scheme introduced in july 2012 although the government has exempted the agricultural sector from the scheme by employing a computable general equilibrium model and an environmentally extended social accounting matrix this article simulates the effects of different carbon tax policy scenarios the modeling results show that all agricultural sectors will be affected negatively but to differing degrees the household compensation policy will improve the performance of the poultry and fishing sectors while having opposite effects in the other agricultural sectors the inclusion of the agricultural industry into the carbon tax scheme will lead to a considerable further decrease in output employment and profitability in the agricultural sector and a significant further reduction in real gdp but a much larger emission reduction

long and short term interest rates in a risky world abstract the paper develops and tests a general equilibrium model in which variability or risk affects the choice of portfolios our measures of variability include only the variability of unanticipated growth in monetary and non monetary aggregates and our tests use data ending with the change in federal reserve procedures in october 1979 we find that increased variability of unanticipated money growth raises demands for debt and money and reduces the demand for real capital interest rates on both short and long term debt rise by a risk premium we estimate the size of the risk premium before and after the october 1979 change and we show that the change in federal reserve procedures moved the economy to a less efficient point

the reaction of exchange rates to economic news this paper examines the short run responses of spot exchange rates to several types of economic news survey data are used to divide economic announcements into expected and unexpected components with the latter measuring news the results indicate that exchange rates are systematically related to unexpected money announcements after the october 1979 switch in federal reserve operating procedures but not before this response does not appear to have changed however after the october 1982 federal reserve regime change short run exchange rate movements are not systematically related to news on inflation or real activity

estimating the fisher effect and the stochastic money growth process this paper demonstrates that a change in the stochastic process generating money can alter the relationships between money and inflation and between inflation and interest rates the extent to which inflation is forecastable is shown to depend significantly on the extent to which money is forecastable thus the greater the persistence and forecastability of money the greater the likelihood of observing a statistically significant fisher effect us data over the 1953 86 period are used to demonstrate that instability in the fisher effect coincides with changes in the stochastic process generating money there is a significantly stronger fisher effect during a subsample in which money and hence inflation are more predictable

how does tax system on energy industries affect energy demand co2 emissions and economy in china abstract energy savings and co2 emission reduction have become a major issue in recent years taxes on energy production sectors may be an effective way to save energy reduce co2 emissions and improve environmental quality this paper constructs a dynamic recursive computable general equilibrium cge model to analyze the impact of the energy tax on energy economy and environment from the perspective of tax rates and tax forms specific tax and ad valorem tax the results show that adjusting the tax system and the tax rate has important implications for energy conservation while having minor impacts on the output of other industries the impact of an increasing energy tax on the energy demand is greater than the impact on sectoral output indicating that energy efficiency will be increased to some extent the co2 reduction will increase over time when an ad valorem tax is implemented on enterprises we found that ad valorem tax has greater elasticity of economic output energy demand and co2 emission reduction the results support the direction of china s resource tax reform however we argue that it is better to increase the tax rate relatively and relax the control on energy prices so that energy efficiency will increase

impact of a carbon tax on the chilean economy a computable general equilibrium analysis abstract in 2009 the government of chile announced their official commitment to reduce national greenhouse gas emissions by 20 below a business as usual projection by 2020 due to the fact that an effective way to reduce emissions is to implement a national carbon tax the goal of this article is to quantify the value of a carbon tax that will allow the achievement of the emission reduction target and to assess its impact on the economy the approach used in this work is to compare the economy before and after the implementation of the carbon tax by creating a static computable general equilibrium model of the chilean economy the model developed here disaggregates the economy in 23 industries and 23 commodities and it uses four consumer agents households government investment and the rest of the world by setting specific production and consumptions functions the model can assess the variation in commodity prices industrial production and agent consumption allowing a cross sectoral analysis of the impact of the carbon tax the benchmark of the economy upon which the analysis is based came from a social accounting matrix specially constructed for this model based on the year 2010 the carbon tax was modeled as an ad valorem tax under two scenarios tax on emissions from fossil fuels burned only by producers and tax on emissions from fossil fuels burned by producers and households the abatement cost curve has shown that it is more cost effective to tax only producers rather than to tax both producers and households this is due to the fact that when compared to the emission level observed in 2010 a 20 emission reduction will cause a loss in gdp of 2 and 2 3 respectively under the two scenarios the tax value that could lead to that emission reduction is around 26 us dollars per ton of co2 equivalent the most affected productive sectors are oil refinery transport and electricity having a contraction between 7 and 9 analyzing the electricity sector by energy source the production of electricity from fossil fuels will decrease by 11 but electricity from renewables will increase by 43 electricity producers will pass the cost of the carbon tax to the consumer by increasing the price of electricity by 8 the findings of this paper will allow policy makers to take better and more informed decisions by providing a cross sectoral analysis of the impact on the economy of reducing emissions by 20 by implementing a national carbon tax