nominal income targeting in an open economy optimizing model abstract this paper presents simulation results regarding the performance of nominal income targeting a monetary policy rule that sets interest rates in response to deviations of nominal gdp growth from a target path the macroeconomic model is one in which agents solve dynamic optimization problems with rational expectations but in an environment with slow price adjustments in the present version consumption choices reflect habit formation and the economy is open to international flows of goods and securities when calibrated to quarterly us data the model s results suggest that nominal income targeting performs well in relation to inflation targeting and taylor rules

exchange rate pass through in developing and emerging markets a survey of conceptual methodological and policy issues and selected empirical findings abstractglobal integration has increased the international linkages of financial markets for emerging market countries a key channel for the international transmission of inflation and economic cycles is from exchange rate movements to domestic prices known as exchange rate pass through erpt this article reviews the conceptual methodological and policy issues connected with erpt in emerging market and developing countries and critically surveys selected empirical studies a key contribution is to categorise and compare the heterogeneous methodologies used to extract erpt measures in the empirical literature single equation models and systems methods are contrasted frequent misspecifications that produce unreliable erpt estimates are highlighted the discerning policy maker needs to ascertain by which methods erpt measures were calculated the controls and restrictions applied and the time frame and stability of the estimates

conservative central banks and nominal growth exchange rate and inflation targets a framework is developed in which inflation biases with different target variables are compared a nominal growth target measured in consumer prices may yield less stabilization bias than a nominal income growth target exchange rate and inflation targets result in less stabilization bias than an income growth target the more important the terms of trade stabilization persistence in output causes excessive stabilization of productivity shocks and of shocks to the terms of trade under discretion an inflation weight conservative central bank is more likely under an inflation target than under an exchange rate target and less likely under a nominal income growth target

what aspects of formality do workers value evidence from a choice experiment in bangladesh this study uses a choice experiment among 2 000 workers in bangladesh to elicit willingness to pay wtp for job attributes a contract termination notice working hours paid leave and a pension fund using a stated preference method allows calculation of wtp for benefits in this setting despite the lack of data on worker transitions and the fact that many workers are self employed which makes it difficult to use revealed preference methods workers highly value job stability the average worker would be willing to forego a 27 percent increase in income to obtain a 1 year contract relative to no contract or to forego a 12 percent increase to obtain thirty days of termination notice there is substantial heterogeneity in wtp by type of employment and gender women value shorter working hours more than men while government workers place a higher value on contracts than do private sector employees

gender differences in training capital and wages this paper constructs an equilibrium job matching model where workers differ in their attachment to the labor force the model predicts that workers with weaker attachment to the labor market will receive lower starting wages and lower post training wages and will be placed in jobs that offer less training and use less capital the implications of the model for gender differences in pay and job assignment are tested with the eopp data set ourfindings suggest that while training intensity during the first three months of employment is similar in positions filled by males and females females are employed in positions that have a shorter duration of on the job training and that use less capital these differences in on the job training and capital in positions filled by men and women as well as a lower market value for women s prior labor market experience account for a substantial part of the gap in wages between males and females

currency substitution policy rule and pass through evidence from turkey in this article we analyse empirically currency substitution and exchange rate pass through in the turkish economy where their ongoing presence could undermine the implementation of a successful monetary policy especially in a flexible exchange rate regime even though a considerable time has passed after the implementation of a flexible exchange rate regime in turkey by using vector error correction model for the period from 1987 to 2004 we find that the currency substitution and exchange rate pass through still have importance in the turkish economy and the monetary policy stance has been considerably strong possibly as a response of ongoing presence of them if this is the case to avoid the undesired consequences of this strong monetary policy turkey should consider some policy measures to reduce the degree of pass through and currency substitution

monthly pass through ratios abstract this paper estimates monthly pass through ratios from import prices to consumer prices in real time conventional time series methods impose restrictions to generate exogenous shocks on exchange rates or import prices when estimating pass through coefficients instead our estimation strategy follows an event study approach based on monthly releases in import prices projections from a dynamic common factor model with daily panels before and after monthly releases of import prices define the innovation for import prices we apply our identification procedure to swiss prices and find strong evidence that the median of the monthly pass through ratio is around 0 3 tests show that standard assumptions of non real time data and limited information breath are critical for the pass through estimates

exchange rate pass through into import prices revisited what drives it a large sample of developed and emerging economies is utilized to investigate import exchange rate pass through panel models reveal that various economic aspects of the destination country can explain about one third of the total variation in pass through elasticities and the remaining variation comes largely in the form of unobserved country specific effects inflation exchange rate volatility openness and relative wealth play a clear role as drivers of emerging markets pass through whereas the output gap and protectionism appear influential more generally nonlinearity regarding large versus small changes in the exchange rate is quite pervasive our evidence challenges the widely held view that pass through has been universally falling in developed markets and that it is higher for emerging markets the economic drivers are shown to play a role as out of sample predictors of pass through the findings confirm pricing to market theories and have implications for the optimal conduct of monetary policy

do women prefer women s work a new methodology is implemented to determine whether job characteristics can explain why women are concentrated in low paying female dominated occupations extensive information on jobs and labour market histories are collected from the 1982 national longitudinal survey youth cohort for women and men characterized by substantial labour market attachment significant differences in nonpecuniary job characteristics between the male and female samples are found to exist nevertheless we find no evidence that women differentially favour those job characteristics commonly associated with women s work

limits of floating exchange rates the role of foreign currency debt and import structure abstract a traditional argument in favor of flexible exchange rates is that they insulate output better from real shocks because the exchange rate can adjust and stabilize demand for domestic goods through expenditure switching this argument is weakened in models with high foreign currency debt and low exchange rate pass through to import prices the present study evaluates the empirical relevance of these two factors we analyze the transmission of real external shocks to the domestic economy under fixed and flexible exchange rate regimes for a broad sample of countries in a panel var and let the responses vary with foreign currency debt and import structure we find that flexible exchange rates do not insulate output better from external shocks if the country imports mainly low pass through goods and foreign indebtedness is high

low inflation pass through and the pricing power of firms abstract recently there has been a significant decline in the degree to which firms pass through changes in costs to prices a decline that is frequently characterized as a reduction in the pricing power of firms the decline appears to be associated with the decline in inflation in many countries the decline has important implications for monetary policy because it affects both forecasts of inflation and the effects of changes in monetary policy on inflation some have argued that the decline in pricing power helped to keep inflation low in the face of apparently strong demand pressures in the united states in the late 1990s this paper puts forth the view that the decline in pass through or pricing power is due to the low inflation environment that has recently been achieved in many countries first a microeconomic model of price setting is used to show that lower pass through is caused by lower perceived persistence of cost changes evidence is then presented showing that inflation is positively correlated with persistence of inflation suggesting that the low inflation itself has caused the low pass through an economy wide model consistent with the micromodel is then presented to illustrate how such changes in pricing power affect output and inflation dynamics in favorable ways but can disappear quickly if monetary policy and expectations change

real exchange rate monetary policy and the u s economy evidence from a favar model this paper examines the effects of exchange rate depreciation to the u s economy in a factor augmented vector autoregression model using monthly data of 148 variables for the post bretton woods period of 1973 2017 exchange rate shock is identified to reflect exogenous disturbances to the foreign exchange market and movements in exchange rate that are not accounted for by changes in the u s monetary policy we find that depreciation is expansionary and inflationary to the broad u s economy the current account improves over time conforming to the j curve theory and monetary policy is leaning against the wind jel e3 e5 f31 f32 f41

exchange rate and utilization of free trade agreements focus on rules of origin abstract tariff rates under a free trade agreement fta are not necessarily used in the majority of trade even among members of an fta one of the causes of this phenomenon is the presence of rules of origin roos which require exporters to comply with specific conditions when utilizing an fta scheme to consider how roos should be designed so that exporters can more robustly use an fta scheme this paper investigates the effect of exchange rates on fta scheme utilization with a focus on roos exchange rates affect exporters compliance with roos by changing the so called value added ratio which is defined as 1 price of imported inputs from non fta member countries export product price based on a model of pricing to market we propose that an unexpected depreciation of exporters currency against importers currency improves the value added ratio through a rise in the export product s price which in turn enhances exporters utilization of an fta scheme we also show strong empirical support for the proposition using the detailed product level data on fta scheme utilization in korea s imports from association of south east asian nations asean countries

exchange rate pass through to domestic prices does the inflationary environment matter abstract the paper tests a hypothesis suggested by j taylor 2000 low inflation pass through and the pricing power of firms european economic review 44 7 1389 1408 that a low inflationary environment leads to a low exchange rate pass through to domestic prices to test this hypothesis the paper derives a pass through relation based on new open economy macroeconomic models a large database that includes 1979 2000 data for 71 countries is used to estimate this relation there is strong evidence of a positive and significant association between the pass through and the average inflation rate across countries and periods the inflation rate moreover dominates other macroeconomic variables in explaining cross regime differences in the pass through

exchange rate pass through and inflation a nonlinear time series analysis abstract this paper investigates the relationship between the exchange rate pass through erpt and inflation by estimating a nonlinear time series model based on a simple theoretical model of erpt determination we show that the dynamics of erpt can be well approximated by a class of smooth transition autoregressive star models using the past inflation rate as a transition variable we employ several u shaped transition functions in the estimation of the time varying erpt to us domestic prices the estimation result suggests that declines in the erpt during the 1980s and 1990s are associated with lowered inflation

globalisation pass through and the optimal policy response to exchange rates abstract in this paper we examine how monetary policy should respond to nominal exchange rates in a new keynesian open economy model that allows for a non trivial role for sterilised intervention the paper develops the argument against the backdrop of the evolving policy making environment of asian economies sterilised intervention can be a potent tool that offers policymakers an additional degree of freedom in maximising global welfare we show that the gains to sterilised intervention are greater when goods market integration is low and exchange rate pass through is high however increased financial internationalisation reduces the effectiveness of sterilised intervention as the international policy trilemma becomes more relevant unsterilised intervention may also have a role to play although the potential welfare gains from this are generally smaller most central banks in asia have actively used sterilised foreign exchange intervention as a policy tool to smooth exchange rates but over time declining exchange rate pass through and the increasing international integration of financial and goods markets will tend to reduce the efficacy of sterilised intervention given the limited effectiveness of unsterilised intervention our model implies that the role of exchange rate movements in the optimal setting of monetary policy in asia is decreasing

investigation of production sales and inventory relationships using multicointegration and non symmetric error correction models the accumulated sum of a stationary series is called integrated if a linear combination of some of the integrated series is stationary it is said to be cointegrated this paper presents empirical results on inventories to consider the possibility of a deeper form of cointegration called multicointegration which is introduced in granger and lee 1989 a vector integrated series is multicointegrated if the accumulated sum of its stationary cointegrated linear combination is again cointegrated with itself inventory which is the accumulated sum of production minus sales is probably cointegrated with production and sales the empirical results generally support the presence of multicointegration of production and sales in many u s industries and industrial aggregates the results also favour the non symmetric error correction model providing evidence that the strength of attraction is different on both sides of the attractor a modified s s rule for inventory control is investigated in the context of a non symmetric error correction model and the results generally do not support the s s rule sufficient evidence is found to conclude that multicointegration is a useful concept in the area of inventory determination

worker sorting and the risk of death on the job this article examines worker sorting across occupations in response to the risk of death on the job we use family structure as a proxy for willingness to trade safety for wages to test the proposition that workers with strong aversion to this risk sort into safer jobs we estimate conditional logit models of occupation choice as a function of injury risk and other job attributes our results confirm the sorting hypothesis within gender single moms and dads are the most averse to risk overall differences in the risk of death across occupations explain about one quarter of occupational gender segregation

gains from anchoring inflation expectations evidence from the taper tantrum shock abstract have improvements in monetary policy frameworks increased emerging market resilience to external shocks this paper exploits the may 2013 taper tantrum episode in the united states to study the reaction of 18 large emerging markets to an external shock conditioning on their degree of inflation expectations anchoring we find that while the tapering announcement negatively affected growth prospects regardless of the level of anchoring countries with weakly anchored inflation expectations experienced larger exchange rate pass through to consumer prices and higher inflation these findings suggest that gains in inflation expectations anchoring can improve central bank s policy trade offs when facing external shocks

inflation targeting and exchange rate pass through this paper analyzes how endogenous imperfect exchange rate pass through affects inflation targeting optimal monetary policies in a new keynesian small open economy the paper shows that an inverse relation exists between the pass through and the insulation of the economy from foreign and monetary policy shocks and that imperfect pass through tends to decrease the variability of the terms of trade furthermore with cpi inflation targeting in the short run delayed pass through constrains monetary policy more than incomplete pass through and interest rate smoothing amplifies this effect when the pass through decreases the variability in economic activity tends to rise and the trade off between the stabilization of cpi inflation and output worsens in direct relation to how strictly the central bank is targeting cpi inflation in contrast with domestic inflation targeting optimal monetary policy is not constrained and opposite results occur consequently imperfect pass through favors the choice of domestic to cpi inflation targeting

another pass through bites the dust oil prices and inflation el presente articulo presenta evidencia de que el traspaso de los movimientos del precio del petroleo al nivel general de precios ha disminuido en forma importante en las ultimas decadas se encuentra que tal disminucion es generalizada para un amplio conjunto de paises luego de documentar correlaciones entre el indice de precios al consumidor y el precio del petroleo se utilizan dos estrategias de estimacion en un intento por identificar adecuadamente el efecto inflacionario de los shocks del petroleo primero se estima la curva de phillips tradicional para 34 paises aumentada de modo de incluir el petroleo y testear si existe quiebre estructural esta metodologia muestra una caida en el traspaso medio estimado para los paises industrializados y en menor medida para las economias emergentes segundo se estiman vectores autorregresivos en ventanas moviles para una submuestra de paises para los que existen datos suficientes se derivan funciones de impulso respuesta de la inflacion a los shocks petroleros y se interpretan las integrales como estimaciones del traspaso se encuentra que el efecto de los shocks petroleros sobre la inflacion se ha reducido en la mayoria de los doce paises de la muestra entre los factores que podrian explicar esta caida en nuestra opinion los mas importantes son que la intensidad economica del petroleo se ha reducido en el mundo que tambien ha disminuido el traspaso del tipo de cambio que el ambiente inflacionario es mas favorable y que el actual shock del precio del petroleo es el resultado de una solida demanda mundial estos factores ayudan a entender no solo por que el actual shock ha tenido efectos inflacionarios limitados sino asimismo por que sus consecuencias en el producto tambien han sido limitadas

exchange rates and monetary policy in emerging market economies this paper investigates the effects of exchange rate regimes and alternative monetary policy rules for an emerging market economy that is subject to a volatile external environment in the form of shocks to world interest rates and the terms of trade in particular we highlight the impact of financial frictions and the degree of exchange rate pass through in determining the relative performance of alternative regimes in stabilizing the economy in the face of external shocks our results are quite sharp when exchange rate pass through is high a policy of non traded goods inflation targeting does best in stabilizing the economy and is better in welfare terms when exchange rate pass through is low however a policy of strict cpi inflation targeting is better in all cases a fixed exchange rate is undesirable in addition financial frictions have no implications for the ranking of alternative policy rules

permanent and transitory shocks in the presence of asymmetric error correction this article highlights the potential importance of asymmetries in the loading vector of a set of cointegrated variables for the construction analysis and interpretation of permanent and transitory shocks using impulse response functions we derive an asymmetric version of the permanent transitory decomposition suggested by gonzalo and ng 2001 and illustrate the potential importance of such asymmetries using the cay data of lettau and ludvigson 2004

exchange rate pass through in emerging countries do the inflation environment monetary policy regime and central bank behavior matter abstract in this paper we estimate the exchange rate pass through erpt to import and consumer prices for a sample of 14 emerging countries over the 1994q1 2015q3 period to this end we augment the traditional bivariate relationship between the nominal effective exchange rate and inflation by accounting for monetary stability proxied by the inflation environment monetary policy regime and central bank behavior we show that both the level and volatility of inflation as well as adopting an inflation target or the transparency of monetary policy decisions clearly reduce erpt to consumer prices however uncertainty about domestic monetary policy seems less relevant in explaining the pass through to the price of imports

intermediate goods and business cycles implications for productivity and welfare this paper presents an aggregate demand driven model of business cycles that provides a new explanation for the procyclicality of productivity and simultaneously predicts large welfare losses from monetary nonneutrality the key features of the model are an input output production structure imperfect competition countercyclical markups and for some results state dependent price rigidity true technical efficiency is procyclical even though production takes place with constant returns without technology shocks or technological externalities the paper has observable implications that distinguish it empirically from related work these implications are generally supported by data from u s manufacturing industries copyright 1995 by american economic association

revisiting the exchange rate pass through a general equilibrium perspective abstract a large literature estimates the exchange rate pass through to prices erpt using reduced form approaches whose results are an important input for central banks we show two shortcomings of these empirical measures for monetary policy analysis which are quantitatively important and may lead to imprecise and biased inflation predictions first while the literature describes a single erpt which we will label unconditional there are different erpt conditional on each shock that hits the economy second these crucially depend on expected monetary policy so that empirical erpt measures should not be taken as given in evaluating policy actions we use a simple model of a small and open economy to understand the intuition behind these two critiques showing that these results seem to hold under many alternative specifications we then highlight the quantitative relevance of these distinctions using a large scale dsge model of a small open economy

brics how important is the exchange rate pass through this paper analyses the exchange rate pass through erpt into domestic consumer prices in brics brazil russia india china and south africa countries from mid 1990s onwards by using three different econometric approaches i e the single equation approach the var approach and the time varying parameter approach it is also studied the role of macroeconomic determinants in erpt our results suggest that a erpt is higher for the emerging markets with mostly floating exchange rates brazil russia and south africa than for the other brics countries b exchange rate explains on average around the 40 of the price variance for brazil russia and south africa and c inflation volatility exchange rate volatility and openness seem to be the key macroeconomic determinants in brics countries

gender wage discrimination methodological issues and empirical results for a canadian public sector employer a methodology for testing the statistical significance of wage discrimination is presented from two perspectives first the question of whether or not wage discrimination is present and second the question of whether or not wage discrimination is of sufficient magnitude to make a statistically significant contribution to the earnings advantage of the majority group using this methodology the total effect of within occupation wage discrimination against females at a large canadian public sector employer is estimated to be statistically insignificiant at the same time occupational femaleness has a negative effect on female earnings so that a pay equity programme is estimated to reduce the earnings advantage of males at this employer by 27 37

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

estimating workers marginal willingness to pay for job attributes using duration data this paper develops and applies a method for estimating workers marginal willingess to pay for job attributes when workers job choices are characterized by imperfect information and labor market search as an application this paper analyzes the job durations of white males using data from the national longitudinal survey youth cohort and the dictionary of occupational titles estimates of workers willingness to pay derived from the job duration model are compared with those derived from an hedonic wage model

input substitution export pricing and exchange rate policy abstract this paper develops a small open economy model with sticky prices to show why a flexible exchange rate policy is not desirable in east asian emerging market economies we argue that weak input substitution between local labor and import intermediates in traded good production and extensive use of foreign currency in export pricing in these economies can help to explain this puzzle in the presence of these two trade features the adjustment role of the exchange rate is inhibited so even a flexible exchange rate cannot stabilize the real economy in face of external shocks instead due to the high exchange rate pass through exchange rate changes will lead to instability in domestic inflation as a result a flexible exchange rate regime becomes less desirable in a very limited parameter space a fixed exchange rate can be superior to monetary policy rules with high exchange rate flexibility such as non traded good price targeting in most cases however non traded good price targeting still delivers higher welfare

price adjustment and exchange rate pass through abstract this paper develops a simple theoretical model that can be used to account for the determinants of exchange rate pass through to consumer prices while recent evidence has found low estimates of pass through in many countries there is little consensus on an explanation for this our paper argues that sticky prices represent a key determinant of exchange rate pass through we make this argument in two stages first holding the frequency of price change constant we show that our model calibrated to data from low inflation countries can reproduce the estimates of very low pass through for these countries the principal determinant of low pass through in this case is the slow adjustment of prices we then extend the model to allow the frequency of price change to be endogenous calibrating to a wider set of countries including both low inflation and high inflation countries we show that our model implies that exchange rate pass through is increasing in average inflation but at a declining rate performing the identical exercise on the data we find a striking correspondence between the predictions of the model and those of the data

a systematic framework for analyzing the dynamic effects of permanent and transitory shocks this paper proposes a systematic framework for analyzing the dynamic e ects of permanent and transitory shocks on a system of n economic variables we consider a two step orthogonolization on the residuals of a vecm with r cointegrating vectors the rst step separates the permanent from the transitory shocks and the second step isolates n r mutually uncorrelated permanent shocks and r transitory shocks the decomposition is computationally straightforward and entails only a minor modi cation to the choleski decomposition commonly used in the literature we then show how impulse response functions can be constructed to trace out the propagating mechanism of shocks distinguished by their degree of persistence in an empirical example the dynamic responses to the identi ed permanent shocks have properties similar to shocks to productivity the real interest rate and money growth even though no economic

gender discrimination and compensating differentials in sweden the determinants of the unexplained component of the male female wage difference in sweden are examined the hypothesis that there is a compensating wage differential associated with undesirable job charcteristics is tested hedonic wage equations are estimated using data collected in the 1981 swedish level of living survey the estimation takes into consideration possible sample selection bias due to the non randomness takes of employment and the potential endogeneity of job choice variables in wage offer equations overall the analysis indicates that compensating wage differentials are not a major determinant of the male female wage difference in sweden

revisiting the pass through of exchange rate in the transition economies new evidence from new eu member states abstract this paper revisits the exchange rate pass through erpt for a set of transition economies namely for 10 new eu member states nms over the period 1996 2015 as the transition process has entailed a deep transformation in their economies and institutions the extent of pass through is expected to be regime dependent on this changing macroeconomic environment we propose to implement a nonlinear panel smooth transition regression pstr approach where transitional factors related to eu accession are captured properly from the data our empirical results suggest that the inflation regime is the main macroeconomic driver of the extent of erpt when inflation levels exceed the threshold of 4 56 i e within a high inflation environment the degree of pass through is higher and reaches a full erpt however with the shift towards a stable and low inflation regime i e when inflation levels are below a threshold of 4 56 the extent of pass through significantly declines in the nms group our findings shed further light on how the credibility gained through the commitment to euro area membership is beneficial and would ensure better control of inflation

emerging floaters pass throughs and some new commodity currencies in spite of early skepticism on the merits of floating exchange rate regimes in emerging markets 8 of the 25 largest countries in this group have now had a floating exchange rate regime for more than a decade using parsimonious var specifications covering the period of floating exchange rates this study computes the dynamics of exchange rate pass throughs to consumer price indices we find that pass throughs have typically been moderate even though emerging floaters have seen considerable nominal and real exchange rate volatilities previous studies that set out to estimate exchange rate pass throughs ignored changes in policy regimes making them vulnerable to the lucas critique we find that within the group of emerging floaters estimated pass throughs are higher for countries with greater nominal exchange rate volatilities and that trade more homogeneous goods these findings are consistent with the pass through model of floden and wilander 2006 and earlier findings by campa and goldberg 2005 respectively furthermore we find that the indonesian rupiah the thai baht and possibly the mexican peso are commodity currencies in the sense that their real exchange rates are cointegrated with international commodity prices

market power price adjustment and inflation we study the responses of real and nominal prices to random flutuations in costs and money growth using a monetary search economy in which there are no costs or temporal restrictions on sellers ability to change prices the economy exhibits a form of price stickiness in that the price level may react incompletely to either type of shock as a result of endogenous changes in the average mark up driven by movements in consumers search intensity the average mark up falls as inflation rises a finding consistent with emprical observations as a result of this reduction in market power prices become more responsive to shocks as inflation rises our results are consistent with empirical findings that the degree of price adjustment in response to both cost and money growth shocks is increasing in the average rate of inflation that the variance of inflation increases with its average level and that positive and negative shocks to money growth have asymmetric effects