black market exchange rate and the productivity bias hypothesis abstract previous studies that tested the productivity bias hypothesis employed the official nominal exchange rate in constructing the real rate hence in testing the productivity bias hypothesis in this paper we show that if official real exchange rate does not support the productivity bias hypothesis the real black market rate does this conjecture is tested by using data from chile colombia and costa rica

dynamic perspectives on agricultural policy issues among the innovators fred waugh was one of the most prolific he made pioneering contributions in linear programming statistics and econometrics demand analysis the welfare effects of price risk and the analysis and explanation of commodity cycles as a research leader mentor and teacher at the usda he left his mark on the work of later generations of researchers i find myself no exception as will become clear from what i have to say in this paper even though i never met him in person my work has been influenced by what he wrote and by what his students wrote and taught among the many topics that interested waugh were the dynamics of free market behavior and the implications for policy formation in this paper i consider models of markets in which the dynamics run in two directions forward from current conditions to expectations of future prices and back from price expectations to current decisions both types of linkages can be crucial in competitive models of agricultural production in which land has a prominent role as the quintessential fixed asset a central challenge of market analysis from waugh s time till now has been to infer from market observations whether markets are behav

cattle cycles heterogeneous expectations and the age distribution of capital abstract this paper builds a dynamic forward looking model describing the approximate 10 year cattle cycle the theoretical model improves on existing models by 1 keeping track of the age distribution of the capital stock 2 allowing for heterogeneous expectations and 3 recognizing that cow calf operators make investment decisions on both the cow and calf margins the structural parameters are estimated with gmm techniques and used to produce impulse response functions which show that the model endogenously propagates shocks to produce 10 year cattle cycles without relying on shocks that hit every 10 years focusing solely on several major macroeconomic shocks i also show that the model is capable of matching the timing and amplitude of the u s cattle cycle

purchasing power parity in the long run a cointegration approach this paper utilizes cointegration analysis to examine purchasing power parity relationships over a long time horizon the results indicate that the exchange rate is cointegrated strongly with the wholesale price index ratio and somewhat weakly with the consumer price index ratio the cointegrating coefficient between the exchange rate and the price ratio is close to one when cointegration is confirmed the hypothesis that the real exchange rate follows a random walk is rejected in most cases finally a new test for common trends finds no such common trends in exchange rates or price ratios copyright 1990 by ohio state university press

agricultural household models extensions applications and policy this book presents the basic model of an agricultural household that underlies most of the case studies undertaken so far the model assumes that households are price takers and is therefore recursive the decisions modeled include those affecting production and the demand for inputs and those affecting consumption and the supply of labor comparative results on selected elasticities are presented for a number of economies the empirical significance of the approach is demonstrated in a comparison of models that treat production and consumption decisions separately and those in which the decisionmaking process is recursive the book summarizes the implications of agricultural pricing policy for the welfare of farm households marketed surplus the demand for nonagricultural goods and services the rural labor market budget revenues and foreign exchange earnings in addition it is shown that the basic model can be extended in order to explore the effects of government policy on crop composition nutritional status health saving and investment and to provide a more comprehensive analysis of the effects on budget revenues and foreign exchange earnings methodological topics primarily the data requirements of the basic model and its extensions along with aggregation market interaction uncertainty and market imperfections are discussed the most important methodological issues the question of the recursive property of these models is also discussed

a simple model of endogenous agricultural commodity price fluctuations with storage a debate has been raging for centuries regarding the effects of interannual storage on commodity prices most analysts consider storage to function as a price stabilizer while others place it at the core of an explanation of intriguing features of commodity price series such as skewed distributions most studies have been developed in the context of the theory of competitive storage where random shocks affect supply or demand recently the endogenous chaotic behavior of markets has become another possible hypothesis regarding the origin of commodity price fluctuations we develop a nonlinear cobweb model with intra and interannual storage risk averse agents and adaptive expectations like the theory of competitive storage this nonlinear cobweb model with storage can reproduce some of the stylized facts of agricultural commodity prices autocorrelation of first rank low kurtosis and skewness in addition the effects of storage on price variation are mixed in the presence of interannual storage chaotic price series show less variation compared to a situation without interannual storage but we find that storage contributes to the endogenous volatility of prices by making chaotic dynamics more likely

a farm household model for agri food policy analysis in developing countries application to smallholder farmers in sierra leone this paper presents a generic farm household model for use in the context of developing countries to gain knowledge on food security and rural poverty alleviation under different policy options it is a static positive programming model which simultaneously solves a set of microeconomic farm models reproducing the behaviour of representative individual farm households this model is designed to capture key features of developing countries agriculture such as the non separability of production and consumption decisions due to market imperfections the inter linkage between transaction costs and market participation decisions the interaction among farm households for factor markets and the seasonality of resource use model use is illustrated in this paper by simulating the impact of rice seed policy on the livelihood of representative smallholder farmers in sierra leone results show that the seed policy would improve farm productivity and boost household income but that it is not sufficient to fight poverty since 90 of the surveyed farm households would continue to live below the extreme poverty line of 1 usd equivalent per person per day

policy reform shadow prices and market prices how should public projects and policy reforms be assessed when market prices give misleading signals revenues and costs at market prices then give distorted measures of social gains and losses and our appraisal should use social opportunity costs or shadow prices we show how shadow prices may be integrated into an analysis of policy reform demonstrate the critical dependence of these prices on government policy and analyse their relations with market prices the model allows for a wide range of sources of impairment of price signals we also discuss key issues in the analysis of price reform and privatisation

does ignoring heterogeneity in impacts distort project appraisals an experiment for irrigation in vietnam could the simplifying assumptions made in project appraisal be so far from the truth that the expected benefits of public investments are not realized using data for vietnam commonly used estimates of the benefits from irrigation investments based on means are compared with impacts assessed through an econometric modeling of marginal returns that allows for household and area heterogeneity using integrated household level survey data the simpler method performs well in estimating average benefits nationally but can be misleading for some regions and by ignoring heterogeneity it overestimates gains to the poor and underestimates gains to the rich at moderate to high cost levels ignoring heterogeneity in impacts results in enough mistakes to eliminate the net benefits from public investment when irrigating as little as 3 percent of vietnam s non irrigated land the savings from the more data intensive method are sufficient to cover the full cost of the extra data required ignoring other benefits from that data

choosing rural road investments to help reduce poverty the author examines how rural road investment projects should be selected and appraised when the objective is poverty reduction after critically reviewing past and current practices the author develops an operational approach grounded in a public economics framework in which concerns of equity and efficiency are inseparable information is incomplete in important ways and resources are limited she addresses a key problem that an important share of the benefits to the poor from rural roads cannot be measured in monetary terms the selction formula she proposes aims to identify places where poverty and economic potential are high and access is low she illustrates the method using data for and project experience in vietnam among the advantages of proceeding as outlined in her proposal this approach holds the hope of building capacity and is participatory it extracts local information that may not be readily available to the central government and it appears to be feasible because it relies on local authorities participating in the appraisal of subprojects

multivariate cointegration analysis and the long run validity of ppp this paper tests the long run validity of ppp using johansen s multivariate cointegration methodology on exchange rates and domestic and foreign price levels monthly data covering the recent flexible exchange rate period of the dm vis a vis 15 currencies le ad to the following conclusion ppp seems to hold in the long run for s ix european currencies the pound lira norwegian krone schilling escudo and peseta however ppp has to be rejected for the united states and the canadian dollar as well as for the belgian franc and the danish krone nevertheless the authors analysis is more favorable to ppp as a long run property of exchange rates than the recent work applying the engle granger regression methodology copyright 1993 by mit press

is the business cycle characterized by deterministic chaos abstract tests are conducted on u s macroeconomic data for the presence of low dimensional deterministic chaos where deterministic chaos is defined as in grandmont s 1985 walras bowley lecture or in brock 1986 the idea is to test for evidence of endogenous instability causing the business cycle low order autoregressions are hard to reject with our methods evidence of chaos is weak but our tests may be too weak to detect it evidence of nonlinearity is present in employment 1950 i to 1983 iv unemployment 1949 i to 1982 iv monthly post war industrial production and pig iron production 1877 1937

chaos significance mechanism and economic applications imagine a bargaining model say involving diplomats negotiating tariff levels or a disarmament treaty in which each party has been instructed by higher headquarters to respond to each new offer by her opposite number with a counteroffer that is to be calculated from a simple reaction function provided in advance both negotiating parties are prohibited from revealing their own reaction functions to the other if the perfectly deterministic sequence of offers and counteroffers that must emerge from these simple rules were to begin to oscillate wildly and apparently at random the negotiations could easily break down as each party not understanding the source of the problem came to suspect the other side of duplicity and sabotage yet all that may be involved as we will see is the phenomenon referred to as chaos a case that is emphatically not pathological but in which a dynamic mechanism that is very simple and deterministic yields a time path so complicated that it will pass most standard tests of randomness chaos has become a subject of great interest to specialists and nonspecialists alike besides economics it has entered the literature of geometry physics ecology and meteorology it has been written about at length in the new york times magazine and scientific american as well as technical publications this article seeks to describe what it is how it works and what it means for economics

why are services cheaper in the poor countries in their important work on international comparisons of national incomes and of comparative price structure kravis heston and summers i982 p 8 have noted that services are much cheaper in the relative price structure of a typical poor country than in that of a rich country this phenonomen has been documented now fairly systematically by the data gathered under their guiding hand of the united nations international comparison icp which covers 34 countries table i reproduced from their work i982 and fig i based on rows 3 and ii 13 indeed show this tendencyfor the relationship between relative service prices and real per capita gdp in this kravis heston summers 34 country 6 group sample the tendency is strongly evident except for the intermediate groups iii and iv

on nonlinear dynamics the case of the pork cycle new methods for analyzing nonlinear dynamic processes are used to evaluate the hogcorn price ratio the results present evidence of nonlinear dynamics in the pork cycle moreover while garch processes account for some of the nonlinearities the pork cycle is apparently characterized by more complex dynamic forms the empirical analysis provides some evidence of the presence of chaos in the pork cycle the results also indicate that the dynamic process generating the pork cycle is nonlinear and cannot be adequately characterized by a small number of state variables

asymmetry in farm retail price transmission for major dairy products an econometric model is used to estimate the net relationship between changes in the farm level price of milk and changes in the retail prices of four major dairy products fluid milk butter cheese and ice cream results indicate that the farm retail price transmission process in the dairy sector is asymmetric retail dairy product prices adjust more rapidly and more fully to increases in the farm price of milk than to decreases the role in pricing asymmetry of retail demand versus farm supply shifts is tested via a chow type test asymmetry is tested using the houck procedure for estimating nonreversible functions

when risk generates chaos abstract with risk averse producers the traditional linear cobweb model becomes nonlinear the currently produced quantity is an homographic function of previous years quantities this may result in the market generating chaotic price and quantity series especially if demand is rigid hedging facilities are unable to reduce the magnitude of fluctuations which are socially detrimental especially from the consumers point of view this might justify public intervention on markets such as staple food commodities or health cares

productivity bias hypothesis and the purchasing power parity a review article abstract productivity differentials among countries are said to be one of the major sources that contribute to the deviation of the purchasing power parity based exchange rate from the equilibrium rate hence the productivity bias hypothesis prior to last review article on the productivity bias hypothesis in 1976 almost all studies relied upon cross sectional regression analysis since then two groups of empirical studies have emerged while one group has employed time series data the other one has used panel data these two later groups have provided more support to the hypothesis than the earlier cross sectional studies this paper reviews and criticizes each group separately and provides tables that summarize main features of each study

hyteresis in import prices the beachhead effect this paper shows that temporary real exchange rate fluctuations can have persistent hysteretic effects on trade specifically when market entry costs are sunk sufficiently large exchange rate shocks alter domestic market structure and thereby induce hysteresis this simple result has strong implications for exchange rate theory t rade policy and estimation of trade equations empirical evidence su ggests that the recent dollar overvaluation induced hysteresis in u s import prices namely the aggregate pass through equation of exchange rates to import prices shifted in the 1980s the shift s nature and timing is broadly consistent with the hysteresis hypothesis copyright 1988 by american economic association

on the complexities of complex economic dynamics complex economic nonlinear dynamics endogenously do not converge to a point a limit cycle or an explosion their study developed out of earlier studies of cybernetic catastrophic and chaotic systems complexity analysis stresses interactions among dispersed agents without a global controller tangled hierarchies adaptive learning evolution and novelty and out of equilibrium dynamics complexity methods include interacting particle systems self organized criticality and evolutionary game theory to simulate artificial stock markets and other phenomena theoretically bounded rationality replaces rational expectations complexity theory influences empirical methods and restructures policy debates

inefficiency of male and female labor supply in agricultural households evidence from uganda this article analyzes the efficiency of the intra household allocation of female and male labor inputs in agricultural production in a collective household model spouses optimal on farm labor supply is such that the marginal rate of technical substitution between male and female labor is equated over different crops using the uganda national household survey 2005 06 we test whether this condition holds by estimating production functions and controlling for endogeneity using a method proposed by gandhi navarro and rivers 2009 we find that women are less productive than men that there is more female labor input on low productivity parcels and that men are relatively more productive on female controlled plots compared with male controlled plots total farm output could be higher and pareto improvements could be possible if male labor was reallocated to female controlled plots and or female labor was reallocated to male controlled plots

cointegration tests of purchasing power parity the case of swiss exchange rates abstract this paper tests purchasing power parity ppp as a long run equilibrium condition by examining the long run relationshiop between exchange rates and wholesale price indices using cointegration tests this paper avoids some of the problems of previous cointegration tests of ppp by using more precise data pretests and by not imposing a priori restrictions upon the cointegrating vector of the nine combinations of swiss exchange rates and price indices examined cointegration is detected in seven cases thus supporting ppp as a long run equilibrium jel f31 c32

real exchange rates ppp and the relative price of nontraded goods the purchasing power parity hypothesis ppp states that nominal exchange rates move with differences in relative prices between economies the theory has received considerable attention in the economic literature since cassell 6 and is the foundation of many long run theoretical hypotheses in international finance yet its empirical validity remains in question many tests of ppp focus on the stationarity of the real exchange rate the nominal exchange rate adjusted for changes in price levels between economies if domestic and foreign price levels and the nominal exchange rate are integrated then cointegration between these variables implies the existence of both a long run equilibrium relationship and ppp the residual the real exchange rate then follows a stationary process the paper uses the multivariate cointegration methodology of johansen 16 and johansen and juselius 17 18 to examine the source of real exchange rate nonstationarity is the nonstationarity due to shifts in the domestic and foreign price of nontradeables or productivity differentials between traded and nontraded sectors or is the nonstationarity a possible outcome of difficulties in intercountry comparisons of prices movements associated with construction of these price indices most research finds the real exchange rate follows a nonstationary process due to the presence of a unit root 8 12 1 9 19 27 however the existence of a variable trend in the real exchange rate does not imply the absence of a long run relationship between relative prices levels and nominal exchange rates for two reasons first a long run relationship between price levels and nominal exchange rates may exist but not the one for one relationship implicit in the calculation of real exchange rates due to measurement differences in the construction of price indices between economies second ppp violations may occur due to the presence of permanent productivity innovations which affect the relative price of nontradeables if these shocks are not represented by measurable variables a cointegrating relationship will not exist the paper constructs traded and nontraded gdp price indices and productivity rates for 14 oecd economies and tests 1 if the variable trend the nonstationary process in the real exchange rate is due to permanent innovations in relative price of domestic and foreign nontradeables 2 if long run ppp violations are due to permanent movements in the relative price of nontradeables 3 if the nonstationarity in the real exchange rate is due to permanent innovations in domestic and foreign productivity differentials between the traded and nontraded sectors 4 if the variable trend in the relative price of nontradeables is due to permanent innovations in productivity between sectors lastly the paper constructs a cointegrating error correction model

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

incomplete markets and government agriculture policy this paper investigates the welfare effects of several stereotypical agricultural policies in an economy with production risk and incomplete contingent claim markets the policies analyzed include target price deficiency payment programs the brannan plan production controls the cochrane plan and land set asides when there is no trading in contingent claims and when economic parameters take on values characteristic of staple food markets the paper finds that ajoint brannan plan production control program is often welfare increasing however production controls on their own tend to be welfare decreasing in addition land set asides are generally welfare reducing even in the presence of a brannan plan these results are derived analytically in a simple equilibrium model they are illustrated with a numerical example which demonstrates that welfare benefits from typical agricultural policy interventions can be large

the determination of the real exchange rate the productivity approach abstract this paper explains deviations of exchange rates from purchasing power parity with the differences between countries of the relative growth rates of labor productivity between traded and nontraded sectors two cases are considered germany and japan versus their respective major trading partners the results show that the time series methodology yields a more favorable confirmation of the productivity differential model than the cross section regressions in the literature

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

a confusion of agricultural economists a professional interest survey and essay a random survey of members of the american agricultural economic association is used to examine basic philosophical issues regarding the discipline of agricultural economics in comparison to other studies of economists much more diversity of response is found among agricultural economists the data suggests important correlates between the pattern of responses and socioeconomic variables some variables which affect responses are agricultural interests age school of graduation area of specialization and employment self interest information differences and empathy are among the possible explanations of the patterns of responses

cointegration and tests of purchasing power parity nonstationarity in the levels of spot exchange rates and domestic and foreign price indices makes the use of conventional tests of the absolute version of purchasing power parity ppp inappropriate if ppp is true inter country commodity arbitrage ensures that deviations from a linear combination of spot exchange rates and domestic and foreign price levels should be stationary under these conditions exchange rates and price levels should form a cointegrated system we find the null hypothesis of no cointegration cannot be rejected for all five countries thus violating the long run absolute version of ppp

the effects of direct storage subsidies under limited rationality a general equilibrium analysis we study here the effects of a public subsidy to private storage set up at world level to simulate the welfare effects and impacts on market fluctuations of this subsidy we use a dynamic computable general equilibrium model assuming imperfect expectations we also perform different statistical analysis based on our cge results and show that the storage subsidy can have the undesired effect of destabilizing agricultural markets depending on the form of economic agents price expectations and on the structure of the shocks impacting the agricultural production

measuring exchange rate misalignment inflation differentials and domestic relative prices abstract empirical studies of exchange rate misalignment generally use crosscountry differences in overall inflation as proxy measures for a country s real exchange rate rer this paper shows that using such differential inflation proxies introduces two systematic biases in model results understatement of rer movements and a spurious trend towards depreciation these biases can be corrected only with disaggregated data on domestic relative prices of tradable and nontradable products using a standard model with disaggregated data for zimbabwe it is found that proxy based results understate misalignment by almost 25 and exaggerate depreciation by 4 per year

market instability and nonlinear dynamics the potential role of nonlinear dynamics in generating market instability is investigated using a simple market equilibrium model of the u s dairy industry the supply function reflects the nonlinear dynamics of the dairy herd as estimated by chavas and klemme it is shown that in the absence of any uncertainty an inelastic demand contributes to market instability and chaos