capital controls global liquidity traps and the international policy trilemma the zero bound on interest rates introduces a new dimension to the trilemma in international policy the openness of the international financial market might render monetary policy ineffective even within a system of fully flexible exchange rates because shocks that lead to a liquidity trap in one country are propagated through financial markets to other countries however the effectiveness of monetary policy can be restored by the imposition of capital controls we derive the optimal response of monetary policy to a global liquidity trap in the presence of capital controls we show that even though capital controls might facilitate effective monetary policy capital controls are not generally desirable in terms of welfare

on monoculture and the structure of crop rotations an issue when seeking to identify rotation choice is persistence in yield enhancement and input saving carry over effects focusing on carry over length and the monoculture decision we use quasi convexity of choice functions to develop price independent and price dependent principles concerning rotation structure iowa corn soybean rotation data suggest corn has one year memory for corn soybeans in the prior year is yield increasing 16 5 bu ac and nitrogen saving 51 lb ac the hypothesis that soybean has two year memory cannot be rejected corn in the prior year two years increases yield by 7 bu ac 11 6 bu ac we simulate to find price and practice subsidy levels that support different rotations

social security in panama a multiperiod analysis of income distribution abstract a unique multiperiod data set is used to look at the income distribution effects of the retirement portion of the social security system of panama while it is clear that the system is an important source of income for workers it is argued that its true redistributive importance is greatly exaggerated using a multiperiod view it is found that previously high wage and urban workers are disproportionately represented among current recipients it is also argued that social security has substantially reduced the work effort of these workers hence the appropriateness of the present social security system is questioned on both equity and efficiency grounds

does the type of political regime matter for trade and labor market policies this article uses cross country data to examine the link between a country s type of political regime and its degree of openness and labor market distortion the analysis indicates that more authoritarian regimes are associated with higher trade protection and greater labor market distortions this supports the view that political authoritarianism may be counterproductive to development in important respects

optimal monetary policy in a small open economy with home bias we analyze optimal monetary policy in a small open economy characterized by home bias in consumption peculiar to our framework is the application of a ramseytype analysis to a model of the recent open economy new keynesian literature we show that home bias in consumption is a su cient condition for inducing the monetary policy maker of an open economy to deviate from a strategy of strict markup stabilization and contemplate some optimal degree of exchange rate stabilization we focus on the optimal setting of policy both in the case of rms setting prices one period in advance and in a gradual fashion subject to adjustment costs while the rst setup allows us to analytically highlight home bias as an independent source of equilibrium

predatory versus productive government the case of u s agricultural policies this essay will argue that agricultural policy in the united states has led to both the enhancement of efficiency through productive policies and the transfer of wealth and income to special interests through redistributive or predatory policies these two activities can be labeled as pests and perts pest policies or political economic seeking transfers are meant to redistribute wealth from one social group to another and are not explicitly concerned with efficiency in contrast perts or political economic resource transactions are intended to correct market failures or to provide public goods these policies have neutral distributional effects at least in design a review of the history of public policy in agriculture reveals not only tension between the pert and pest roles of the public sector but also some coordination between these two types of activities as different interest groups pressure the political process the government trades off pests and perts in its attempts to acquire balance and secure political power at times this has led to combinations of programs that appear incoherent in such a world the challenge for economists is to design and advocate policies that are both economically productive and politically sustainable

political economy of public policies insights from distortions to agricultural and food markets the agricultural and food sector is an ideal case for investigating the political economy of public policies many of the policy developments in this sector since the 1950s have been sudden and transformational while others have been gradual but persistent this paper reviews and synthesizes the literature on trends and fluctuations in market distortions and the political economy explanations that have been advanced based on a rich global data set covering a half century of evidence on commodities countries and policy instruments the paper identifies hypotheses that have been explored in the literature on the extent of market distortions and the conditions under which reform may be feasible

black hole tariffs and endogenous policy theory political economy in general equilibrium preface acknowledgments list of results 1 a preview of the results 2 endogenous policy theory a diagrammatic approach part i endogenous policy theory with specific factors the theory of industry tariffs in partial equilibrium 3 the probabilistic voting model of political efficiency and powerless politicians 4 endogenous lobbying theory and the contribution specialization theorem 5 endogenous tariff theory 6 the power function model of endogenous industry lobbying 7 three simple tests of the stolper samuelson theorem 8 the invisible foot and the waste of nations lawyers as negative externalities part ii endogenous policy theory in general equilibrium a long run theory of national tariff levels 9 the 2 x 2 x 2 x 2 model of endogenous redistribution theory 10 a prisoner s dilemma theory of endogenous protection the leontief model 11 the compensation effect and the multiple equilibrium trap 12 increasing returns to politics and factor endowments economic development and brazilian vitality versus the indian disease 13 endogenous protection in the united states 1900 88 14 a cobb douglas model 15 black hole tariffs 16 the endowment effect cross national evidence on endogenous tariffs part ii postscript 17 the senile industry argument for protection 18 optimal obfuscation and the theory of the second worst the politically efficient policy mathematical appendices references author index subject index

the case for open market purchases in a liquidity trap prevalent thinking about liquidity traps suggests that the perfect substitutability of money and bonds at a zero short term nominal interest rate renders open market operations ineffective for achieving macroeconomic stabilization goals we show that even were this the case there remains a powerful argument for large scale open market operations as a fiscal policy tool as we also demonstrate however this same reasoning implies that open market operations will be beneficial for stabilization as well even when the economy is expected to remain mired in a liquidity trap for some time thus the microeconomic fiscal benefits of open market operations in a liquidity trap go hand in hand with standard macroeconomic objectives motivated by japan s recent economic experience we use a dynamic general equilibrium model to assess the welfare impact of open market operations for an economy in japan s predicament we argue japan can achieve a substantial welfare improvement through large open market purchases of domestic government debt

an economic model of soil conservation by introducing soil depth and soil loss into a simple model of agricultural production this paper seeks to determine when the private path of erosion differs from the socially optimal path considering the depletion of soil only and abstracting from the environmental disruption caused by erosion the paper argues that under most institutional arrangements the social and private rates of erosion are the same the paper concludes that public policy should be directed toward reducing erosion only when it leads to significant pollution externalities

rationality of weather predictions and insurance purchases testing the gambler s and hot hand fallacies deviations from the rational behaviour assumed in many economic models have been found in a variety of settings two such deviations the gambler s and hot hand fallacies have been found in lab set

political agency government responsiveness and the role of the media abstract the role of mass media in making governments responsive to the needs of citizens is a relatively neglected area in economics we sketch a theoretical example with a role for media in enhancing government responsiveness based on asymmetric information between citizens and government we then use data for the period 1958 1992 on the extent to which indian state governments responded to food shortages via the public distribution of food correlating these with proxies of media political and economic development we find that states that are more responsive tend to also be those with high levels of newspaper circulation electoral turnout and literacy in contrast richer states do not tend to be more responsive than poorer states

price support to the ec agricultural sector an optimal policy politicians in all developed countries including the ec countries have consistently chosen to support the farmers through the market and thus slowed down the adaptation of the agricultural sector to lower prices which would otherwise have taken place the main principle of ec agricultural policy which was formulated in the 1960s was to guaran tee farmers prices significantly above world market prices for a number of key products to secure the income of farmers at a reasonable level

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

the fiscal multiplier and spillover in a global liquidity trap we consider the fiscal multiplier and spillover in an environment in which two countries are caught simultaneously in a liquidity trap using an optimizing two country sticky price model we show that the fiscal multiplier and spillover are contrary to those predicted in textbook economics for the country with government expenditure the fiscal multiplier exceeds one the currency depreciates and the terms of trade worsen the fiscal spillover is negative if the intertemporal elasticity of substitution in consumption is less than one and positive if the parameter is greater than one incomplete stabilization of marginal costs due to the existence of the zero lower bound is a crucial factor in understanding the effects of fiscal policy in open economies

determinants of motives for land use decisions at the margins of the corn belt abstract the extent of united states great plains grass agriculture has ebbed and flowed over decades in response to market incentives government policies technological innovations and weather patterns our thesis is that the land most responsive to these drivers is at the economic margin between grass based production and cropping much of the eastern dakotas is such an area primarily under crop based agriculture although grass remains an important land use we surveyed land operators in the area on their views about motivators for land use choices their views are largely consistent with the economic margin viewpoint the importance of crop output prices crop input prices innovations in cropping equipment and weather patterns on land use decisions grow as one moves north toward the economic margin land in more highly sloped areas is more sensitive to crop prices and crop insurance policies consistent with human capital theory older operators are generally less responsive to factors that affect land use those renting more land being more exposed to market forces are more responsive as farm size increases respondents declared higher land use sensitivity to policy issues and technological innovations suggesting that scale effects render land units more sensitive to land use change drivers

the provision of public goods under alternative electoral incentives politicians who care about the spoils of office may underprovide a public good because its benefits cannot be targeted to voters as easily as pork barrel spending we compare a winner take all system where all the spoils go to the winner to a proportional system where the spoils of office are split among candidates proportionally to their share of the vote in a winner take all system the public good is provided less often than in a proportional system when the public good is particularly desirable we then consider the electoral college system and show that it is particularly subject to this inefficiency

international fiscal spillovers a two country business cycle model featuring nominal rigidities countercyclical mark ups rule of thumb consumers and government spending reversals is used to identify inequality predictions that are robust across a range of empirically plausible parameterizations these robust inequality restrictions are imposed onto a regime change factor model for the united states and its main trade partners to estimate the international fiscal spillovers the effects of u s government spending on foreign real activity are found to be sizable and significant operating mainly by lowering real interest rates rather than boosting trade balances in contrast there seems to be only limited evidence of state dependence in the international transmission of fiscal policy

political preference functions and public policy reform a model of policy making is developed where governments seek to maximize support from social groups through the combination of both pert social welfare increasing and pert welfare transferring policies the implicit weights of a political preference function shift with a change in the relative cost of interest group organizing attention is paid to the degree of wealth transfers as total social welfare increases because of pert policy changes the model demonstrates that in the case of two competing groups the weight given to one group in the allocation of social surplus will increase as total social welfare increases with a bias toward the other group the relative weights placed on consumers and producers based on pest policies alone are misleading indicators of the political influence of groups a number of general implications of this political economic analysis for the reform of public policies are investigated

assessing cost effectiveness of the conservation reserve program crp and interactions between the crp and crop insurance we examine the u s conservation reserve program crp enrollment design while accounting for the crp s interactions with the federal crop insurance program we find that the current crp is not cost effective despite its intent to balance benefits and costs based on crp contract level data we show that adopting a cost effective enrollment design and incorporating crop insurance subsidies into the crp s environmental benefits index would significantly increase the crp acreage environmental benefits and savings on crop insurance subsidies while leaving government outlay unchanged large geographical redistributions of crp acreage would also occur we further investigate the cost effective design s robustness to crp benefit misspecifications

the growth of agricultural protection in europe in the 19th and 20th centuries 1247 johan f m swinnen dramatic changes took place in agricultural policies in europe in the 19th and 20th centuries in the 1860s european nations agreed on a series of trade agreements which spread free trade across the continent in the 1960s european nations concluded an international agreement which spread heavy government intervention and protection against imports across the continent this paper quantifies these changes in protection over the course of a century relates them to changes in policies and offers a political economy explanation for the growth in agricultural protection in europe

mass media and public policy abstract if more informed voters receive favorable policies then mass media should influence policy because it provides most of the information people use in voting this paper uses a simple model to analyze the effect of mass media provision of news on a number of policy issues redistribution the size of the government sector rents and corruption the effectiveness of lobby groups and political business cycles it is easy to deal with such a wide range of issues because existing models of political competition often include informed and uniformed voters modelling mass media simply endogenizes who is informed and who is not the paper also discusses empirical evidence and point to areas for future research

on the form of transfers to special interests an important question in political economy concerns the form of transfers to special interests the chicago view is that political competition leads politicians to make such transfers efficiently the virginia position is that lack of information on the part of voters leads politicians to favor inefficient sneaky methods of redistribution this paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests it shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians inefficient methods of redistribution may be employed

fiscal policy in a currency union at the zero lower bound this paper constructs a two country core periphery new keynesian model of a currency union to address the interaction between the objectives of regionally directed fiscal policy constrained by a single currency and the aggregate use of fiscal policy in face of the zero lower bound zlb on policy interest rates we identify an optimal path of aggregate and relative fiscal policy responses to a negative region specific demand shock our results show that i in a monetary union the optimal policy response to an asymmetric reduction in demand concentrated in the periphery always entails a relative shift of fiscal expenditure toward the worse affected regions ii though no aggregate fiscal response is required outside the zlb and iii optimal union wide fiscal policy is expansionary at the zlb therefore optimal policy always entails an expansion in the periphery at the zlb but the optimal fiscal response in the core regions can be either expansionary or contractionary depending on the parameters of the model however iv fiscal expansion in the core is warranted if the periphery cannot implement an expansion due to constraints on public spending

political economy of the 2014 farm bill this article assesses the political economy of the 2014 u s farm bill with a focus on the farm support safety net the farm bill secured substantial bipartisan majorities in a politically contentious congress planned outlays are predominately for nutrition assistance programs directed toward a traditional nonfarm constituency in the farm bill coalition while annual fixed direct payments to farmers are eliminated but replaced with enhanced downside risk protection against low prices or revenue the new support programs may prove more or less costly than the foregone fixed payments with farmers offered a choice between a price countercyclical program with increased reference prices and a revised moving average revenue guarantee program the role of insurance is enhanced notably by replacing past support programs with a new upland cotton revenue insurance program and dairy milk to feed margin protection program open policy issues that are highlighted include the costs and distortionary effects of moving average revenue benchmarks versus fixed reference prices the overall level of insurance premium subsidies the potential for overlap between commodity and insurance programs and lastly food environmental and biofuels concerns that reflect the diverse portfolio of products demanded from agriculture in an international context we conclude that the 2014 farm safety net likely would not have been enacted had multilateral agreement been reached on the 2008 doha round world trade organization negotiating documents conversely the 2014 farm bill makes achieving those limits more difficult research is discussed that can elucidate the ongoing political economy of u s farm policy and help shape future program design

domestic politics foreign interests and international trade policy reply this paper incorporates the foreign interest in the determination of a country s international trade policy into a model of political competition between candidates contesting elective office we envisage foreign and domestic producer interests as expressing political support for a candidate via campaign contributions and candidates as making trade policy pronouncements to maximize political support from producer interests tariffs are divisive but vers are consistent with conciliatory policy positions yielding mutual gain to foreign and domestic interests no candidate has an interest in formulating a trade policy position using a tariff if a ver is a policy option protection in the developed countries has in recent years often taken the form of bilaterally negotiated voluntary export restraints vers rather than the more traditional unilaterally imposed import restrictions the use of voluntary export restraints has been paralleled by interest in the theoretical literature the effects of vers have been compared with tariffs and quotas and vers have been examined in a political economy framework with a view to identifying the gainers and losers from this form of restric

the wto trade effect this paper reexamines the gatt wto membership efiect on bilateral trade ows using nonparametric methods including pair matching permutation tests and a rosenbaum 2002 sensitivity analysis together these methods provide an estimation framework that is robust to misspeciflcation biases allows general forms of heterogeneous treatment efiects and addresses potential hidden selection biases this is in contrast to most conventional parametric studies on this issue our results suggest large gatt wto trade promoting efiects robust to various restricted matching criteria alternative indicators for gatt wto involvement different matching methodologies non random incidence of positive trade ows and inclusion of multilateral resistance terms

monetary fiscal policy interactions and fiscal stimulus abstract increases in government spending trigger substitution effects both inter and intra temporal and a wealth effect the ultimate impacts on the economy hinge on current and expected monetary and fiscal policy behavior studies that impose active monetary policy and passive fiscal policy typically find that government consumption crowds out private consumption higher future taxes create a strong negative wealth effect while the active monetary response increases the real interest rate this paper estimates markov switching policy rules for the united states and finds that monetary and fiscal policies fluctuate between active and passive behavior when the estimated joint policy process is imposed on a conventional new keynesian model government spending generates positive consumption multipliers in some policy regimes and in simulated data in which all policy regimes are realized the paper reports the model s predictions of the macroeconomic impacts of the american recovery and reinvestment act s implied path for government spending under alternative monetary fiscal policy combinations

causes of u s farm commodity programs this paper i s an attempt to explain variations by commodity in producer protection afforded by farm price support programs since the1930s particularly emphasized are theideas that these programs are essentially income redistributional measures and that given political forces the programs are attempts to redistribute efficiently variables associated with the cost to producers of generating political pressure and the social cost deadweight losses of redistribution are both found to be empirically important copyright 1987 by university of chicago press

the copula garch model of conditional dependencies an international stock market application abstract modeling the dependency between stock market returns is a difficult task when returns follow a complicated dynamics when returns are non normal it is often simply impossible to specify the multivariate distribution relating two or more return series in this context we propose a new methodology based on copula functions which consists in estimating first the univariate distributions and then the joining distribution in such a context the dependency parameter can easily be rendered conditional and time varying we apply this methodology to the daily returns of four major stock markets our results suggest that conditional dependency depends on past realizations for european market pairs only for these markets dependency is found to be more widely affected when returns move in the same direction than when they move in opposite directions modeling the dynamics of the dependency parameter also suggests that dependency is higher and more persistent between european stock markets

radio s impact on public spending if informed voters receive favorable policies then the invention of a new mass medium may affect government policies since it affects who is informed and who is not these ideas are developed in a voting model the model forms the basis for an empirical investigation of a major new deal relief program implemented in the middle of the expansion period of radio the main empirical finding is that u s counties with many radio listeners received more relief funds more funds were allocated to poor counties with high unemployment but controlling for these and other variables the effects of radio are large and highly significant

designing targeting rules for international monetary policy cooperation this study analyzes a two country dynamic general equilibrium model with nominal rigidities monopolistic competition and producer currency pricing a quadratic approximation to the utility of the consumers is derived and assumed as the policy objective function of the policymakers it is shown that only under special conditions there are no gains from cooperation and moreover that the paths of the exchange rate and prices in the constrained efficient solution depend on the kind of disturbance that affects the economy it might be the case either for fixed or floating exchange rates despite this result simple targeting rules that involve only targets for the growth of output and for both domestic gdp and cpi inflation rates can replicate the cooperative allocation

an empirical analysis of acreage effects of participation in the federal crop insurance program the extent to which crop insurance programs have resulted in additional land being brought into production has been a topic of considerable debate we consider multiequation structural models of acreage response insurance participation crp enrollment and input usage our analysis focuses on corn and soybean production in the corn belt and wheat and barley production in the upper great plains our results confirm that increased participation in insurance programs provokes statistically significant acreage responses in some cases though the response is very modest in every case in the most extreme cases 30 decreases in premiums as a result of increased subsidies provoke acreage increases ranging from 0 2 to 1 1 a number of policy simulations involving increases in premium subsidies are considered

the political economy of the media coverage of the lumber tariff dispute the political economy of groups suggest that policies are more likely to be implemented if the benefits are concentrated and the costs are dispersed the importance of the role of media in society changes the classic models media can awaken the sleeping masses to the dispersed costs of a policy and raise resentment towards the group who benefits thus the content of media coverage can affect policy stromberg s 2001 model shows that the amount of newspaper space devoted to an issue should rise as the square of the number of people affected this paper finds empirical support for stromberg s theoretical findings with content analysis of newspaper coverage of the lumber tariff dispute

dynamic persistence of primary commodity prices this article examines the persistence of shocks to international commodity prices from 1900 to 2008 using the updated grilli yang index the main innovation of this study is that it determines whether commodity prices are characterized by multiple changes in persistence specifically bootstrap methods are used to estimate persistence and the associated half life shocks are calculated we find that the persistence of shocks can vary widely depending on the individual commodity and the time period the results suggest that policy makers need to exercise caution when introducing measures to cushion the effect of shocks to world commodity prices

the 2014 farm bill and the wto the 2014 farm bill reduced expected budgetary costs of us farm programs according to estimates prepared by the congressional budget office cost projections are very sensitive to market conditions and program participation assumptions and stochastic analysis indicates that farm program costs could easily differ from expected values by 5 billion or more in any given year by replacing direct payments with new policies that make payments tied to market prices and yields the bill could have important world trade organization wto implications if the new policies are classified as non commodity specific amber box support projections indicate that existing wto limits on the current aggregate measure of support would not be exceeded on average but could be under some market conditions furthermore the new policies are very likely to exceed some wto rules proposed by various parties in the doha round negotiations

monetary and fiscal policy interactions in a micro founded model of a monetary union abstract this paper analyzes in detail the mechanisms behind fiscal stabilization policy and the role of policy commitment in a micro founded new keynesian model of a two country monetary union which is hit by supply shocks we also explore the determinants of the gains from fiscal stabilization while monetary policy with identical union members is concerned with stabilizing the union wide economy fiscal policy aims at stabilizing inflation differences and the terms of trade besides exploring optimal policies we also consider monetary and fiscal rules we study these rules both under coordination and non coordination by the fiscal authorities

do general and firm specific employer payroll taxes have the same incidence theory and evidence abstract this paper shows that there are theoretical reasons to distinguish between general payroll taxes and firm specific payroll taxes and that their incidence can be different data for collective agreements signed in quebec by large firms in the secondary sector for the 1975 1984 period are used to estimate their incidence

on the economics of the optimal fallow cultivation cycle abstract this paper considers the so called fallow cultivation problem in traditional agriculture the paper specifies the problem and determines the optimal duration of the fallow cultivation cycle we study and deduce results on the impact of the switching costs and the output price on this cycle finally we discuss the relation between soil fertility and the output price the fallow cultivation problem is an important economic problem since traditional farming provides the food in most low income countries however it is also worth studying since it is an interesting specimen case in a class of dynamic models in which sensible controls split process variables in distinctive phases

news droughts news floods and u s disaster relief this paper studies the influence of mass media on u s government response to approximately 5 000 natural disasters occurring between 1968 and 2002 these disasters took nearly 63 000 lives and affected 125 million people per year we show that u s relief depends on whether the disaster occurs at the same time as other newsworthy events such as the olympic games which are obviously unrelated to need we argue that the only plausible explanation of this is that relief decisions are driven by news coverage of disasters and that the other newsworthy material crowds out this news coverage

escaping from a liquidity trap and deflation the foolproof way and others existing proposals to escape from a liquidity trap and deflation including my foolproof way are discussed in the light of the optimal way to escape the optimal way involves three elements 1 an explicit central bank commitment to a higher future price level 2 a concrete action that demonstrates the central bank s commitment induces expectations of a higher future price level and jump starts the economy and 3 an exit strategy that specifies when and how to get back to normal a currency depreciation is a direct consequence of expectations of a higher future price level and hence an excellent indicator of those expectations furthermore an intentional currency depreciation and a crawling peg as in the foolproof way can implement the optimal way and in particular induce the desired expectations of a higher future price level i conclude that the foolproof way is likely to work well for japan which is in a liquidity trap now as well as for the euro area and the united states in case either would fall into a liquidity trap in the future

fighting corruption to improve schooling evidence from a newspaper campaign in uganda what are the most effective ways to increase primary school enrollment and student learning we argue that innovations in governance of social services may yield the highest return since social service delivery in developing countries is often plagued by inefficiencies and corruption we illustrate this by using data from an unusual policy experiment a newspaper campaign in uganda aimed at reducing capture of public funds by providing schools parents with information to monitor local officials handling of a large education grant program the campaign was highly successful and the reduction in capture had a positive effect on enrollment and student learning jel d73 i22 o12

optimal monetary policy at the zero interest rate bound what should a central bank do when faced with a weak aggregate demand even after reducing the short term nominal interest rate to zero to address this question we solve a central bank s intertemporal loss minimization problem in which the non negativity constraint on nominal interest rates is explicitly considered we find that the optimal path is characterized by policy inertia in the sense that a zero interest rate policy should be continued for a while even after the natural rate of interest returns to a positive level by making such a commitment the central bank is able to achieve higher expected inflation lower long term nominal interest rates and a weaker domestic currency in the adverse periods when the natural rate of interest significantly deviates from a steady state level

optimal fiscal policy in a world liquidity trap we construct a model of the international transmission of liquidity trap shocks and examine the case for international coordination of scal policy to respond to the liquidity trap integrated nancial markets tend to propagate liquidity traps in a global environment scal policy may be eective in raising gdp when the economy is stuck in a liquidity trap but it does so in a beggar thy neighbor fashion when one economy is in a liquidity trap the cross country spillover eect of scal policy is negative we examine the welfare optimizing policy response to a liquidity trap when countries coordinate on scal policy fiscal policy may be an eective tool in responding to a liquidity trap although it is never optimal to use scal expansion su ciently to fully eliminate a downturn moreover there is little case for coordinated global scal expansion for the most part the country worst hit by a liquidity trap shock should use its own policies to respond without much help from foreign policies

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

exchange rate flexibility under the zero lower bound an independent monetary policy and a flexible exchange rate generally help a country in adjusting to macroeconomic shocks but recently in many countries interest rates have been pushed down close to the lower bound limiting the ability of policy makers to accommodate shocks even with flexible exchange rates this paper argues that when the zero bound constraint on nominal interest rates is binding and policy lacks an effective forward guidance mechanism a flexible exchange rate system may be inferior to a single currency area with monetary policy constrained by the zero bound a flexible exchange rate exacerbates the impact of shocks remarkably this may hold true even if only a subset of countries are constrained by the zero bound and other countries optimally adjust their interest rate targets for a regime of multiple currencies to dominate a single currency in a zero bound environment it is necessary to have effective forward guidance in monetary policy

state market civil institutions the case of eastern europe and the soviet republics abstract the transition tasks facing the countries of central and eastern europe are monumental the public sector will play a dominant role during the transition process available evidence suggests that orthodox prescriptions for public sector reform cannot be effectively implemented without an underlying constitution and a legal and regulatory infrastructure lri a well designed constitution and lri instill confidence and policy credibility with perfectly rational expectations and confidence in the constitution and lri the sequence of reforms matters little future reforms are perfectly anticipated today and agents act as though the reforms will occur with certainty short of such confidence reforms need to be simultaneously pursued on many fronts the most important activity is to redefine the role of the state setting a constitution that clearly defines and secures basic political civil and economic freedoms and designing an lri that creates a fertile environment for a vibrant market economy

political institutions and international patterns of agricultural protection this paper analyzes the influence of political systems and rights in patterns of agricultural protection across commodities countries and over time four political systems and a qualitative index of political rights account for differences in political institutions the analysis incorporates the effects of development of constraints on tax collection feasibility and of comparative advantages and terms of trade pluralistic systems are associated with higher agricultural protection levels although in a nonlinear fashion access to pluralism appears to be important although further democratization partly dissipates protection copyright 1994 by mit press

sodbusting crop insurance and sunk conversion costs we build a real option model that articulates sodbusting incentives arising from risk interventions in the presence of conversion costs the model shows that risk interventions reduce expected costs of switching land use between cropping and noncropping activities and hence incentivize sodbusting based on data for south central north dakota over 1989 2012 our simulations show that offsetting 20 of a cropping return shortfall by a risk intervention increases the sodbusting cost threshold below which sodbusting will occur by 41 or 43 7 acre omitting cropping return risk across time underestimates the sodbusting cost threshold by 23 or 24 35 acre and hence underestimates sodbusting caused by crop production

mass media competition political competition and public policy if better informed voters receive favourable policies then mass media will affect policy because mass media provide most of the information people use in voting this paper models the incentives of the media to deliver news to different groups the increasing returns to scale technology and advertising financing of media firms induce them to provide more news to large groups such as taxpayers and dispersed consumer interests and groups that are valuable to advertisers this news bias alters the tradeoff in political competition and therefore introduces a bias in public policy the paper also discusses the effects of broadcast media replacing newspapers as the main information source about politics the model predicts that this change should raise spending on government programmes used by poor and rural voters

land resilience and tail dependence among crop yield distributions we propose and empirically test a simple model to shed light on the nature of interactions between weather land quality and yield the conceptual model posits substitution relations between water stress metrics and soil quality as well as a soil conditioned threshold water stress level beyond which soil cannot buffer crop yields the model implies that yield yield dependence should vary as growing conditions vary in comparison with intermediate growing conditions yield yield dependence should strengthen when growing conditions are either very good or very poor county yield data strongly support substitution between soil and benign water availability levels but complementarity between soil and beneficial heat variables our estimated model provides qualified support for the hypothesis that better land is more resilient to water stress we estimate a pseudo copula that nests the gaussian copula finding strong evidence of left tail dependence among yields our formal model and empirical findings corroborate others concerns about the appropriateness of current usda rate setting methodologies which posit constant state conditional rank correlations implicitly assumed by use of the gaussian copula an application to aggregate crop yield rate setting suggests that current methods underprice area yield and whole farm premiums applying our empirical model to medium range weather projections under a climate change scenario for the northern great plains we infer that systemic yield correlations will increase in future years

global liquidity trap abstract how should monetary policy respond to a global liquidity trap where the two countries may fall into a liquidity trap simultaneously using a two country new open economy macroeconomics model we first characterize optimal monetary policy and show that the optimal rate of inflation in one country is affected by whether or not the other country is in a liquidity trap we next examine how well the optimal monetary policy is approximated by relatively simple monetary policy rules the interest rate rule targeting the producer price index performs well in this respect

theory of the firm past present and future an interpretation hence even if the partial equilibrium analyst knows full well that the actual situation is not really a competitive one he probably will still make a first try using the competitive model with good old fashioned profit maximization and if the results appear too odd appropriate qualifications may still be able to take care of them more simply than if he had started with a cumbersome managerial model in saying this i am showing my bias 18 p 30