euro dollar real exchange rate dynamics in an estimated two country model an assessment abstract several theoretical contributions using two country models have combined alternative forms of pricing under nominal rigidities with different asset market structures to explain real exchange rate dynamics we estimate a two country model using data for the united states and the euro area and study the importance of such alternative assumptions in fitting the data a model with local currency pricing and incomplete markets does a good job in explaining real exchange rate volatility and fits the dynamics of domestic variables well the complete markets assumption delivers a similar fit only when the structure of shocks is rich enough

do central banks react to house prices we estimate the federal reserve s the bank of england s and the bank of japan s responses to house prices we show that generalized method of moments estimates of a taylor rule augmented with house prices are biased and dispersed we then use full information methods and estimate the policy rule together with a var for the nonpolicy variables these estimates are also biased we propose an alternative approach and estimate a dynamic stochastic general equilibrium model embedded with a monetary rule with a direct response to house prices we find that house prices played a separate role in the reaction functions of these central banks

business cycles in an oil economy abstract the recent oil price fall has created concern among policy makers regarding the consequences of terms of trade shocks for resource rich countries this concern is not a minor one the world s commodity exporters combined are responsible for 15 20 of global value added we develop and estimate a two country new keynesian model in order to quantify the importance of oil price shocks for norway a large prototype petroleum exporter domestic supply chains link mainland non oil norway to the off shore oil industry while fiscal authorities accumulate income in a sovereign wealth fund oil prices and the international business cycle are jointly determined abroad these features allow us to disentangle the structural sources of oil price fluctuations and how they affect mainland norway the estimated model provides three key results first oil price movements represent an important source of macroeconomic volatility in mainland norway second while no two shocks cause the same dynamics conventional trade channels make an economically less significant difference for the transmission of global shocks to the oil exporter than to oil importers third the domestic oil industry s supply chain is an important transmission mechanism for oil price movements while the prevailing fiscal regime provides substantial protection against external shocks

optimal monetary policy in open versus closed economies an integrated approach in clarida et al 1999 hereafter cgg we presented a normative analysis of monetary policy within a simple optimization based closedeconomy framework we derived the optimal policy rule and among other things characterized the gains from commitment also we made precise the implications for the kind of instrument feedback rule that a central bank should follow in practice in this paper we show how our analysis extends to the case of a small open economy openness complicates the problem of monetary management to the extent the central bank must take into account the impact of the exchange rate on real activity and inflation how to factor the exchange rate into the overall design of monetary policy accordingly becomes a central consideration here we show that under certain conditions the monetary policy design problem for the small open economy is isomorphic to the problem of the closed economy that we considered earlier hence all our qualitative results for the closed economy carry over to this case openness does affect the parameters of the model suggesting quantitative implications though the general form of the optimal interest rate feedback rule remains the same as in the closedeconomy case for example how aggressively a central bank should adjust the interest rate in response to inflationary pressures depends on the degree of openness in addition openness gives rise to an important distinction between domestic inflation and consumer price inflation as defined by the cpi to the extent that there is perfect exchange rate pass through we find that the central bank should target domestic inflation and allow the exchange rate to float despite the impact of the resulting exchangerate variability on the cpi kosuki aoki 1999 gali and tommaso monacelli 2000

the yield curve in a small open economy abstract long term nominal interest rates in a number of inflation targeting small open economies have tended to be strongly correlated with those of the united states this observation has recently led support to the view that in these economies the long end of the yield curve has decoupled from its short end and naturally to a concern that monetary policy may have lost some of its autonomy we set up and estimate a two country small open economy model in which the expectations hypothesis and uncovered interest rate parity hold to study the co movement of long term nominal interest rates of different currencies we show that differences in the persistence of domestic and foreign disturbances a hypothesis for which we find support in recent data can explain the observed pattern of correlations these correlations are not evidence of weaker monetary policy

learning under fear of floating in recent years a large fraction of economies overcame the fear of floating we study a model that describes the policy of a central bank uncertain about whether currency depreciations cause output to expand textbook model or contract balance sheet model we conclude that the movement away from fear of floating may not be explained by bayesian or robust policies when the private sector anticipates the central bank s policy and endogenously determines the model central banks may fall in a learning trap an increase in financial volatility provides an escape to such trap that replicates patterns in the data

u s monetary regimes and optimal monetary policy in the euro area monetary policy in the united states has been documented to have switched from reacting weakly to inflation fluctuations during the 1970s to fighting inflation aggressively from the early 1980s onward in this paper i analyze the impact of the u s monetary policy regime switches on the eurozone i construct a new keynesian two country model where foreign u s monetary policy switches regimes over time i estimate the model for the u s and the euro area using quarterly data and find that the united states has switched between those two regimes in line with existing evidence i show that foreign regime switches affect home eurozone inflation and output volatility and their responses to shocks substantially as long as the home central bank commits to a time invariant interest rate rule reacting to domestic conditions only optimal policy in the home country instead requires that the home central bank reacts strongly to domestic producer price inflation and to international variables such as imported goods relative prices in fact i show that currency misalignments and relative prices play a crucial role in the transmission of foreign monetary policy regime switches internationally interestingly i show that only marginal gains arise for the euro area when the european central bank ecb adjusts its policy according to the monetary regime in the united states thus a simple time invariant monetary policy rule with a strong reaction to producer price index ppi inflation and relative prices is enough to counteract the effects of monetary policy switches in the united states

mail versus mall a strategic analysis of competition between direct marketers and conventional retailers consumers now purchase several offerings from direct sellers including catalog and internet marketers these direct channels exist in parallel with the conventional retail stores the availability of multiple channels has significant implications for the performance of consumer markets the literature in marketing and economics has however been dominated by a focus on the conventional retail sector this paper is an effort toward modeling competition in the multiple channel environment from a strategic viewpoint at the outset a parsimonious model that accommodates the following consumer and market characteristics is introduced first the relative attractiveness of retail shopping varies across consumers second the fit with the direct channel varies across product categories third the strength of existing retail presence in local markets moderates competition fourth in contrast with the fixed location of the retail store that anchors its localized market power the location of the direct marketer is irrelevant to the competitive outcome the model is first applied in a setting where consumers have complete knowledge of product availability and prices in all channels in the resulting equilibrium the direct marketer acts as a competitive wedge between retail stores the direct presence is so strong that each retailer competes against the remotely located direct marketer rather than against neighboring retailers this outcome has implications for the marketing mix of retailers which has traditionally been tuned to attract consumers choosing between retail stores in the context of market entry conditions under which a direct channel can access a local market in retail entry equilibrium are derived our analysis suggests that the traditional focus on retail entry equilibria may not yield informative or relevant findings when direct channels are a strong presence next the role of information in multiple channel markets is modeled this issue is particularly relevant in the context of direct marketing where the seller can typically control the level of information in the marketplace sometimes on a customer by customer basis e g by deciding on the mailing list for a catalog campaign when a certain fraction of consumers does not receive information from the direct marketer the retailers compete with each other for that fraction of the market the retailer s marketing mix has to be tuned in this case to jointly address direct and neighboring retail competition the level of information disseminated by the direct marketer is shown to have strategic implications and the use of market coverage as a lever to control competition is described even with zero information costs providing information to all consumers may not be optimal under some circumstances in particular when the product is not well adapted to the direct channel the level of market information about the direct option should ideally be lowered the only way to compete with retailers on a larger scale with a poorly adapted product is by lowering direct prices which lowers profits lowering market information levels and allowing retailers to compete more with each other facilitates a higher equilibrium retail price in turn this allows a higher direct price to be charged and improves overall direct profit on the other hand when the product is well adapted increasing direct market presence and engaging in greater competition with the retail sector yields higher returns the finding that high market coverage may depress profits raises some issues for further exploration first implementing the optimal coverage is straightforward when the seller controls the information mechanism as in the case of catalog marketing the internet in contrast is an efficient mechanism to transmit information but does not provide the sellers with such control over the level of market information a key reason is that the initiative to gather information on the internet lies largely with consumers the design and implementation of mechanisms to control aggregate information levels in electronic markets can therefore be an important theme for research and managerial interest second direct marketers have traditionally relied on the statistical analysis of customer records to decide on contact policies the analysis in this paper reveals that these policies can have significant strategic implications as well research that integrates the statistical and strategic aspects could make a valuable contribution the paper concludes with a discussion of issues for future research in multiple channel markets including avenues to model competition in settings with multiple direct marketers

realized and optimal monetary policy rules in an estimated markov switching dsge model of the united kingdom this paper investigates underlying changes in the u k economy over the past thirty five years using a small open economy dsge model using bayesian analysis we find uk monetary policy nominal price rigidity and exogenous shocks are all subject to regime shifting a model incorporating these cha nges is used to estimate the realised monetary policy and derive the optimal mon etary policy for the uk this allows us to assess the effectiveness of the realis ed policy in terms of stabilising economic fluctuations and in turn provide an ind ication of whether there is room for monetary authorities to further improve their polic ies

pricing and product line strategy in a supply chain with risk averse players abstract we study the pricing and product line strategy of a risk averse manufacturer who sells her products through a risk averse retailer we identify the conditions under which the manufacturer extends her product line or replaces the old product with a new product and find that i a higher retailer s risk aversion decreases the retail price but increases the unit wholesale price ii the manufacturer extends the product line if the price caps for both products are sufficiently high both her risk aversion and product substitutability are sufficiently low iii the manufacturer discontinues the old product if the relative price cap of the new product to the old product is sufficiently high her risk aversion is medium and product substitutability are sufficiently high further we find that i the decentralization of supply chain may increase product line length if the retailer s risk aversion and product substitutability are sufficiently high otherwise it may decrease product line length ii the endogenization of quality design increases the motivation to introduce a new product and iii the manufacturer extends or replaces the product line if quality cost is not too high

price and lead time decisions in dual channel supply chains abstract manufacturers today are increasingly adopting a dual channel to sell their products i e the traditional retail channel and an online direct channel empirical studies have shown that service quality we focus on the delivery lead time of the direct channel even goes beyond product price as one of the major factors influencing consumer acceptance of the direct channel delivery lead time has significant effects on demand profit and pricing strategy however there is scant literature addressing the decision on the promised delivery lead time of a direct channel and its impact on the manufacturer s and retailer s pricing decisions to fill this gap we examine the optimal decisions of delivery lead time and prices in a centralized and a decentralized dual channel supply chain using the two stage optimization technique and stackelberg game and analyze the impacts of delivery lead time and customer acceptance of a direct channel on the manufacturer s and retailer s pricing behaviours we analytically show that delivery lead time strongly influences the manufacturer s and the retailer s pricing strategies and profits our numerical studies reveal that the difference between the demand transfer ratios in the two channels with respect to delivery lead time and direct sale price customer acceptance of the direct channel and product type have great effects on the lead time and pricing decisions

the impact of digital channel distribution on the experience goods industry abstract we explore the impact of a digital channel for experience goods on the profitability and behavior of players in the supply chain and on piracy we consider a firm which can sell an experience good in physical form in digitized form or both we analyze different pricing schemes price for whole album on the retail channel and linear and nonlinear pricing for songs on the digital channel consumers are divided into a retail captive segment whose consumers are limited to the retail channel and a hybrid segment whose consumers have access to both retail and digital channels our findings indicate that for realistic problems the dual distribution channel is most profitable the profitability of the retail channel increases with the size of the retail captive segment and the number of desirable songs on an album relative to the total number of songs on it we show that a skimming pricing strategy is best for the retail channel the ability to sell the product in digitized form on the internet erodes much of the power once enjoyed by the record labels the digital channel may be the best way to promote new artists especially when the hybrid consumer segment is large we also find that piracy has a significant effect on channel profits for both the retail and digital channels piracy has the strongest negative impact on the exclusive retail channel consumers access to the digital channel reduces piracy in both digital and dual channel distribution dual channel suffers least from piracy because it allows retail captive consumers to still legally obtain the product

spillover effects from euro area monetary policy across europe a factor augmented var approach i analyze spillover effects from a euro area monetary policy shock to fourteen european countries outside the euro area the analysis is based on a factor augmented var model with two blocks which exploits a large cross country data set after a euro area monetary policy expansion production increases in most non euro area countries whereas short term interest rates and financial uncertainty decline these effects are on average comparable to the responses in the aggregate euro area however the size of spillover effects varies with country characteristics spillovers on production are larger in non euro area economies with higher trade openness whereas financial variables react to a higher extent in countries with higher financial integration regarding the exchange rate regime countries with fixed exchange rates show stronger spillovers both in terms of production and interest rates finally prices increase in western european economies outside the euro area but decline or do not respond in central and eastern europe

explorations into factors explaining money market returns in this article we measure and interpret the common factors that describe money market returns results are presented for both three and four factor models we find that the three factor model explains on average 86 percent of the total variation in most money market returns while the four factor model explains on average 90 percent of this variation using mimicking portfolios we provide an interpretation of the systematic risks represented by these factors in this article we attempt to measure and interpret the common factors that describe money market returns the factor approach we employ assumes that the covariance matrix of a set of random variables in this case excess returns can be decomposed into common or systematic components and idiosyncratic or nonsystematic components this decomposition into systematic and nonsystematic components is based on an assumption of a linear relationship between the returns of each security and a set of common factors this is the assumption of linear return generating models which form an integral part of the structure of many asset pricing theories for example arbitrage pricing theory apt as developed by ross 1976 the interpretation is that the common factors represent sources of systematic or nondiversifiable risk and the idiosyncratic component of returns represents diversifiable risks our focus here is not on testing a particular asset pricing model per se but on developing empirical evidence for the existence of stylized facts regarding money market returns the stylized facts take the form of the existence measurement and interpretation of the common factors that are found in money markets our attempt to measure and interpret these sources of systematic risk may eventually lead to the construction of observable eco

asymmetric monetary policy rules in australia abstractin this study the hypothesis that the reserve bank of australia rba implements an asymmetric monetary policy rule is tested we estimate both linear and asymmetric monetary policy reaction functions for the period before inflation targeting was adopted for the period when inflation targeting was explicitly adopted and for the full sample period the results of the linear monetary policy rules are consistent with the estimates reported from other studies that estimate linear monetary policy rules for australia on the other hand the results of estimating the asymmetric monetary policy rules for the pre inflation targeting period shows that the rba had reacted symmetrically suggesting that it had acted with the same aggressiveness towards both inflation and output gaps of the same magnitude over both phases of the business cycle however for the inflation targeting period the results show that the rba had reacted asymmetrically in its policy response to the inflation gap output gap or both

optimal quality and quantity provisions for centralized vs decentralized distribution market size uncertainty effects abstract we provide insights on how market size uncertainty affects the optimal quality quantity provision in distribution channels when consumers are heterogeneous in their willingness to pay for product quality in this context we denote the difference between the manufacturer s optimal quality quantity provision for a centralized channel and its optimal analog for a decentralized channel as the quality quantity differential we find that market size uncertainty creates or increases the quantity differential but it does not affect the differential s polarity in contrast market size uncertainty decreases the quality differential and it does so to the extent that depending on the level of consumer heterogeneity it reverses the differential s polarity moreover we find that the higher the inherent uncertainty level the more pronounced are the effects we likewise find that the effects of market size uncertainty are amplified if the notion of consumer heterogeneity is replaced with retail level competition

should inflation targeting central banks respond to exchange rate movements abstract this paper examines whether it is optimal for inflation targeting central banks to respond to exchange rate movements the paper finds that exchange rate movements can provide a signal on the developments in the economy that the central bank cannot perfectly observe the results suggest that when the degrees of exchange rate pass through and international financial integration are high it is optimal for the central bank to pay more attentions to exchange rate movements these results however depend on two conditions 1 the ability of the central bank to observe the true exchange rate process and 2 the number of real frictions in the model economy

monetary policy and uncertainty in an empirical small open economy model this paper explores optimal policy design in an estimated model of three small open economies australia canada and new zealand within a class of generalized taylor rules we show that to stabilize a weighted objective of output consumer price in ation and nominal interest variation optimal policy does not respond to the nominal exchange this is despite the presence of local currency pricing and due in large part to observed exchange rate disconnect in these economies optimal policies that account for the uncertainty of model estimates as captured by the parameters posterior distrbution similarly exhibit a lack of exchange rate response in contrast to brainard 1967 the presence of parameter uncertainty can lead to more or less aggressive policy responses depending on the model at hand

exchange rate pass through exchange rate volatility and exchange rate disconnect abstract this paper explores the hypothesis that high volatility of real and nominal exchange rates may be due to the fact that local currency pricing eliminates the pass through from changes in exchange rates to consumer prices exchange rates may be highly volatile because in a sense they have little effect on macroeconomic variables the paper shows the ingredients necessary to construct such an explanation for exchange rate volatility in addition to the presence of local currency pricing we need a incomplete international financial markets b a structure of international pricing and product distribution such that wealth effects of exchange rate changes are minimized and c stochastic deviations from uncovered interest rate parity together it is shown that these elements can produce exchange rate volatility that is much higher than shocks to economic fundamentals and disconnected from the rest of the economy in the sense that the volatility of all other macroeconomic aggregates are of the same order as that of fundamentals

monetary policy and exchange rate volatility in a small open economy we lay out a small open economy version of the calvo sticky price model and show how the equilibrium dynamics can be reduced to a simple representation in domestic inflation and the output gap we use the resulting framework to analyse the macroeconomic implications of three alternative rulebased policy regimes for the small open economy domestic inflation and cpi based taylor rules and an exchange rate peg we show that a key difference among these regimes lies in the relative amount of exchange rate volatility that they entail we also discuss a special case for which domestic inflation targeting constitutes the optimal policy and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with the suboptimal rules

a new paradigm for valuing non market goods using referendum data maximum likelihood estimation by censored logistic regression abstract this paper challenges the w m hanemann amer j agr econom 66 332 341 1984 and c sellar j p chavas and j r stoll j environ econom management 13 382 390 1986 utilizations of logit models to estimate the value of non market resources from referendum survey data these data are more informative than conventional choice data the random utility interpretation of logit models is therefore too restrictive bypassing the utility function entirely it will be shown that parameters and standard errors for utility theoretic inverse hicksian demand functions can be extracted directly and much more simply estimated demand functions need not be limited to those corresponding to the linear in parameters utility difference specifications which can be handled by packaged logit programs

mundell s trilemma policy trade offs within the middle ground abstract mundells s trilemma makes strong categorial predictions on monetary policy trade offs where a small economy either has to adopt floating exchange rates or a closed capital account to establish interest rate autonomy however the trilemma is silent about a functional description of respective trade offs for intermediate middle ground policies accounting for the entire space of such policies we study monetary autonomy in an unrestricted and continuous manner for 20 mostly developed economies evidence suggests that interest rate dependence almost linearly increases with the fx stability indicator under financial openness thereby full independence would require an intensity of fx volatility which policymakers might hardly accept however this strong trade off can be relaxed efficiently by a moderate reduction of financial openness hence such a policy might offer some protection against the global financial cycle and leaves a considerable scope to combine a domestic monetary policy with a reduced fx rate variability

technology shocks in the new keynesian model in the new keynesian model preference cost push and monetary shocks all compete with the real business cycle model s technology shock in driving aggregate fluctuations a version of this model estimated via maximum likelihood points to these other shocks as being more important for explaining the behavior of output inflation and interest rates in the postwar u s data these results weaken the links between the current generation of new keynesian models and the real business cycle models from which they were originally derived they also suggest that federal reserve officials have often faced difficult trade offs in conducting monetary policy

monetary policy rules based on real time data this paper examines the magnitude of informational problems associated with the implementation and interpretation of simple monetary policy rules using taylor s rule as an example i demonstrate that real time policy recommendations differ considerably from those obtained with ex post revised data further estimated policy reaction functions based on ex post revised data provide misleading descriptions of historical policy and obscure the behavior suggested by information available to the federal reserve in real time these results indicate that reliance on the information actually available to policy makers in real time is essential for the analysis of monetary policy rules

gasoline prices transport costs and the u s business cycles abstract the effects of gasoline prices on the u s business cycles are investigated in order to distinguish between gasoline supply and gasoline demand shocks the price of gasoline is endogenously determined through a transportation sector that uses gasoline as an input of production the model is estimated for the u s economy using five macroeconomic time series including data on transport costs and gasoline prices the results show that although standard shocks in the literature e g technology shocks monetary policy shocks have significant effects on the u s business cycles in the long run gasoline supply and demand shocks play an important role in the short run

changes in the federal reserve s inflation target causes and consequences this paper estimates a new keynesian model to draw inferences about the behavior of the federal reserve s unobserved inflation target the results indicate that the target rose from 1 1 4 percent in 1959 to over 8 percent in the mid to late 1970s before falling back below 2 1 2 percent in 2004 the results also provide some support for the hypothesis that over the entire postwar period federal reserve policy has systematically translated short run price pressures set off by supply side shocks into more persistent movements in inflation itself although considerable uncertainty remains about the true source of shifts in the inflation target jel e31 e32 e52

product availability in competitive and cooperative dual channel distribution with stock out based substitution abstract this paper investigates the impact of customers stock out based substitution on the product availability and the channel efficiency of a dual channel supply chain which consists of a supplier distributing a single product to customers through both its wholly owned direct channel and an independent retailer the supplier and its retailer with the objective of optimizing their own profit simultaneously choose their own base stock level to satisfy the stochastic demand from the customers whose channel preferences are heterogeneous and may be affected by each channel s product availability the customers dynamically substitute between the two channels in the event of a stock out the result shows that the effect of the stock out based substitution may increase or decrease the efficiency of a decentralized supply chain it is found that while the integrated supplier retailer may consolidate the base stock levels to benefit from stock out based substitution the independent supplier and retailer are more inattentive to customers stock out based substitution thus the competitive base stock levels of the decentralized dual channel supply chain rarely agree with the system optimal levels various contracts are examined to shed light on channel coordination mechanisms in addition it is shown that the channel efficiency of the dual channel distribution can be improved by the emergence of stackelberg leadership from either the supplier or the retailer

semiparametric estimation of the binary choice model for contingent valuation this paper is concerned with the estimation of the binary choice model without imposing any parametric structure on the distribution of the stochastic term we adapt the distribution free maximum l

does the reserve bank of australia follow a forward looking nonlinear monetary policy rule abstractthe conventional monetary policy rule describes a simple linear relationship between the domestic interest rate inflation rate and output gap an important extension to this rule is to inc

a new comparative approach to macroeconomic modeling and policy analysis in the aftermath of the global financial crisis the state of m acroeconomic modeling and the use of macroeconomic models in policy analysis has come under heavy criticism macroeconomists in academia and policy institutions are blamed for relying too much on a particular class of macroeconomic models that did not sufficiently this paper propose s a comparative approach to macroeconomic policy analysis that is open to competing modeling paradigms macroeconomic model comparison projects have helped produce some very influenti al insights such as the taylor rule however they have been infrequent and costly because they require the input of many teams of researchers and multiple meetings to obtain a limited set of comparative findings this paper provides a new comparative approach to model based research and policy analysis that enables individual researchers to conduct model comparisons easily frequently at low cost and on a large scale using this approach a model archive is built that incl udes many well known empirically estimated models that may be used for quantitative analysis of monetary and fiscal stabilization policies a computational platform is created that allows straightforward comparisons of models implications its application is illustrated by compa ring different monetary and fiscal policies across selected models researchers can easily include new models in the data base and compare the effects of novel extensions to established benchmarks thereby fostering a comparative instead of insular approach to model development

nash game model for optimizing market strategies configuration of platform products in a vendor managed inventory vmi supply chain for a product family this paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies platform product configuration and inventory policies in a vmi vendor managed inventory supply chain the manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers multiple types of products are substitutable each other to end customers the manufacturer makes its decision on raw materials procurement platform product configuration product replenishment policies to retailers with vmi price discount rate and advertising investment to maximize its profit retailers in turn consider the optimal local advertising investments and retail prices to maximize their profits this problem is modeled as a dual simultaneous non cooperative game as a dual nash game model with two sub games one is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers this paper combines analytical iterative and ga genetic algorithm methods to develop a game solution algorithm to find the nash equilibrium a numerical example is conducted to test the proposed model and algorithm and gain managerial implications

the impact of oil price shocks in the canadian economy a structural investigation on an oil exporting economy abstract oil price shocks and monetary policy response by oil producing economies have been the subject of important theoretical investigation in the modern literature this topic seems to be well grounded since fluctuations in the us dollar which is affected by us monetary policy plays an important role in exacerbating run ups and precipitous falls in world oil prices we investigate the economic consequences of oil price shocks using an open economy dsge model that incorporates demand for and supply of oil while allowing for interaction between domestic and foreign monetary policy using canadian and u s data we quantify the relative importance of oil price shocks and monetary policy response on macroeconomic variables we show that domestic monetary policy is a key channel that accounts for over 40 of discounted variation in domestic output across a 4 year horizon after an oil shock in contrast us monetary policy is of lesser importance in propagating oil price shocks on an oil exporting economy through the international channel

semi parametric discrete choice measures of willingness to pay abstract a semi parametric discrete choice method is proposed to recover welfare measures from individual choice data the proposed method is compared with the traditional binary choice models in an application to measure benefits of recreation trips

identification issues in limited information bayesian analysis of structural macroeconomic models the likelihood of the parameters in structural macroeconomic models typically has non identification regions over which it is constant when sufficiently diffuse priors are used the posterior piles up in such non identification regions use of informative priors can lead to the opposite so both can generate spurious inference we propose priors posteriors on the structural parameters that are implied by priors posteriors on the parameters of an embedding reduced form model an example of such a prior is the jeffreys prior we use it to conduct bayesian limited information inference on the new keynesian phillips curve with a var reduced form for us data

the adjustment of global external balances does partial exchange rate pass through to trade prices matter abstract this paper assesses whether partial exchange rate pass through to trade prices has important implications for the prospective adjustment of global external imbalances to address this question we develop and estimate an open economy dsge model in which pass through is incomplete due to the presence of local currency pricing distribution services and a variable demand elasticity that leads to fluctuations in optimal markups we find that the overall magnitude of trade adjustment is similar in a low and high pass through environment with more adjustment in a low pass through world occurring through movements in the terms of trade rather than real trade flows and through a larger response of the exchange rate

has u s monetary policy tracked the efficient interest rate abstract interest rate decisions by central banks are universally discussed in terms of taylor rules which describe policy rates as responding to inflation and some measure of the output gap we show that an alternative specification of monetary policy in which the interest rate tracks the wicksellian efficient rate of return as the primary indicator of real activity fits the u s data better than otherwise identical taylor rules this result holds for a variety of specifications of the other ingredients of the policy rule including the output gap and of private agents behavior

following the leader the relevance of the fed funds rate for inflation targeting countries abstract in a new keynesian model for a small open economy we derive a cpi inflation based taylor rule that implements the flexible price allocation we conclude that in this rule the natural rate of interest should be linked to the foreign interest rate and to domestic productivity shocks this rule ensures that the cpi real rate moves in order to induce movements in consumption that are coherent with the flexible price allocation the empirical evidence shows that inflation targeting central banks respond to movements in the fed funds rate besides reacting to expected cpi inflation and to the domestic output gap this is true for developed and emerging economies furthermore we find that in emerging countries the response to foreign variables is not different from zero as suggested by theory when domestic inflation rather than cpi inflation is introduced in the policy rule

understanding the cross country effects of u s technology shocks abstract business cycles are substantially correlated across countries yet most existing models are not able to generate substantial transmission through international trade we show that the nature of such transmission depends fundamentally on the features determining the responsiveness of labor supply and labor demand to international relative prices we augment a standard international macroeconomic model to incorporate three key features a weak short run wealth effect on labor supply variable capital utilization and imported intermediate inputs for production this model can generate large and significant endogenous transmission of technology shocks through international trade we demonstrate this by estimating the model using data for canada and the united states with limited information bayesian methods we find that this model can account for the substantial transmission of permanent u s technology shocks to canadian aggregate variables such as output and hours documented in a structural vector autoregression transmission through international trade is found to explain the majority of the business cycle comovement between the united states and canada

definition consistent measurement of exchange market pressure currencies can be under severe pressure but in a managed exchange rate regime that is not fully visible via the change in the exchange rate the literature has proposed a way to measure such exchange market pressure emp indirectly by adding interest rate changes and forex interventions to the exchange rate change we demonstrate that this measure is not consistent with the definition of emp and develop a new measure that is consistent this is first derived within the commonly used monetary exchange rate model then we generalize the analysis by avoiding the use of an exchange rate model we find that the interest rate should not be taken in the first difference form used so far but rather in level form and relative to the interest rate chosen if the country had no exchange rate objective applications on the european monetary system and east asian crises confirm that this improvement is highly relevant in practice

explaining business cycles in small open economies abstract this paper analyzes the role of world price shocks fluctuations in the prices of capital intermediate and primary goods and in the world real interest rate in the generation and propagation of business cycles in small open developing countries i construct a stochastic dynamic multi sector small open economy model the model is a variant of the specific factors model and reflects the major structural characteristics of developing economies i utilize variance decomposition methods to quantitatively evaluate the impact of world price shocks the results indicate that world price shocks account for a significant fraction of business cycle variability in developing countries

public preferences for hydrogen buses comparing interval data ols and quantile regression approaches we use a quantile regression qr approach to analyse contingent valuation estimates of public willingness to pay wtp for the air and noise pollution reductions associated with the introduction of hydrogen buses in london qr results show that variables that were not significant in interval regression or ordinary least squares regression become significant at certain quantiles along the wtp distribution in addition the determinants of wtp at the lower tail of the distribution differ from those at the higher end of the distribution our findings illustrate the usefulness of quantile regression methods for analysing contingent valuation data enhancing our understanding of the determinants of willingness to pay

the butterfly effect of small open economies abstract the rational expectations equilibrium of a small open economy can be subject to indeterminacy if foreign monetary policy does not satisfy the taylor principle we study the implications of foreign induced indeterminacy in the two country version of the sticky price small open economy model our main finding is that smallness is a property of the unique rational expectations equilibrium of the large economy and not a general property of the small open economy model if the large economy fails to anchor expectations shocks to the small economy can affect the large one this form of indeterminacy gives rise to a butterfly effect additional assumptions are required to preserve the smallness of the small economy

pricing and the news vendor problem a review with extensions in the newsvendor problem a decision maker facing random demand for a perishable product decides how much of it to stock for a single selling period this simple problem with its intuitively appealing solution is a crucial building block of stochastic inventory theory which comprises a vast literature focusing on operational efficiency typically in this literature market parameters such as demand and selling price are exogenous however incorporating these factors into the mode l can provide an excellent vehicle for examining how operational problems interact with marketing issues to influence decision making at the firm level in this paper we examine an extension of the newsvendor problem in which stocking quantity and selling price are set simultaneously we provide a comprehensive review that synthesizes existing results for the single period problem and develop additional results to enrich the existing knowledge base we also review and develop insight into a dynamic inventory extension of this problem and motivate the applicability of such models

gmm estimation of the new phillips curve abstract this paper applies test statistics developed by stock and wright econometrica 68 2000 1055 to examine the two specifications of the new keynesian phillips curve in gali and gertler journal of monetary economics 44 1999 195 the new test statistics demonstrate the inadequacy of conventional gmm methodology by indicating two features that are neglected by gali and gertler observational equivalence in the baseline model and weak identification in the hybrid model

testing for indeterminacy an application to u s monetary policy reply this paper considers a prototypical new keynesian model in which the equilibrium is undetermined if monetary policy is passive the likelihood based estimation of dynamic equilibrium models is extended to allow for indeterminacies and sunspot fluctuations we construct posterior weights for the determinacy and indeterminacy region of the parameter space and estimates for the propagation of fundamental and sunspot shocks according to the estimated model u s monetary policy post 1982 is consistent with determinacy whereas the pre volcker policy is not we find that before 1979 indeterminacy substantially altered the propagation of shocks

generalized additive models for nonmarket valuation via revealed or stated preference methods single site recreation demand and dichotomous choice contingent valuation analyses are typically conducted by implementing models containing strong parametric assumptions which are rarely underpinned by theoretical arguments this work illustrates how these assumptions can be relaxed and the estimation conducted semiparametrically by using generalized additive models gams this approach directly estimates the degree of the variables nonlinearities from the data thereby avoiding subjective choices on the smoothing parameters and offering many advantages when compared to the conventional modeling techniques that dominate the environmental economics literature additionally this paper illustrates how gams can be specified to construct theoretically consistent willingness to pay measures jel c14 q51

new keynesian macroeconomics and the term structure this article complements the structural new keynesian macro framework with a no arbitrage affine term structure model whereas our methodology is general we focus on an extended macro model with an unobservable time varying inflation target and the natural rate of output which are filtered from macro and term structure data we obtain large and significant estimates of the phillips curve and real interest rate response parameters our model also delivers strong contemporaneous responses of the entire term structure to various macroeconomic shocks the inflation target dominates the variation in the level factor whereas the monetary policy shocks dominate the variation in the slope and curvature factors

the role of the exchange rate in monetary policy rules for a country that chooses not to permanently fix its exchange rate through a currency board or a common currency or some kind of dollarization the only alternative monetary policy that can work well in the long run is one based on the trinity of i a flexible exchange rate ii an inflation target and iii a monetary policy rule while not often put into this threepart format the desirability of such a monetary policy in an open economy is in my view the clear implication of three corresponding strands of recent monetary research i research on fixed exchange rates regimes including the influential 1995 article the mirage of fixed exchange rates by maurice obstfeld and kenneth rogoff and the many analyses of the breakdown of fixed exchange rate regimes in the late 1990 s ii research on the practical success with inflation targeting by ben bernanke et al 1999 and iii research on the benefits of simple monetary policy rules see e g taylor 1999a this clear policy implication however does not end the debate about how exchange rates should be taken into account in formulating monetary policy even if one excludes capital controls and sterilized exchange market intervention from consideration because they are not effective or attractive ways to de link exchangerate movements from the domestic interest rate a crucial question remains how should the instruments of monetary policy the interest rate or a monetary aggregate react to the exchange rate should policymakers avoid any reaction and focus instead on domestic indicators such as inflation and real gdp or is the rule of thumb that a substantial appreciation of the real exchange rate furnishes a prima facie case for relaxing monetary policy as characterized by obstfeld and rogoff 1995 p 93 a better monetary policy rule or perhaps policymakers should heed the obstfeld rogoff warning that substantial departures from ppp purchasing power parity in the short run and even over decades make such a policy reaction to the exchange rate undesirable more generally if one accepts the trinity concept of monetary policy in an open economy then what is the role of the exchange rate in the monetarypolicy rule

high exchange rate volatility and low pass through abstract two specifications of an open economy model are shown to generate high exchange rate volatility and low exchange rate pass through erpt in the model price discrimination causes erpt to be incomplete in both the short and the long run in the short run a small amount of nominal rigidities is enough to reduce erpt sharply still exchange rate depreciation worsens the terms of trade consistent with the evidence possible biases from omitted variables and measurement error in the erpt empirical literature due to data limitations are investigated using model generated time series estimates of erpt coefficients can be quite different from true parameters and are sensitive to the shocks driving the economies estimates can nonetheless detect key structural features of the models

game theoretical perspectives on dual channel supply chain competition with price discounts and pricing schemes abstract this paper evaluates the impact of price discount contracts and pricing schemes on the dual channel supply chain competition channel conflict occurs when the supplier enters the online direct channel traditional contracts normally require tedious administrational participation full information of the cost structures and other factors the introduction of simple price discount contracts aims at providing easy implementation and effective coordination results from supplier stackelberg retailer stackelberg and nash game theoretic perspectives we show that the scenarios with price discount contracts can outperform the non contract scenarios in addition we show consistent pricing scheme can reduce the channel conflict by inducing more profit to the retailer the leader in the games might but is not guaranteed to have advantages

the international transmission of economic fluctuations abstract this paper suggests that for a wide class of international real business cycle models including models with imperfect competition the traditional channels of international transmission of business cycles through world interest rate and terms of trade variations cannot explain the cyclical response of the canadian economy to innovations in u s output empirically testable quantitative models of the effects on canadian economic activity of shocks to the u s economy are developed and their empirical relevance is tested by comparing impulse responses estimated from vector autoregressions to the quantitative predictions of the theoretical models

the fed and the new economy the views expressed herein are those of the authors and not necessarily those of the national bureau ofeconomic research 2002 by laurence ball and robert tchaidze all rights reserved short sections of text not to exceed twoparagraphs may be quoted without explicit permission provided that full credit including notice is givento the source

identifying sources of macroeconomic and exchange rate fluctuations in the uk abstract using quarterly data for the period 1985 1 2011 1 this paper uses a stylised open economy structural var model to identify the types of shocks responsible for macroeconomic fluctuations in the uk economy the stylised model implies a set of short run restrictions that allow for the identification of the shocks the importance of each shock is determined by examining forecast error variance decompositions impulse response functions and implied long run or permanent effects the results presented here imply that two shocks called the technology and is shocks are relatively more important than other shocks monetary shocks do exhibit long run monetary neutrality but clearly monetary policy is not responsible for a meaningful share of output and employment fluctuations during the sample period the estimated var and structural disturbances imply that the model accurately reflects the uk economy there is little evidence of a price puzzle or an exchange rate puzzle evidence against uncovered interest rate parity in response to an unexpected monetary policy tightening

direct marketing indirect profits a strategic analysis of dual channel supply chain design the advent of e commerce has prompted many manufacturers to redesign their traditional channel structures by engaging in direct sales the model conceptualizes the impact of customer acceptance of a direct channel the degree to which customers accept a direct channel as a substitute for shopping at a traditional store on supply chain design the customer acceptance of a direct channel can be strong enough that an indepent manufacturer would open a direct channel to compete with its own retailers here direct marketing is used for strategic channel control purposes even though it is inefficient on its own and surprisingly it can profit the manufacturer even when so direct sales occur specifically we construct a price setting game between a manufacturer and its independent retailer direct marketing which indirectly increases the flow of profits through the retail channel helps the manufacturer improve overall profitability by reducing the degree of inefficient price double marginalization while operated by the manufacturer to constrain the retailer s pricing behavior the direct channel may not always be detrimental to the retailer because it will be accompanied by a wholesale price reduction this combination of manufacturer pull and push can benefit the retailer in equilibrium finally we show that the mere threat of introducing the direct channel can increase the manufacturer s negotiated share of cooperative profits even if price efficiency is obtained by using other business practices

a macro finance model of the term structure monetary policy and the economy this paper develops and estimates a macro finance model that combines a canonical affine no arbitrage finance specification of the term structure with standard macroeconomic aggregate relationships for output and inflation from this new empirical formulation we obtain several interesting results 1 the latent term structure factors from finance no arbitrage models appear to have important macroeconomic and monetary policy underpinnings 2 there is no evidence of monetary policy inertia or a slow partial adjustment of the policy interest rate by the federal reserve and 3 both forward looking and backward looking elements play important roles in macroeconomic dynamics

a happy half way house medium term inflation targeting in new zealand abstract the 2002 policy targets agreement pta between the government and central bank of new zealand asks the central bank to target inflation over the medium term rather than over an annual target delegating such a medium term objective to the central bank shifts inflation targeting towards a halfway house between inflation targeting and price level targeting we show empirically that this helps time consistent policy approximate the first best commitment policy even when the government asks the central bank to weight output stabilisation differently to society we estimate the new zealand economy with a small open economy dsge model and show that the happiest halfway house is located around a two year averaging horizon at most which leads to mild improvements in monetary policy efficiency

the terms of trade the real exchange rate and economic fluctuations this paper examines the relationship between terms of trade and business cycles using a three sector intertemporal equilibrium model and a large multicountry database results show that terms of trade shocks account for nearly one half of actual gdp variability the model explains weak correlations between net exports and terms of trade the harberger laursen and metzler effect and produces large and weakly correlated deviations from purchasing power parity and real interest rate parity terms of trade shocks cause real appreciations and positive interest differentials although productivity shocks have opposite effects the puzzle that welfare gains of international asset trading are negligible is left unresolved copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

strategic introduction of the marketplace channel under spillovers from online to offline sales abstract in recent years the increasing prevalence of online retailing has given rise to a novel e channel the marketplace in which manufacturers sell their products directly to consumers by paying fees to e tailers this e channel unlike the conventional reseller e channel endows manufacturers with absolute control over prices which helps protect brick and mortar channels especially in the presence of different types of spillovers from online to offline sales however the marketplace channel is nevertheless not used in practice in some instances as a result of the e tailer s costly platform fees and the manufacturer s inefficiency in direct retail sales these different attitudes raise key questions of whether and under what conditions the marketplace channel should be introduced in addition to the reseller channel in this paper we study these problems by measuring the combined effects of the online spillover the platform fee and the manufacturer s retailing inefficiency we demonstrate that the manufacturer s willingness to employ the marketplace channel increases and the e tailer s willingness to do so decreases in the level of spillovers when combining the two we find that a pareto improvement can be achieved under a moderate spillover we also present an interesting insight that the introduction of the marketplace channel fundamentally changes the effects of the spillover on the e tailer while merely strengthening those on the manufacturer moreover a higher platform fee does not necessarily incentivize the e tailer to join the marketplace and the manufacturer s retailing inefficiency may either benefit or harm the e tailer depending on the size of the platform fee

macroeconomic effects of nominal exchange rate regimes new insights into the role of price dynamics abstract this paper analyzes the effects of pegged and floating exchange rates using a two country dynamic general equilibrium model that is calibrated to the us and a european aggregate the model assumes shocks to money productivity and the interest rate parity condition it captures the fact that the sharp increase in nominal exchange rate volatility after the end of the bretton woods bw system was accompanied by a commensurate rise in real exchange rate volatility but had no pronounced effect on the volatility of gdp this holds irrespective of whether flexible or sticky prices are assumed which casts doubt on the widespread view that the roughly equal post bw rise in nominal and real exchange rate volatility reflects price stickiness a flex prices variant of the model captures better the fact that the correlation between us and european gdp has been higher in the post bw era than under bw

putting the new open economy macroeconomics to a test abstract this paper explores one way to extend the new open economy macroeconomics in an empirical direction adapting maximum likelihood procedures it estimates and tests an intertemporal small open economy model with monetary shocks and nominal rigidities results offer mixed support for a benchmark model where prices are assumed to be sticky in the currency of the buyer price stickiness seems to be an important element as overall results are poorer for versions of the model in which prices either are flexible or are sticky in the currency of the producer the benchmark model does a better job explaining some variables than others in particular it does a poor job explaining exchange rate movements

semi nonparametric distribution free dichotomous choice contingent valuation abstract we apply a semi nonparametric distribution free estimator for binary discrete response data to the estimation of a dichotomous choice contingent valuation model using this estimator mean and median compensating and equivalent variation can be consistently estimated without making nontheoretically motivated assumptions on consumer preferences the approach is illustrated using a contingent valuation survey of willingness to pay for reduction of risk of premature death due to exposure to hazardous waste we find that a conventional parametric estimator and the proposed estimator give similar estimates of unconditional wtp but that conditional on explanatory variables the estimates are quite different

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

optimal fences and joint price and inventory decisions in distinct markets with demand leakage abstract this paper evaluates the simultaneous determination of price and inventory replenishment when a firm faces demand from distinct market segments a firm utilizes fences such as advance or nonrefundable payment to maintain separation of its market segments however fences are imperfect and allow a degree of demand leakage from the higher priced to the lower priced market segment we investigate the optimal structure of joint price and inventory decisions with fencing and demonstrate that more segments is not necessarily better especially when demand uncertainty is high in the presence of lost sales we also show the impact of imperfect fences on the firm s profitability and evaluate how fencing costs affect the optimal fencing decision

do central banks respond to exchange rate movements a structural investigation abstract we estimate a small scale structural general equilibrium model of a small open economy using bayesian methods our main focus is the conduct of monetary policy in australia canada new zealand and the uk we consider generic taylor type rules where the monetary authority reacts in response to output inflation and exchange rate movements we perform posterior odds tests to investigate the hypothesis whether central banks do target exchange rates the main result of this paper is that the central banks of australia and new zealand do not whereas the bank of canada and the bank of england do include the nominal exchange rate in its policy rule this result is robust for various specification of the policy rule we also find that terms of trade movements do not contribute significantly to domestic business cycles

commodity trade and international risk sharing how much do financial markets matter abstract this paper evaluates the social gains from international risk sharing in some simple general equilibrium models with output uncertainty a simulation model calibrated to selected moments of u s and japanese data estimates the incremental loss from a ban on international portfolio diversification to be on the order of 0 20 percent of output per year even the theoretical gains from asset trade may disappear under alternative sets of assumptions on preferences and technology the paper argues that the small magnitude of potential trade gains may help explain the apparently inconsistent findings of empirical studies on the degree of international capital mobility

does us monetary policy respond to oil and food prices a common view is that us monetary policy does not respond to changes in volatile energy and food prices despite this view the popular new keynesian models assume taylor type rules under which the short term interest rates react to headline inflation this paper evaluates the fit of alternative taylor rules within an estimated new keynesian model a main finding is that the us central bank includes energy and food prices in its policy rule although the weight assigned to these prices is much smaller than their share in the economy

a supply chain model with direct and retail channels abstract we study a dual channel supply chain in which a manufacturer sells to a retailer as well as to consumers directly consumers choose the purchase channel based on price and service qualities the manufacturer decides the price of the direct channel and the retailer decides both price and order quantity we develop conditions under which the manufacturer and the retailer share the market in equilibrium we show that the difference in marginal costs of the two channels plays an important role in determining the existence of dual channels in equilibrium we also show that demand variability has a major influence on the equilibrium prices and on the manufacturer s motivation for opening a direct channel in the case that the manufacturer and the retailer coordinate and follow a centralized decision maker we show that adding a direct channel will increase the overall profit our numerical results show that an increase in retailer s service quality may increase the manufacturer s profit in dual channel and a larger range of consumer service sensitivity may benefit both parties in the dual channel our results suggest that the manufacturer is likely to be better off in the dual channel than in the single channel when the retailer s marginal cost is high and the wholesale price consumer valuation and the demand variability are low

considering environmental implications of distribution channel choices a comparative study based on game theory abstract recently with the rapid development of e commerce in the world the total scale of online shopping has reached a notably high level the environmental benefits of online retailing have been highlighted in many studies but many factors could have contributed to opposing results motivated by the new sharp expansion of online shopping in china we employ a game theoretic based model to make a comparative study of the environment impacts of single channel traditional retail channel and dual channel online direct channel and traditional retail channel supply chains by taking product characteristics customers distribution range and propensities into account to the best of our knowledge no previous researchers have considered these factors simultaneously numerical analyses are applied to illustrate the model and demonstrate the influences of these factors on channel selection decisions and their resulting effects on the environment our results provide a reference for companies to decide whether to add an online direct channel for a specific product the conclusions can also benefit the government in guiding companies to distribute products in more eco friendly ways

semiparametric approaches to welfare evaluations in binary response models applied welfare analysis is commonly based on mean or median benefit estimates however the whole conditional distribution of benefits is often of interest for policy makers this article compares the distributional information recovered by competing semiparametric methods results obtained using a valuation study for the improvement of water resources in brazil suggest that the semiparametric approaches are in line with each other capturing a rich heterogeneity structure that is ignored by the logit approach failure to take this structure into account may lead to the undue rejection of the project according to the kaldor hicks criterion

a strategic analysis of dual channel supply chain design with price and delivery lead time considerations abstract this paper extends the work of chiang et al 2003 by investigating how price and delivery lead time decisions affect channel configuration strategy under either the manufacturer owned or the decentralized mode we show the choice of channel structure depends on customer acceptance of the online channel and the cost parameters following a threshold policy in both forms of ownership we prove that the strategic use of direct marketing to mitigate the double marginalization the major finding in chiang et al 2003 still holds even in this general situation moreover pareto zone exists where both manufacturer and retailer outperform their counterparts in the traditional indirect channel only case thus indicating that mitigating double marginalization may bring mutual benefits we also compare pricing and delivery lead time decisions between different forms of ownership or between different channel structures under the same form of ownership the manufacturer adopts a slow down deliver later approach and speeds up delivery to serve customers with a higher sensitivity to delivery lead time when he owns the whole indirect channel but chooses to stay fast and brag about better services and surprisingly slows down the speed of service when customers are more sensitive to delivery lead time due to the internal competition between two channels in the decentralized mode

business cycles through international shocks a structural investigation abstract this paper investigates the sources of output volatility by decomposing the international shocks into finance and trade shocks through structural bayesian estimations of an open economy dsge model on 16 countries on average international shocks explain around 70 of output fluctuations

when should a manufacturer set its direct price and wholesale price in dual channel supply chains abstract applying an observable delay game framework developed in noncooperative game theory we investigate the timing problem concerning when a manufacturer managing dual channel supply chains consisting of a retail channel and a direct channel should post its wholesale price and direct price conventionally operational research models describing dual channel supply chains examine price competition where the retailer and the manufacturer simultaneously determine the retail and direct prices respectively in contrast to this conventional setting our model demonstrates that such simultaneous price competition never arises if the manufacturer and retailer can choose not only the level of the price but also the timing of pricing if the manufacturer sets the direct price after setting the wholesale price to the retailer the retailer accelerates the timing of retail pricing prior to the direct price setting by the manufacturer our findings suggest that the manufacturer should post the direct price before or upon but not after setting the wholesale price for the retailer this upfront posting of the direct price not only constitutes the subgame perfect nash equilibrium of the noncooperative game between channel members but also maximizes the profits for a manufacturer employing multichannel sales strategies

how well can the new open economy macroeconomics explain the exchange rate and current account abstract this paper advances the new open economy macroeconomic literature in an empirical direction estimating and testing a two country model fit to u s and g7 data the model performs moderately well for the exchange rate and current account results offer guidance for future theoretical work parameter estimates lend support to the assumption of local currency pricing estimates are found for key parameters commonly calibrated in the theoretical literature such as the elasticity of substitution between home and foreign composite goods and the response of a country s risk premium to the net foreign asset position results also indicate that deviations from interest rate parity are not closely related to monetary policy shocks as recently hypothesized but that these deviations are strongly related to shifts in the current account

targeting the real exchange rate theory and evidence abstract this paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate an intertemporal optimizing model suggests that in the absence of changes in fiscal policy a more depreciated level of the real exchange rate can only be attained temporarily this can be achieved by means of higher inflation and or higher real interest rates depending on the degree of capital mobility evidence for brazil chile and colombia supports the model s prediction that undervalued real exchange rates are associated with higher inflation

uncovering the hit list for small inflation targeters a bayesian structural analysis we estimate underlying structural macroeconomic policy objectives of three of the earliest explicit inflation targeters within the context of a small open economy dynamic stochastic general equilibrium model we assume central banks set policy optimally such that we can reverse engineer policy objectives from observed time series data joint tests of the posterior distributions of these policy preference parameters suggest that the central banks are very similar in their overall objective none of the central banks show a concern for stabilizing the real exchange rate all three central banks share a concern for minimizing the volatility in the change in the nominal interest rate we also show that the resulting optimal policy rule responds to exchange rate movements even in the case where the central banks do not explicitly care about exchange rate stabilization this result is also corroborated by results from an alternative simple rule characterization and estimation of central bank behavior these last two findings point to the pitfalls of making inferences from the level of ad hoc simple rules about what central banks may care about

the new open economy macroeconomics a survey since the 1995 publication of obsteld and rogoff s redux model there has been an outpouring of research on open economy dynamic general equilibrium models that incorporate imperfect competition and nominal rigidities this paper offers an interim survey of this recent literature 2001 elsevier science b v all rights reserved

on the precision of calvo parameter estimates in structural nkpc models abstract we study the extent of empirical information that can be obtained from alternative structural new keynesian inflation equations concerning the average duration of prices in the united states given that such specifications may be hard to identify using four different indexation and real wage rigidity based models in conjunction with identification robust econometric methods we evaluate the precision of calvo parameter estimates while results are sensitive to calibration and instrument selection we find confidence bounds on the average duration of prices that line up with available micro founded studies statistically significant coefficients for the forcing variables and non zero estimates on the coefficient of lagged inflation

competing across technology differentiated channels the impact of network externalities and switching costs technology driven commerce channels such as the web possess several unique features that differentiate them from traditional channels the interaction between firms operating across these differentiated channels involves interesting competitive dynamics that cannot be captured by isolated models of electronic markets this paper develops a stylized spatial differentiation model to examine the impact of differences in channel flexibility network externalities and switching costs on competition between online traditional and hybrid firms a basic model highlighting the moderating influence of the hybrid firm on both channels is extended to account for differential network externalities and switching costs across the two channels our analysis indicates that while network effects as well as switching costs lead to the tipping of markets such tipping occurs primarily due to the moderating effects of the competing channel more importantly with network effects an increased market share does not translate into higher profits contradictory to conventional wisdom our results indicate that in a static market consumers rather than firms benefit from increasing network externalities with competitive effects outweighing the surplus extraction abilities of firms our results also highlight the importance of alternative revenue streams and provide insights for firms grappling with issues of channel choice as well as integration and divestiture