bounded price variation and rational expectations in endogenous switching model of the u s corn market a model that includes bounded price variation and rational expectations by producers is estimated for the u s corn market the resulting model specification is highly nonlinear though since the probability of market equilibrium must be determined endogenously unlike previous research the cross equation restrictions implied by the rational expectations hypothesis are incorporated in the bounded prices model by using fair and taylor s 1983 procedure for obtaining maximum likelihood estimates of nonlinear rational expectations models the resulting model is compared against a standard equilibrium model with naive expectations the results show the bounded prices model is a superior specification copyright 1989 by mit press

the impact of setup costs commonality and capacity on schedule stability an exploratory study abstract this paper examines the effect of setup costs component commonality and capacity on schedule stability in supply chains in particular this work focuses on the situation where schedule changes over a rolling horizon convey information that is important to successful coordination in the supply chain a lot sizing model is deployed within the structure of a designed experiment to evaluate the effects of these design factors on schedule stability findings suggest that designing component commonality into products avoiding the tendency to batch multiple customer orders into fewer production orders and providing surplus capacity have a stabilizing effect on rolling schedules

physician induced demand for surgery following up the earlier findings by fuchs on surgeon induced demand this paper makes numerous data and econometric improvements in conducting a test of neoclassical and inducement theories a simultaneous equation model is used to estimate physician demand and equilibrium fees for surgery from a sample of 350 psus over the 1969 76 period the results provide definite support for the notion of competitive market failure particularly in large metropolitan areas other things equal fees and utilization are higher in surgeon rich areas although our estimated shift elasticities were only about one third those found by fuchs a statistically significant albeit small price elasticity of demand for surgery was also obtained in contrast to fuchs increasing monopoly and disequilibrium models are also tested without altering the basic findings where surgeons were in short supply their availability significantly affected surgery rates although a small supply effect was found in plentiful areas as well

theories of the price and quantity of physician services a synthesis and critique abstract in the traditional neoclassical model of supply and demand prices determine the allocation of economic resources the difficulty in applying this model to physician services is the rationing of resources directly by physicians themselves eliminating the allocative function of prices welfare consequences are appropriately judged in terms of efficiency and equity not departures from the structural relationships implied by supply and demand as interpreted here both competitive theories and target income theories of this market imply that physicians consider both their own welfare and the welfare of their patients in their decision making all consumer benefits and all producer costs are internalized by physicians they consequently have an incentive to obtain the maximum possible social benefit from the resources at their disposal to the extent that they are implicitly allowed to share in the resulting social gains the distributions of gains between patients and physicians is determined by professional ethics within bounds imposed by competitive forces

the income effect and supplier induced demand evidence from primary physician services in norway a much debated issue within the health economic literature is whether physicians can induce demand for their services the relationship between physicians nonpractice income and supply of primary physician services in norway is examined it is argued that if inducement exists physicians with a low nonpractice income who work in municipalities where competition for patients is high compensate for lack of patients by inducing demand this model is adapted to the institutional setting of the norwegian primary physician services where there is a fixed fee schedule the analyses were performed on a large set of data encompassing all primary care physicians in norway who are remunerated per item of treatment data on output in practice were merged with information about nonpractice income from the tax forms of the physician and her his spouse in municipalities with high physician density nonpractice income had no effect on the number of consultations per physician or on the number of treatment items

interrupted work careers depreciation and restoration of human capital the quantitative effects and even the existence of a human capital depreciation phenomenon have been a subject of controversy in the recent literature prior work however was largely cross sectional and the longitudinal dimension if any was retrospective using longitudinal panel data on married women in nls we have now established that real wages at reentry are indeed lower than at the point of labor force withdrawal and the decline in wages is greater the longer the interruption another striking finding is a relatively rapid growth in wages after the return to work this rapid growth appears to reflect the restoration or repair of previously eroded human capital the phenomenon of depreciation and restoration is also visible in data for immigrants to the united states however while immigrants eventually catch up with and often surpass natives returnees from the nonmarket do not fully restore their earnings potential

econometric developments in agricultural and resource economics the first 100 years this article reviews the major contributions of agricultural and resource economists in the area of econometrics over the past 100 years early on a number of agricultural economists were in on the ground floor in terms of developing new econometric methods over time as the economics profession became more empirically oriented agricultural and resource economists increasingly assumed the role of early adopters of new econometric methods even so agricultural and resource economists continue to make useful modifications to econometric techniques in order to adapt the methods to the unique nature of the problems and applications that we study

economic policy uncertainty and sovereign credit rating decisions panel quantile evidence for the eurozone we employ a panel quantile framework that quantifies the relative importance of quantitative and qualitative factors across the conditional distribution of sovereign credit ratings in the eurozone area we find that regulatory quality and competitiveness have a stronger impact for low rated countries whereas gdp per capita is a major driver of high rated countries a reduction in the current account deficit leads to a rating or outlook upgrade for low rated countries economic policy uncertainty impacts negatively on credit ratings across the conditional distribution however the impact is stronger for the lower rated countries in other words the creditworthiness of low rated countries takes a much bigger hit than that of high rated countries when european policy uncertainty is on the rise

imports and the supply of winter tomatoes an application of rational expectations a model of the florida tomato industry is formulated under the hypothesis that growers make production decisions as rational economic agents this assumption implies that anticipated mexican tomato imports as well as other economic variables are taken into account when the planting decision is made maximum likelihood estimation methods are used to solve the simultaneous equations model and the implications of the model s reduced form are analyzed the empirical findings are consistent with the rational expectations hypothesis that producers respond to market information in its entirety when making acreage decisions key vwords expectations imports mexico rational expectations supply response tomatoes florida produces about 90 of u s tomatoes harvested for fresh use during the november to mid june season since the cuban trade embargo of february 1962 mexico has become the major foreign supplier of fresh winter tomatoes the total fresh winter tomato market in the united states has been almost equally shared by florida and mexico in recent years the rivalry for this market reached the point in 1978 that florida growers charged that mexican producers were dumping their product on the u s market schmitz firch hillman many florida growers suggest that unless mexican tomato imports are limited the florida tomato industry will effectively disappear primary attention in this paper is focused on domestic tomato acreage allocations in light of the mexican influence on the winter tomato market the paper does not attempt to evaluate the welfare effects of mexican imports on the florida tomato industry in addition to the emphasis on acreage response the domestic quantity and price effects are also considered most efforts to explain acreage devoted to agricultural crops have utilized some variant of a cobweb model because the ultimate price of the crop cannot be ascertained until the completion of the production cycle nevertheless if the supply and demand framework is truly representative of the way the market works an alternative to lagged price for representing the anticipated price for the crop is the price prediction of the supply and demand model itself thus acreage would be dependent on the expected price of the crop and expected price would result from the solution of the supply and demand model for price on the basis of information available at planting time the underlying hypothesis is that producers are acting in accordance with the information available to them at planting time and in a way represented by the interaction in the supply and demand model viewed in this way planted acreage decisions would be based on such factors as anticipated mexican imports and their attendant effect on the price of tomatoes one distinction between this and the traditional cobweb framework is that in the latter case lagged imports may influence planted acreage via their effect on lagged prices but any impact expected imports might have on current price is ignored in the acreage

multiproduct short run hospital cost functions empirical evidence and policy implications from cross section data economists and policymakers have been interested in hospital costs and the structure of hospital technologies for several decades now early interest was focused on the possibility of scale economies which implied increased efficiency for larger hospitals 6 8 12 13 18 20 while more recent interest has been stimulated by the inflationary spiral of hospital costs 1 15 17 22 as hospital costs have risen important policy questions concerning the impact on costs of the hospitals diagnostic case mix the hospitals admitting physicians the hospitals size and the hospitals efficiency have emerged and researchers have attempted to deal with these issues within the context of increasingly complex econometric models 1 2 5 24 27 however in attempting to analyze these important policy issues researchers have been forced to make two major types of compromises on the one hand appropriate data are often not available for estimating a well specified cost function e g information on admitting physicians and diagnostic case mix are often missing so that problems of specification error often plague the econometric results conversely in using imaginative ways to deal with data problems e g weighting in patient and out patient care to form a single index of hospital services 1 27 or estimating separate cost functions for each department in the hospital 2 researchers sometimes place unrealistic and unnecessary constraints on their econometric models the purpose of this study is to analyze the impact of several of the primary hospital characteristics mentioned above on the short run costs of hospitals within a theoretically consistent framework in the following discussion we also develop the theoretical

a simple approach for assessing the cost of system nervousness abstract a well known problem in coordinating supply chain inventories is that replenishment decisions are revised due to stochastic demands this issue is often referred to as system nervousness the literature distinguishes between two types of nervousness setup oriented and quantity oriented it is widely accepted that cost of nervousness is difficult to measure we argue that this cost can be evaluated by means of three well established inventory control strategies static uncertainty dynamic uncertainty and static dynamic uncertainty these strategies reflect extreme cases with regard to the setup and the quantity oriented nervousness and provide a simple yet an objective measure to assess the cost of system nervousness our results are of practical importance we highlight that the setup oriented nervousness which is considered to be the most critical in practice can be eliminated with a minor cost penalty this is however not the case for the quantity oriented nervousness

demand inducement and the physician patient relationship the physician patient relationship is a paradigm for any expert client relationship the physician both diagnoses the patient s illness and recommends a treatment this dual role gives the physician incentive to recommend treatments whose costs outweigh their medical benefits these socially inefficient treatments correspond to the notion of physician induced demand the level of inducement chosen by the physician is shown to depend on the price and potential medical benefits of treatment and the relative diagnostic skills of physician and patient this model offers several testable hypotheses some of which are confirmed by related studies

acreage decisions under risk the case of corn and soybeans an acreage supply response model is developed under expected utility maximization the resulting framework is used to specify and estimate a system of risk responsive acreage equations for corn and soybeans in the united states particular attention is given to the truncation effects of government price supports on the distribution of corn and soybean prices also a wealth variable is included in the acreage equations the empirical results indicate that risk and wealth variables play an important role in cornsoybean acreage decisions the analysis also shows that cross commodity risk reduction is important in acreage allocation decisions

identification of supplier induced demand in the health care sector this paper explores the issues and pitfalls encountered when attempting to test empirically the hypothesis that physician hospital or any other input supply level induces increasing demand for health services in the strict sense of demand shift and through that increased demand for the input in question evidence is presented which suggests that an empirical test of the supplier induced demand sid hypothesis of the type traditionally performed may not in fact be feasible with cross sectional aggregate data such as is usually used

consumer health information and the demand for medical care this paper is an empirical investigation of consumer health information using a new direct measure of information the econometric approach treats both information and physician visits as endogenous variables when estimating the demand for medical care the results show that information increases the probability that a consumer uses medical care but that conditional on use the quantity of care consumed is not related to information the results contradict specific implications of models where physicians can create or induce demand for their own services several results suggest that poorly informed consumers tend to underestimate the productivity of medical care in treating illness copyright 1990 by mit press

a new test for supplier inducement and application to the canadian market for dental care abstract the hypothesis that dentists do not induce demand for their services is tested using reduced form estimates of the price elasticity of demand if demand is autonomous shifts in supply for whatever reason should generate equivalent estimates provided access costs change proportionately with shifts in supply if demand inducement is present demand can appear to be very elastic or very inelastic depending on what is causing the shift in supply each of three applications of this test conducted in the context of jointly estimated fee and quantity equations using annual canadian data for 1956 1989 rejects the no inducement hypothesis

how much of commodity price behavior can a rational expectations storage model explain a rational expectations competitive storage model was applied to the u s corn market to assess the aptness of this framework in explaining monthly price behavior in an actual commodity market relative to previous models extensive realism was added to the model in terms of how production activities and storage costs are specified by modeling convenience yield backwardation in prices between crop years did not depend on the unrealistic assumption of zero ending stocks our model generated cash prices that were distributed with positive skewness and kurtosis and mean and variance that increased over the storage season comparable to the persistence and the occasional spikes observed in commodity prices futures prices were generated as conditional expectations of cash prices at contract maturity and the variances of futures prices exhibited realistic time to maturity and seasonal patterns model realizations of cash and futures prices over many years were used to demonstrate the wide variety of price behaviors that could be observed in an efficient market with a similar market structure implying that economic and policy implications drawn from short historical samples of prices could be misleading

ratings quality over the business cycle credit rating agencies cras have long held that reputational concerns discipline their behavior the value of reputation however depends on economic fundamentals that vary over the business cycle in a model of ratings incorporating endogenous reputation and a market environment that varies we find that ratings quality is countercyclical specifically a cra is more likely to issue less accurate ratings when fee income is high competition in the labor market for analysts is tough and securities default probabilities are low persistence in economic conditions can diminish our results while mean reversion exacerbates them the presence of naive investors reduces overall quality but quality remains countercyclical finally we demonstrate that competition among cras yields similar results

supplier induced demand a disequilibrium test this paper tests the hypothesis of market disequilibrium and supplier induced demand in the market for physicians services using canadian data from the period prior to the introduction of national health insurance the results support the hypothesis of disequilibrium with rapid upward adjustment of fees in the face of excess demand and extremely slow downward adjustment of fees in response to excess supply they do not support the hypothesis that physicians induced demand in the face of an excess supply of services

a further analysis of the physician inducement controversy this article extends several recent contributions that have compared the physician induced demand hypothesis to the theory of a monopoly where advertising is included as a decision variable by introducing a standard profit maximizing model with inducement it derives the conditions for the optimum level of inducement to show that the controversy over inducement is directly related to the elasticity of demand for the physician s services in particular inducement is likely to be prevalent only where the individual physician has a high degree of monopoly power as measured by its elasticity of demand it will disappear entirely as competitive conditions are approached furthermore the article argues that a physician s level of induced output is likely to diminish and not increase as others have suggested following increases in physician supply

identification of physician induced demand whether market failure exists in the health care sector because physicians induce demand in their own self interest has not been clearly addressed because of identification problems a model is developed which includes the patient s financial burden as a limiting factor on demand inducement new data from a national survey are used to test the demand inducement hypothesis and identify physician initiated expenditures when individual health insurance and other factors are held constant additional corroboration of the physician induced demand hypothesis is found but the magnitude of the effect is very small and is statistically significant only for more discretionary expenditures

rational expectations in limited dependent variable models abstract the appropriate characterizations of rational expectations solutions in one limit and two limit models are derived we prove the existence and uniqueness of the rational expectations solution for each model our analysis is general without imposing serial independence and the parametric distributional assumption

bounded price variation models with rational expectations and price risk abstract the bounded price variation model under rational expectations is extended to include higher moments of price in the supply equation the resulting framework is then used to estimate a disequilibrium model of the u s corn market that includes price risk

a clarification of theories and evidence on supplier induced demand for physicians services this article both simplifies and extends the literature on physician induced demand it shows that inducement should be expected in all imperfectly competitive markets that are also characterized by incomplete agency relationships more important it argues that confusion over the extent of the inducement phenomenon has been created by several contributions that fail to distinguish between the effects of changes in physician population ratios on changes in the individual physician s output and the effects on per capita utilization in particular it demonstrates that by confounding units of analysis the major empirical results found in recent articles by rossiter and wilensky are contradicted by their model their evidence however together with findings from other studies are reinterpreted to suggest that physicians are even more constrained than is generally believed in being able to induce increases in demand

hospital efficiency and indigent care 1990 hospital efficiency and indigent care applied economics vol 22 no 11 pp 1597 1610

modeling expectations of bounded prices an application to the market for corn the presence of farm programs should directly affect the expectations of producers this paper analyzes the formation of price expectations when price supports constitute an effective lower bound on the distribution of the expectations we first investigate what the expected price would be if the usual rational expectations formula is used this leads to a relationship that is not estimable we suggest two alternatives one based on a tobit approximation and the other based on a perfect prediction of when the support is going to be effective using a simplified model of the u s corn market the methodology is demonstrated and compared to an alternative method of using futures prices as the expectation of harvest price the analysis of supply response for the major u s field crops is made difficult due to government intervention in these markets this intervention has been characterized by the use of price supports acreage diversion storage incentives etc during the last thirty years many studies have analyzed producer behavior in the presence of governmental involvement such studies have typically been concerned with modeling the effect of supports and diversions in an ex post sense rather than with how producers used the knowledge of farm programs to form their expectations if producers are rational economic agents their expectations of harvest prices should be conditioned both by free market forces and the type and degree of governmental intervention in the market of course farm programs have varied in nature and extent during the past thirty years and it is doubtful that any structural model could capture their complexities in this paper we attempt to introduce rational expectations in a simplified model of the u s corn market in essence we focus on the formation of price expectations when price supports constitute an effective lower bound on the distribution of the expectations we proceed by developing a theoretical model that connects the rational expectations model with a model of bounded price variation it is shown that one representation that may characterize the corn market is a triangular structural system with endogenous switching a full information maximum likelihood estimator is proposed for the system next an empirical model is specified and estimated the model is evaluated in comparison to an augmented model that contains a futures price so that some inferences may be made concerning the rational expectations model s success in summarizing relevant market information expectations under bounded prices consider a market that may be represented by a simple supply and demand system q a pt a2w el supply function pt b qt b2xt e2t demand function 1 where p and q represent market price and quantity w and x represent supply and demand shifters and p represents the rational expectation of product price at the time production decisions are made note that this system has a familiar recursive structure when the expected price variable is specified in terms of one or more lagged prices when the restricted reduced form of the structural system is solved for in terms of the expected price and this expression is used to replace pj wallis 1980 then models similar to those of goodwin and sheifrin 1982 and shonkwiler and emerson 1982

moody s and s p ratings are they equivalent conservative ratings and split rated bond yields we examine the relative impact of moody s and s p ratings on bond yields and find that at issuance yields on split rated bonds with superior moody s ratings are about 8 basis points lower than yields on split rated bonds with superior s p ratings this suggests that investors differentiate between the two ratings and assign more weight to the ratings from moody s the more conservative rating agency moody s becomes more conservative after 1998 and the impact of a superior moody s rating becomes stronger furthermore the differential impact of the two ratings is more pronounced for the more opaque rule 144a issues

the expectations hypothesis of the term structure when interest rates are close to zero abstract in an economy where cash can be stored costlessly in nominal terms the nominal interest rate is bounded below by zero this paper derives the implications of this non negativity constraint for the term structure and shows that it induces a nonlinear and convex relation between short and long term interest rates the long term rate responds asymmetrically to changes in the short term rate and by less than that is predicted by the benchmark linear model in particular a decrease in the short term rate produces a smaller response in the long term rate than an increase of the same magnitude the empirical predictions of the model are examined using data from japan

comparison of s s and s nq inventory control rules with respect to planning stability abstract the application of a rolling horizon planning framework in inventory control causes different order release decisions in successive planning cycles these lead to the so called planning system nervousness in this paper for a single stage inventory system with arbitrary stochastic demand it is shown analytically how the setup oriented planning stability concerning deviations of planned orders in all periods of a given stability horizon is influenced by the use of s s and s nq control rules it turns out that the reorder point s does not affect stability whereas the lot size determining parameters s s and q as well as the level of uncertainty have a considerable impact the paper is concluded with directions for further research

sovereign credit rating determinants a comparison before and after the european debt crisis this paper compares the importance of different sovereign credit rating determinants over time using a sample of 90 countries for the years 2002 2015 applying the composite marginal likelihood approach we estimate a multi year ordered probit model for each of the three major credit rating agencies after the start of the european debt crisis in 2009 the importance of the financial balance the economic development and the external debt increased substantially and the effect of eurozone membership switched from positive to negative in addition gdp growth gained a lot of importance for highly indebted sovereigns and government debt became much more important for countries with a low gdp growth rate these findings provide empirical evidence that the credit rating agencies changed their sovereign credit rating assessment after the start of the european debt crisis

an analysis of the determination of deutsche mark french franc exchange rate in a discrete time target zone model following krugman 1 99 i recent models of exchange rates within a target zone have paid particular attention to the effect of the band on exchange rate expectations see for example miller and weller i 989 and froot and obstfeld i 989 the basic idea is that the band as long as it is credible has a stabilising effect on the exchange rate not only because the authorities when necessary would control the fundamentals in order to contain the movements of the exchange rate but also because expectations are influenced by the band these studiesby employing the continuous time stochastic setting of regulated brownian motion familiar from option pricing theory cf merton 1973 have also made a significant contribution to the theoretical analysis of the exchange rate the advantage of the continuous time framework is that in a multiperiod setting it makes the analysis of bands algebraically more manageable than a discrete formulation to illustrate the approach consider the following simple model from the literature

monetary policy shocks expectations and information rigidities this paper contributes to the literature by assessing expectation effects from monetary policy for g7 economies we rely on expectation data from consensus economics and a panel vector autoregression framework which accounts for international spillovers and time variation we analyze whether monetary policy has changed the degree of information rigidity after the emergence of the subprime crisis and estimate effects of interest rate changes on expectations disagreements and forecast errors we find strong evidence for information rigidities and identify higher forecast errors by professionals after monetary policy shocks our results suggest that the international transmission of monetary policy shocks introduces noisy information and partly increases disagreement among forecasters jel e31 e52

an empirical comparison of agricultural supply response mechanisms 1982 an empirical comparison of agricultural supply response mechanisms applied economics vol 14 no 2 pp 183 194

disequilibrium market analysis an application to the u s fed beef sector in this paper current theory and estimation procedures are applied in an analysis of disequilibrium price behavior in the u s fed beef sector although tests of equilibrium versus disequilibrium hypotheses are not well developed results indicate the possible presence of disequilibrium prices in the market for fed beef at least the hypothesis of significant disequilibrium could not be rejected

estimating the credibility of an exchange rate target zone abstract recent breakthroughs in the theory of exchange rate target zones have not been followed by similar contributions on the empirical side the drift adjustment method of evaluating the credibility of a target zone has become common practice however the estimates of the expected rate of depreciation inside the band do not model knowledge of the band in the agents information set in this paper a rational expectations limited dependent variable method to estimate the expected rate of depreciation is used to remedy this weakness in the case of the franc mark target zone with daily data covering a 4 year period we show that expected rates of devaluation of the order of 2 5 were still present in the early 1990s their reappearance in the autumn of 1992 may thus not be surprising

a heteroskedastic multivariate tobit analysis of price dynamics in the presence of price floors this article presents an econometric analysis of the effects of price floors on price dynamics and price volatility in a multimarket context we investigate the implications of a government price support program providing a censoring mechanism to the price determination process the analysis uses a dynamic multivariate tobit model under time varying volatility the model is applied to the u s dairy markets with a special focus on the effects of government price support programs in a period of market liberalization the econometric analysis provides useful information on the multimarket effects of price supports on price dynamics and price volatility

physician induced demand for childbirths a controversial technique for testing the hypothesis that physicians induce demand involves two stage least squares tsls regression analysis of cross section data on physician supply and utilization this paper tests the power of tsls by applying it where there is at most only a trivial amount of demand inducement the demand for childbirths we find evidence of inducement of childbirths calling into question the validity of the tsls approach this unlikely finding may be traced to at least two factors the first stage regression is not identified and the second stage regression does not adequately address border crossing

testing the rational expectations hypothesis in an agricultural market a recent survey on models of agricultural supply equations listed over 500 studies in which variants of nerlove s adaptive expectations model were employed one might naively assume that the scientific evidence overwhelmingly favored the adaptive expectations hypothesis but this inference would not be warranted in particular there have been very few studies which have even attempted to estimate a rational expectations version of the traditional agricultural supply models and none that have explicitly tested the rational expectations hypothesis 2 in this paper we estimate a model of agricultural supply and demand for the chicken broiler industry under the maintained assumption of rational expectations in the sense of muth 1961 and provide a series of tests of the model specification we find that in this case the hypothesis of muth rationality receives strong support in recent years there has been increasing interest in models in which economic actors are assumed to form expectations of variables rationally for the most part empirical applications of the rational expectations hypothesis have employed single equation econometric methods these methods have permitted consistent estimation of equations under the assumption of the rational expectations hypothesis but do not allow for any explicit testing of the maintained hypothesis of rationality this paper presents estimates of a simultaneous equation model of the chicken broiler industry using maximum likelihood methods and provides a joint test of the rational expectations hypothesis and the model specification our econometric procedure is related to the recent theoretical work of wallis 1980 and combines time series analysis with traditional econometric estimation techniques under the assumption of rational expectations the model can be solved for the expected price as a function of the expected values of the exogenous variables this function can then be substituted into the model leading to a specification which contains the original endogenous and exogenous variables plus the expected values of the exogenous variables in general following this substitution the model will contain overidentifying restrictions time series analysis is utilized to generate the necessary forecasts of the exogenous variables the complete system of equations is estimated by full information maximum likelihood and the constraints are tested by a log likelihood ratio test the overidentifying constraints arise in the model because the suppliers are assumed to act as if they know both the underlying structure of the model and the stochastic processes governing the exogenous variables the two requirements of rational expectations while the expected price enters only the supply equation of our model it is necessary in the econometric formulation to specify the demand equation the instrumental variable procedures of mccallum 1976 and nelson 1975b are single equation methods and do not permit a test of the rational expectations hypothesis by specifying the complete model the additional structure imposed on the problem allows us to estimate the coefficients and test the implied restrictions there has not been universal agreement that the rational expectations hypothesis is the best theoretical device to model rational behavior according to muth s original formulation economic actors forecast endogenous variables according to the true reduced form equations of the model decanio 1979 and friedman 1979 have argued that the economic actors actually received for publication august 24 1981 revision accepted for publication march 2 1982 university of new mexico and university of california davis respectively we wish to thank g king r l huntzinger r pope and l wegge for advice on this project a nelson and e shaw contributed useful research assistance i the paper by askari and cummings 1977 provides references for these studies 2 huntzinger s 1979 paper is one of the first attempts at estimatitng a rational expectations model of agricultural supply

hospital performance in a noncompetitive environment in this article we perform a quantitative analysis of the performance of hospital services in a nonmarket environment based on a very complete data set evaluating efficiency in a nonmarket system is important since the absence of market mechanisms could yield large inefficiencies in fact we show that hospital performance varies greatly across institutions specifically our results suggest that hospitals with high levels of quasi fixed factors are less efficient than other institutions in general hospitals performed very differently even after controlling for differences in services hospital and patient characteristics all in all increased efficiencies could lead to potential savings for the quebec government in the hundreds of millions of dollars

state dependence and stickiness of sovereign credit ratings evidence from a panel of countries using data from moody s we examine three sources of sovereign credit ratings persistence true state dependence spurious state dependence and serial error correlation accounting for ratings persistence we also examine whether ratings were sticky or procyclical for two major crises the european debt crisis and the east asian crisis we set up a dynamic panel ordered probit model with autocorrelated disturbances and nonparametrically distributed random effects an efficient markov chain monte carlo algorithm is designed for model estimation we find evidence of stickiness of ratings and of the three sources of ratings persistence with the true state dependence being weak

the impact of sovereign rating changes on european syndicated loan spreads the role of the rating based regulation abstract we analyze the impact of sovereign rating changes on european corporate loan spreads we demonstrate that sovereign downgrades lead to significant increases in the spread of loans to domestic firms we find evidence that the negative effects of a sovereign downgrade are widespread across all firms also unrated which are the majority of firms in the european syndicated loan market a relevant part of this impact depends on the reliance of financial regulation on credit ratings certification effect which reduces also loan size and leads to additional burdens for investment grade firms instead we do not find evidence of a significant impact generated by an upgrade our results hold also controlling for the sovereign risk crisis periods lender characteristics and endogeneity of loan contract terms

uncovering financial markets beliefs about inflation targets this paper exploits the term structure of interest rates to develop testable economic restrictions on the joint process of long term interest rates and inflation when the latter is subject to a targeting policy by the central bank in an empirical application to the canadian inflation target zone results indicate that financial markets perceive the band to be of approximately the same width as announced but asymmetrically distributed around the official target this finding suggests that in practice the monetary authority might attach different weights to positive and negative inflation deviations from the target copyright 2000 john wiley sons ltd

global corporate bond issuance what role for us quantitative easing the paper analyses the link between global corporate bond issuance and us quantitative easing qe it finds that purchases and holdings of mbs and treasuries by the fed have a strong impact on gross corporate bond issuance across advanced and emerging economies the results are robust to a large number of checks including controlling for the reduced supply of domestic and international bank loans in the aftermath of the global crisis which might have induced the corporate sector to issue more bonds our results support the gap filling theory greenwood et al 2010 where corporate bonds replace the assets removed from the market by large scale asset purchases specifically asset holdings and purchases crowded out investors from the markets where the fed intervened and accelerated portfolio rebalancing across assets and countries leading to stronger corporate bond issuance across the globe a counterfactual analysis shows that bond issuance in emerging markets since 2009 would have been halved without qe

estimates of the demand for medical care under different functional forms we estimate price and income elasticities from a linear log linear and the almost ideal demand model with and without an adjustment for selectivity bias in an effort to show that special attention should be paid to the underlying assumptions of consumer behaviour when estimating a medical care demand model the literature on medical care utilization is extended by incorporating two major components of spending as separate demands in a system of medical care spending we find that estimates of elasticities vary depending on the functional form of the estimating equation thus questioning the usefulness for policy purposes of single estimates of elasticities

has the crisis affected the behavior of the rating agencies panel evidence from the eurozone we examine the determinants of credit ratings for the eurozone countries over the period 2002 2013 within a panel framework that allows for cross sectional dependence we find that government debt and the cumulative current account exert a stronger impact on ratings post 2008 compared to the period before

quasi rational and ex ante price expectations in commodity supply models an empirical analysis of the us broiler market a statistically optimal inference about agents ex ante price expectations within the us broiler market is derived using futures prices of related commodities along with a quasi rational forecasting regression equation the modelling approach which builds on a hamilton type framework includes endogenous production and allows expected cash price to be decomposed into anticipated and unanticipated components we therefore infer the relative importance of various informational sources in expectation formation results show that in addition to the quasi rational forecast the true supply shock future prices and ex post commodity price forecast errors have at times been influential in broiler producers price expectations copyright 2003 john wiley sons ltd

hospital reserve margins structural determinants and policy implications using cross section data as is well known hospitals like electric utilities urban freeways and telecommunication systems do not generally operate at full capacity the reasons are essentially twofold uncertain demand for hospital services and the high cost of changing capacity quickly in the case of hospitals the resulting excess bed capacity is known as reserve margin and plays a key role in determining costs efficiency and the potential benefits of both increased competition and hospital consolidation the purpose of this study is to analyze the determinants of hospital reserve margins using a recent cross section of u s short term care hospitals a number of empirical hospital studies have looked at the relationship between hospital costs

on information and market dynamics the case of the u s beef market abstract the paper investigates the nature of dynamic prices and expectations in a competitive market the approach is applied to the u s beef market which exhibits cyclical patterns and significant biological lags in the production process beef price equations are estimated under different expectation regimes the empirical results indicate the presence of heterogeneous price expectations with a significant number of market participants neglecting information about the existence of a beef cycle

the normative economics of health care finance and provision whereas in many countries the crisis in medical care has been seen in terms of excess spending on health services in the uk it has been seen at least by most of those who manage and work in the nhs as a crisis of underfunding this has come about as the result of the government s successful attempts to restrain the rate of growth of real spending on the nhs which in turn reflects the government s belief that its principal effective weapon against what it perceives to be inefficiency in the nhs is to challenge management itself reformed and to some extent liberated by systematic financial squeezes the same concern has given rise to a host of proposals for reform of the nhs most of which involve a much greater role for private insurance private finance of other kinds such as out of pocket payments and private provision of health care itself

credit ratings and the pricing of sovereign debt during the euro crisis this paper identifies the impact of credit rating changes on the sovereign spreads in europe and investigates the macro and financial factors that account for the time varying effects of a given credit rating change we find that changes of ratings are informative significant economically and robust even after controlling for conventional fundamentals a one unit rise in the average credit rating in a scale index of 25 ratings decreases cds spreads by about 45 basis points on average however the association between credit rating changes and spreads follows a complicated non linear pattern dependent on the level of the credit rating applying a non linear spline regression we find high sensitivity large change in spreads for a given change in ratings at the very low end of credit ratings and then a u shape pattern ratings at the moderately low end b and very high end of credit levels above a are fairly insensitive while middle ratings are quite sensitive to credit rating changes with the highest sensitivity at the bb level we also find that european countries had quite similar cds responses to credit rating changes during the pre crisis period but that large differences emerged between the now highlysensitive giips group and other european country groupings eu and euro area excluding giips and the non eu area we also find that contagion from changing the ranking of the giips on other euro countries disappears when own country credit rating changes are taken into account in contrast a decline in the credit rating in the giips area is transmitted as a decline in the cds spread of non euro eu which may be deemed as a substitute asset that increases in demand when the perceived risk of giips sovereign debt increases

methods of estimation for models of markets with bounded price variation under rational expectations abstract the present paper extends the analysis in an earlier paper by maddala on estimation of disequilibrium market models with controlled prices to the case where the supply function depends on expected prices and expectations are formed rationally as suggested by muth

were the peseta exchange rate crises forecastable during target zone period during the 1990s several fixed or quasi fixed exchange rate systems collapsed currency crises have happened in both developed and emerging countries so it is necessary to forecast and avoid them however financial market crises have been extremely difficult to forecast economic agents expectations are nonobservable variables that cannot be ignored in the models in addition if it is required to study the european case during the 1990s the censored disposition of the exchange rate cannot be ignored either a discrete time target zones model is proposed where these aspects are taken into account it will be tested in a peseta deutsche mark exchange rate framework from june 1989 to december 1998 the results indicate differences between before and after the shift in band widths in august 1993

technology as an agricultural pollution control policy in this paper we consider the market level impacts of factor augmenting innovations designed to reduce the use of fertilizers and pesticides first within the context of a simple two factor model and then through a simulation model of the u s corn market in both models the impacts depend on the output demand elasticity and input substitution elasticities the principal conclusion of the simulation analysis is that the potential for new techniques to reduce the use of agricultural chemicals is limited capital augmenting innovations would actually raise fertilizer and pesticide usage land augmenting innovations would also tend to increase pesticide usage

the impact of market clearing assumptions and dynamics on demand elasticities abstract this paper establishes support for the empirical regularity that model specifications which assume market clearing produce more elastic impact demand price elasticities than their disequilibrium counterparts specification error analysis helps explain this regularity the regularity is shown to be only a short run phenomenon

a note on the estimation of limited dependent variable models under rational expectations abstract in this paper we derive the expressions for the expected price in a disequilibrium model with upper and lower limits on prices under rational expectation relaxing the assumption of perfect foresight made in earlier studies we prove the uniqueness of the solution to the rational expectations model and outline the estimation method and iterative procedure

estimating an hedonic translog cost function for the home health care industry medicare home health care plays an important role in providing cost effective care for the chronically ill and elderly long seen as a cost effective substitute for nursing home care home care has become even more important with expenditures increasing by 31 4 from 1990 to 1996 the purpose of this paper is to provide a short run cost analysis of a sample of home health care providers to gain insight into the efficient provision of home health care services this paper is a significant improvement over previous studies in that it uses a nationwide database to more accurately represent the multiproduct nature of the industry and uses an hedonic translog cost estimation with desirable economic properties

analysis of exchange rate target zones using a limited dependent rational expectations model with jumps this article examines the exchange rate determination in a target zone regime when the bounds can be fixed for an extended period but are subject to occasional jumps in this case the behavior of the endogenous variable is affected by the agents expectations about both the occurrence and the size of the jump empirical results using data for the franc mark exchange rate provide support for the nonlinear model with time varying realignment probability and indicate that the agents correctly anticipated most of the observed changes in the central parity

an investigation of setup instability in non stationary stochastic inventory systems in stochastic inventory systems unfolding uncertainties in demand lead to the revision of earlier replenishment plans which in turn results in an instability or so called system nervousness in this paper we provide the grounds for measuring system nervousness in non stationary demand environments and gauge the stability and the cost performances of r s and s s inventory policies our results reveal that both the stability and the cost performance of inventory policies are affected by the demand pattern as well as the cost parameters and the r s policy has the potential to replace the cost optimal s s policy for systems with limited flexibility

regulation market structure and hospital costs during the past decade a host of studies of hospital costs have appeared in the literature these papers have led to several fundamental advances in our understanding of the nature of hospital costs yet despite these advances considerable controversy remains about the impacts of regulation and market structure on hospital costs for instance proponents of certificate of need con regulation have argued that the effects of regulating hospital capital expansion programs will be to reduce if not eliminate what is seen as a chronic tendency on the part of hospitals to over build others for example sloan and steinwald 14 have argued that con regulation has generally not reduced costs and may have actually increased hospital costs in cases where con regulation has been designed primarily to control bed expansion the purpose of this paper then is to shed light on some of these unresolved issues surrounding the impacts of regulation and market structure on hospital costs with the benefit of a more general theoretical approach and a novel data set we determine that in recent years con regulation has acted to constrain hospital bed growth and hospital costs while market concentration acts ceteris paribus to increase firm costs

price and quantity controlled agricultural markets and disequilibrium econometrics a survey abstract this survey reviews the literature on estimating single markets in disequilibrium in the presence of regulated price and or quantity controls e g minimum price regimes and or marketing quotas most of the literature is found to describe pure econometric technique with only a few applications having emerged to date various reasons for the broad non acceptance of this literature are offered including a perceived lack of realism proposals to close this econometric theory application gap are put forward including the use of effective demand concepts in specifying demand and supply functions synthesizing some closely related literature on agricultural price quantity controls with disequilibrium econometrics i e endogenous government policy and the effects controls have on yield uncertainty and price risk and outlining more applicable econometric technique extensions