ppp and structural breaks the peseta sterling rate 50 years of a floating regime abstract this paper aims to illustrate the relevance of considering structural breaks in purchasing power parity ppp tests to that end we examine the peseta sterling real exchange rate between 1870 and 1935 this is an interesting series given that the peseta was not part of the gold standard yet maintained a floating rate regime during most of that period when breaks are not considered it is impossible to reject the existence of a unit root in the series however if two breaks are allowed with these capturing the particular events that occurred in the monetary history of these currencies at the beginning and end of the period then the null hypothesis can be rejected and ppp emerges as a good approximation of the behavior of the peseta sterling exchange rate even if that rate was predominantly a floating regime

are shocks to real effective exchange rates permanent or transitory evidence from pacific island countries in this article we consider the stability of the real effective exchange rates for four pacific island countries using the lee and strazicich 2003a b unit root test which allows one to incorporate at most two structural breaks in the data series our main finding is that for papua new guinea and samoa exchange rates are stable implying that shocks will have a transitory effect on real effective exchange rates while for fiji and the solomon islands we find exchange rates to be unstable implying that shocks will have a permanent effect on real effective exchange rates

nonlinear dynamics in deviations from the law of one price a broad based empirical study abstract in this paper we test empirically the validity of the law of one price using data for five major bilateral us dollar exchange rates and nine goods sectors during the recent floating exchange rate regime since the early 1970s using threshold autoregressive models we find strong evidence of nonlinear mean reversion in deviations from the law of one price with plausible convergence speeds consistent with theoretical arguments on international goods markets arbitrage under transactions costs and with an emerging strand of empirical literature these results contribute towards forming a consensus view in favor of discrete regime switching in deviations from the law of one price and the presence of differing nonzero transactions costs across a broad range of goods and countries

the great appreciation the great depreciation and the purchasing power parity hypothesis abstract although there has been much recent work on purchasing power parity ppp neither univariate nor panel methods have produced strong rejections of unit roots in us dollar real exchange rates for industrialized countries during the post 1973 period we investigate the hypothesis that these non rejections can be explained by one episode the large appreciation and depreciation of the dollar in the 1980s by developing unit root tests which account for this event and maintain long run ppp using panel methods we can strongly reject the unit root null for those countries that adhere to the typical pattern of the dollar s rise and fall

extended generalized purchasing power parity and optimum currency area in east asian countries this article extends the theory of generalized purchasing power parity g ppp by developing a model including foreign variables such as the real money supply output and interest rate a cointegration rank test with two structural breaks in the deterministic trend was adopted to selected asian countries with japan as the base country there were two cointegrating vectors and six common stochastic trends in the model the cointegrating vectors were estimated by the same approach used by pesaran et al 2000 the first cointegrating vector is interpreted as g ppp and the second one is interpreted as the extended g ppp according to g ppp these countries could form a single currency area the first stochastic trend is primarily driven by japan s real money supply the second third and fourth by the real exchange rates of the philippines singapore and thailand respectively the fifth by japan s output and the sixth by japan s government bond yields

compatibility and bundling of complementary goods in a duopoly this paper presents a simple model of compatibility and bundling in industries where consumers assemble several necessary components into a system that is close to their ideal the authors show that for a wide range of parameters firms will choose to produce compatible components but will offer discounts to consumers who purchase all components from the same firm however firms would be better off if they could commit not to provide such discounts furthermore the equilibrium tends to involve socially excessive bundling finally mixed bundling strategies tend to increase the range of parameters over which socially excessive standardization occurs copyright 1992 by blackwell publishing ltd

desirability of compatibility in the absence of network externalities i compare the incentives firms have to produce individual components compatible with components of other manufacturers instead of systems composed of components that are incompatible with components of competing manufacturers i show that even in the absence of positive consumption externalities network externalities prices and profits will be higher in the regime of compatibility equilibrium total surplus could be higher in either regime both regimes overprovide variety compared to the surplus maximizing solution in today s environment many products are complex specified by a long array of characteristics part of the decision of the firm is to choose if it should break this long array of features into two or more smaller parts and produce the products corresponding to the smaller arrays instead of the product that embodies the full array we will call the products that correspond to these smaller arrays components and the product that corresponds to the full array a system note that components are by their definition complements components produced by different manufacturers are compatible if it is feasible for the consumers to combine them costlessly into a working system in this paper we will assume that there are two components which make up a system we will discuss competition under full compatibility when components produced by all firms are compatible with each other and under incompatibility when no components produced by different firms are compatible and no hybrid systems can exist 2 assuming availability of the same

hedonic price indexes for spreadsheets and an empirical test for network externalities in this article i first estimate hedonic price equations for computer spreadsheet programs and then use the analysis to empirically test whether network externalities exist in this industry the study shows that consumers are willing to pay a significant premium for spreadsheets that are compatible with the lotus platform and for spreadsheets that offer links to external databases and a similar premium for spreadsheets that offer local area network externalities finally the quality adjusted real price of computer spreadsheets declined by approximately 15 per year from 1986 to 1991

environmental standards and cournot duopoly a stability analysis in this paper the dynamic effects of public environmental policies are investigated in a cournot duopoly with both heterogeneous and homogeneous expectations in a context of limited rationality it is shown that the increase in upper limits to emissions always tends to destabilise markets and generate a chaotic market dynamics in both cases the policy implication of this result is that the use of environmental policies may favour market stability it is also shown that higher costs of abatement technology entail a higher likelihood of stability loss although in the heterogeneous expectations case also a decrease in costs may destabilise

new evidence on purchasing power parity from 17 oecd countries there is a large literature that investigates whether or not real exchange rates are stationary in an attempt to unravel support for purchasing power parity ppp at best the empirical results are mixed this paper applies a unit root test that allows for a simultaneous structural break in the intercept and slope shown by sen 2003 to minimize power distortions to examine ppp for 17 oecd countries our results on ppp are mixed when the real exchange rate is based on the us dollar evidence is found of ppp for only france portugal and denmark when the real exchange rate is based on the deutschmark we find evidence of ppp for austria belgium norway spain netherlands switzerland and denmark

testing for non linear structure in an artificial financial market abstract we present a stochastic simulation model of a prototype financial market our market is populated by both noise traders and fundamentalist speculators the dynamics covers switches in the prevailing mood among noise traders optimistic or pessimistic as well as switches of agents between the noise trader and fundamentalist group in response to observed differences in profits the particular behavioral variant adopted by an agent also determines his decision to enter on the long or short side of the market short run imbalances between demand and supply lead to price adjustments by a market maker or auctioneer in the usual walrasian manner our interest in this paper is in exploring the behavior of the model when testing for the presence of chaos or non linearity in the simulated data as it turns out attempts to determine the fractal dimension of the underlying process give unsatisfactory results in that we experience a lack of convergence of the estimate explicit tests for non linearity and dependence the bds and kaplan tests also give very unstable results in that both acceptance and strong rejection of iidness can be found in different realizations of our model all in all this behavior is very similar to experience collected with empirical data and our results may point towards an explanation of why robustness of inference in this area is low however when testing for dependence in second moments and estimating garch models the results appear much more robust and the chosen garch specification closely resembles the typical outcome of empirical studies

testing for long run purchasing power parity a time series analysis for the greek drachma abstract long run purchasing power parity ppp for six drachma bilateral exchange rates is tested by means of unit root and cointegration tests the results reject long run ppp

trend stationary of inflation rates evidence from lm unit root testing with a long span of historical data the article applies the lm univariate unit root test recently developed by lee and strazicich 2003 2004 to re examine the validity of trend stationary in the inflation rates of 11 oecd and asian countries using a longer span of historical data our empirical findings are favourable to the trend stationary of the inflation rates when we control the structural breaks in series and therefore they point to the absence of hyperinflation in the majority of the countries the results indicate that shocks to inflation rates are temporary and soon converge with the inflation rates being trend stationary hence most structural breaks in the inflation rate occur around the great depression world war i world war ii and energy shock periods for the convergence effect we repeat the unit root tests utilized above for smaller sub samples so as to provide a robust analysis the outcomes show that by selecting a longer data span we can catch more powerful convergent evidence overall some policy implications a

network effects software provision and standardization in this paper we examine the software provision decision of software firms the provision decision by software firms determines the value and hence the market share of competing hardware technologies we show how the provision decision by software firms determines whether multiple hardware technologies are supported in equilibrium or whether there is de facto standardization with only one hardware technology supplied with software in equilibrium we show that when consumers place a high value on software variety there is a suboptimal amount of standardization by the market

adoptions and orphans in the early microcomputer market in this paper we examine the development of the microcomputer market in the early 1980s cp m a widely adopted operating system was orphaned by the user and the development communities a new operating system dos and a new hardware platform the ibm pc became the predominant industry standard we examine the statistical relationship between data that reflects hardware and software sales for the competing platforms we conclude that the economic processes underlying the development of dos differed from those underlying cp m and that many of these differences related to the role of software development

the determinants of technology adoption the case of the banking firm using data on the adoption of automatic teller machines by firms in the banking industry this study examines the relationship between the decision to adopt new technology and its determinants since banking firms differ considerably in terms of the competitive environments in which they operate focusing on this one innovation in this industry allows a stronger test of the relationship between market structure and the adoption of new technology than has been previously conducted using a failure time estimation procedure we find that larger banks and banks operating in more concentrated local banking markets register a higher conditional probability of adopting this new technology all else equal we also find that other results are consistent with the underlying model and that the bank s regulatory environment shapes its adoption decision in plausible ways

the overvaluation of purchasing power parity abstract recent panel studies of purchasing power parity have reported strong evidence of mean reversion in real exchange rates however these studies fail to control for cross sectional dependence in the data this failure has dramatic consequences raising the significance level of tests with a nominal size of 5 percent to as much as 50 percent it is shown in this paper that controlling for cross sectional dependence no evidence against the random walk null can be found in panels of up to 64 real exchange rates this finding cannot be attributed to low power as there is ample power in panels of this size to reject the unit root null

are oil shocks permanent or temporary panel data evidence from crude oil and ngl production in 60 countries this paper examines the unit root properties of crude oil production for 60 countries employing a range of panel data unit root tests for the period 1971 to 2003 the study first employs a number of panel data tests that do not accommodate structural breaks and then proceeds to apply the lagrange multiplier lm panel unit root test with one structural break the results of the panel data tests without a structural break are inconclusive with at best mixed support for joint stationarity the findings from the lm panel unit root test with a structural break however are conclusive suggesting that for a world panel and smaller regional based panels crude oil and ngl production are jointly stationary

how does incompatibility affect prices evidence from atm s if consumers value mix and match combinations of network complements incompatibility between different sellers components should affect prices in atm markets a 1996 governance change exogenously generated such incompatibility by allowing banks to impose surcharges when other banks deposit customers use their atm s in our data incompatibility makes the relationship between deposit account pricing and own atm s more positive and makes the relationship between deposit account pricing and competitors atm s more negative the level effect on prices is positive the pattern of results is more pronounced in high population density markets where customers may care more about atm s

real and nominal exchange rates in the long run an empirical investigation abstract this paper reports on econometric tests of the hypothesis that purchasing power parity holds as a long run relationship using data on eight industrialized countries during the flexible exchange rate period the empirical work proceeds by i testing whether nominal exchange rates and relative price levels are co integrated and ii conducting impulse response analysis of long run exchange rate and relative price level changes to explain the data keynesian models suggest that shocks during the estimation period were due principally to exogenous shifts in aggregate demand while equilibrium models suggest that monetary factors have been relatively more important

purchasing power parity with flexible fourier stationary test for central and eastern european countries this study applies stationary test with a fourier function proposed by enders and lee 2004 2009 to test the validity of long run purchasing power parity ppp to assess the nonstationary properties of the real exchange rate rer for seven central and eastern european countries ceecs we find that our approximation has higher power to detect u shaped breaks and smooth breaks than linear method if the true data generating process of exchange rate is in fact a stationary nonlinear process we examine the validity of ppp from the nonlinear point of view and provide robust evidence clearly indicating that the ppp holds true for all ceecs our findings point out their exchange rate adjustment is mean reversion towards ppp equilibrium values in a nonlinear way

purchasing power parity as a long run relation dickey fuller and stock watson tests of purchasing power parity ppp as a long run proposition are provided within the cointegration framework proposed by granger since different countries use different weights to construct price indices the traditional constraint that the coefficients on the price indices should be unity in the log linear ppp relation is relaxed the absence of a general ppp relation cannot be rejected at most a ppp relation is indicated in five out of fifteen country pairs that are examined even if a long run ppp relation exists it is not found to be useful in predicting future nominal exchange rates which is consistent with efficient speculative markets

equilibrium models displaying endogenous fluctuations and chaos abstract this paper surveys current developments in dynamic general equilibrium theory concerned with conditions under which endogenous fluctuations are possible existing contributions are divided into two classes the larger one consists of models with a unique perfect foresight equilibrium while the second includes models where equilibrium is indeterminate and the set of equilibria involving endogenous fluctuations includes sunspots equilibria while the two classes of models involve oscillations of different natures and with different policy implications we show that both are consistent with optimizing behavior and competitive equilibrium

stationarity of health expenditures and gdp evidence from panel unit root tests with heterogeneous structural breaks this paper re examines the stationarity of national health care expenditures and gdp in a panel setting utilizing data from 20 oecd countries over the period from 1960 to 1997 previous research in this area has recognized the drawback of not allowing for structural breaks in their unit root tests and noted that their empirical results may not be robust we advance the literature by utilizing a recently developed panel lm unit root test that allows for heterogeneous level shifts in contrast to previous analyses that did not consider breaks our results reject the unit root null hypothesis for both series

atm foreign fees and cash withdrawals abstract we evaluate the impact of foreign fees paid by consumers on their cash withdrawals at automatic teller machines henceforth atms these so called foreign fees are paid when consumers withdraw cash from atms which are not owned by their home bank we take advantage of a natural experiment whereby non linear foreign atm fees in one specific bank became suddenly applicable at one point in time we also use this experiment to evaluate the substitutions between foreign atm withdrawals and other home atm or desk withdrawals as well as with payments by card using panel data on accounts we first estimate average treatment effects on the treated before carrying on with the estimation of a simple structural model the latter procedure allows us to compute the counterfactual impacts of changing the schedule of foreign fees impacts are sizeable on bank profits and consumer welfare

competition and integration among complements and network market structure this article analyzes the competition and integration among complementary products that can be combined to create composite goods or systems the model generalizes the cournot duopoly complements model to the case in which there are multiple brands of compatible components it analyzes equilibrium prices for a variety of organizational and market structures that differ in their degree of competition and integration the model applies to a variety of product networks including automatic teller machines real estate multiple listing services and airlines crs as well as to nonnetwork markets of compatible components such as computer cpus and peripherals hardware and software and long distance and local telephone services copyright 1992 by blackwell publishing ltd

a test of long run purchasing power parity abstract there is a continuing debate whether purchasing power parity holds as a long run equilibrium relationship this note applies an exact small sample pointwise most powerful invariant unit root test to annual long horizon real exchange rates this test finds clear and consistent evidence in favor of the true purchasing power parity relationship

mix and match compatibility with vertical product dimensions this article considers a duopoly in which each firm produces two components of a system if the components are compatible consumers may mix and match the firms components the system components and consumer tastes are assumed to differ with regard to vertical characteristics in the model one firm may be the quality leader in one or both characteristics moreover a consumer s taste for the quality of one component may be perfectly correlated with or independent of his taste for the quality of the other component it is shown that in all cases the sum of each producer s component prices is weakly higher if the components are compatible the same is true of producer profits

strategic incompatibility in atm markets abstract we test whether firms use incompatibility strategically using data from atm markets high atm fees degrade the value of competitors deposit accounts and can in principle serve as a mechanism for siphoning depositors away from competitors or for creating deposit account differentiation our empirical framework can empirically distinguish surcharging motivated by this strategic concern from surcharging that simply maximizes atm profit considered as a stand alone operation the results are consistent with such behavior by large banks but not by small banks for large banks the effect of incompatibility seems to operate through higher deposit account fees rather than increased deposit account base

dynamic analysis of policy lag in a keynes goodwin model stability instability cycles and chaos abstract in this paper we investigate the impact of government s stabilization policy on the dynamic behavior of the economic system in an analytical framework of a keynes goodwin model of the growth cycle in particular we study the effects of the policy lag on macroeconomic stability analytically and numerically it is shown that the increase of the policy lag contributes to destabilize the system and cyclical behavior and chaotic motion emerge in some ranges of the parameter values

increasing evidence of purchasing power parity over the current float we conduct unit root tests of real exchange rates with the united states dollar and the german mark as base currencies using samples of data which begin in 1973 and end between 1982 and 1996 we find that as the sample is extended the evidence of ppp strengthens with panel but not univariate methods because of the sharp rise and fall of the dollar in the early 1980s rejections of the unit root null do not monotonically increase with the sample size the evidence of ppp is uniformly stronger when the mark is used as the base currency

panel unit root tests of purchasing power parity for price indices abstract this paper adopts four panel unit root tests to evaluate ppp over the floating period for six different price indices results generally support ppp albeit the speeds of adjustment differ considerably between price indices and test procedures the degree of contemporaneous and serial correlation as well as heterogeneity of the series in the panel affect stationarity and the speed of mean reversion

to surcharge or not to surcharge an empirical investigation of atm pricing this paper investigates depository institutions decisions whether or not to impose surcharges direct usage fees on nondepositors who use their atms in addition to documenting patterns of surcharging we examine motives for surcharging including both direct generation of fee revenue and the potential to attract deposit customers who wish to avoid incurring surcharges at an institution s atms consistent with expectations we find that the probability of surcharging increases with both the institution s share of market atms and the time since surcharging was first allowed in the state and decreases with increasing local atm density further we find evidence consistent with the use of surcharges to attract deposit customers who are new to the local banking market but we find no evidence that larger banks use surcharges as a means to attract existing customers away from smaller local competitors

competition between networks a study of the market for yellow pages this paper estimates the importance of network effects in the market for yellow pages i estimate three simultaneous equations consumer demand for usage of a directory advertiser demand for advertising and a publisher s first order condition derived from profit maximizing behaviour estimation shows that advertisers value consumer usage and that consumers value advertising implying a network effect i find that internalizing network effects would significantly increase surplus as an application i consider whether the market benefits from monopoly which takes advantage of network effects or oligopoly which reduces market power i find that a more competitive market is preferable copyright 2004 wiley blackwell

are asian real exchange rates mean reverting evidence from univariate and panel lm unit root tests with one and two structural breaks there are a number of studies that examine the purchasing power parity ppp hypothesis the empirical findings from the extant literature for the ppp hypothesis are mixed this article applies univariate and panel lagrange multiplier lm unit root tests with one and two structural breaks to real exchange rates for 15 asian countries the univariate lm unit root tests find evidence of ppp for two thirds of the sample the results from the panel lm unit root test support long run ppp for the asian countries in the sample the results from the lm panel unit root tests differ from those of existing panel unit root tests of ppp for asian countries that have not allowed for the existence of structural breaks

intertemporal equilibrium dynamics with a pollution externality abstract a discrete model of a market economy is coupled to an accumulating pollutant and the intertemporal equilibrium dynamics of the resulting three dimensional economic environmental system is investigated through analysis and numerical methods conditions for the existence and stability of sustainable equilibria are studied under the usual assumption of linear uptake of the pollutant by the biosphere and under an alternative assumption of a threshold mechanism for uptake that leads to potential fold bifurcations and problems of existence for real equilibria over parts of the parameter space

are bilateral real exchange rates stationary evidence from lagrange multiplier unit root tests for india the paper examines the stationarity of india s real exchange rate vis a vis 16 of its major trading partner countries for the period 1960 2000 application of the conventional adf unit root test the lagrange multiplier lm unit root test with one structural break and the lm unit root test with two structural breaks provides evidence that india s exchange rate vis a vis 15 out of 16 countries is stationary implying support for purchasing power parity

a reconsideration of hedonic price indexes with an application to pc s this paper compares hedonic to matched model indexes matched model indexes are averages of the price changes of goods that remain on sampled stores shelves since goods that disappear tend to have falling market values matched model indexes select from the right tail of price changes the bls can construct hedonic indexes that correct for this selection and are justified by standard arguments in an empirical study of pc s hedonics produce sharp price declines while matched model indexes are near zero also though there are modifications to hedonics that seem desirable they are not those in current use

purchasing power parity and the theory of general relativity the first tests we implement novel tests of general relative purchasing power parity ppp defined as a long run unit elasticity of the nominal exchange rate with respect to relative national prices allowing for potentially permanent real exchange rate shocks the finite sample properties of the estimators used are analyzed through monte carlo analysis allowing for country heterogeneity cross sectional dependence and non stationary disturbances application to panel data sets of industrialized and developing economies reveals that inflation differentials are on average reflected one for one in long run nominal exchange rate depreciation i e that general relative ppp holds

the impact of technology adoption on market structure this paper examines the impact of bank adoptions of automated teller machines atms on subsequent levels of concentration in local banking markets the findings suggest that banks have had some success in using atms to attract customers from competitors as a consequence technology adoption s impact on market structure depends upon whether it is the larger or smaller firms within the market that adopt the new technology large firm adoptions increase concentration levels while small firm adoptions tend to reduce them the evidence also suggest that a state of structural disequilibrium seems to be characteristic of banking markets copyright 1990 by mit press

chaos in economic models with exogenous shocks abstract we investigate the generation of chaos in economic models through exogenous shocks the perturbation is formulated as a pulse function where either values or instants of discontinuity are chaotically behaved we provide a rigorous proof of the existence of chaos in the perturbed model the analytical results are applied to kaldor kalecki type models of the aggregate economy subject to export and rainfall shocks respectively simulations are used to demonstrate the emergence and the control of chaos our results shed light on a novel source of chaos in economic models and have important implications for policy making

did installed base give an incumbent any measurable advantages in federal computer procurement this research examines the relative strength and significance of the status of incumbent contractor in federal computer procurement one finding as expected is that an agency is likely to acquire a system from an incumbent vendor another finding perhaps more interesting is that the in compatibility between a buyer s installed base and a potential system also influences the vendor choice a result that may be the first econometric measurement of the competitive effects of incompatibility an illustration of this thesis comes from ibm s experience new evidence shows however that ibm s apparent disadvantage with government agencies is largely due to incompatibilities in ibm s product line

parity reversion persistence in real exchange rates middle income country case this article investigates purchasing power parity ppp in the specific context of middle income countries to circumvent the low power of traditional stationarity tests augmented dickey fuller and phillips perron tests it performs variance ratio and fractional integration tests in addition to perron s test that accounts for potential structural changes in real exchange rate processes beyond estimating half life shocks to ppp this article attempts to explain these estimates using a set of country specific variables as suggested by economic theory the evidence suggests that reversion to parity tends to be faster in high inflation countries and that productivity improvement leads to a higher level of persistence openness to trade tends to reduce the extent of deviations from parity but this result does not appear to be statistically robust evidence shows also that deviations are less persistent under a fixed exchange rate regime and under unrestricted capital mobility

are real exchange rates nonlinear with a unit root evidence on ppp for italy a note in this article we apply the recently developed threshold autoregression model to examine both linearity and stationarity of italy s real exchange rate vis vis her six trading partner g6 countries our main finding is that italy s real exchange rate is a nonlinear process that is not characterized by a unit root process for five of six trading partner countries this provides strong support for purchasing power parity

cointegration analysis with structural breaks and deterministic trends an application to the canadian dollar this article applies recent developments in cointegration analysis with structural breaks and deterministic trends to analyse the relationship between the real canada us exchange rate and commodity prices previous empirical studies disagree on whether these variables are cointegrated the root of disagreement could be in the handling of deterministic trends and potential structural breaks i find that even after controlling for these matters the question of whether the real exchange rate and commodity prices are cointegrated for canada remains unresolved

atm surcharges effects on deployment and welfare this paper analyzes the effects of atm surcharges on deployment and welfare in a model where banks compete for atm and banking services foreign fees surcharges and the interchange fee are endogenously determined we find situations in which surcharges are welfare enhancing under strategic fee setting the increase in deployment caused by surcharging might compensate the surplus loss caused by the increase in prices

purchasing power parity abstract this paper examines the purchasing power parity henceforth ppp using historical data and the cointegration approach the results indicate that the exchange rate is cointegrated with the wholesale price index wpi ratio but not with the consumer price index cpi ratio the cointegrating vector is close to 0 1 for the cpi based real exchange rates however we cannot reject the random walk hypothesis the findings caution us on the use of general price indexes that give a large weight to nontraded goods and are therefore subject to long run deviations from ppp

evidence on ppp for selected asian countries from a panel cointegration test with structural breaks the goal of this article is to examine evidence for purchasing power parity ppp for a panel of asian countries namely malaysia thailand india pakistan sri lanka and the philippines our main contribution is that for the first time in this literature we use a panel cointegration test developed by westerlund 2006 which allows us to incorporate multiple structural breaks we find that using gregory and hansen s 1996 residual based test for cointegration and pedroni s 1999 panel cointegration test without structural breaks provide weak evidence of cointegration between nominal exchange rates vis a vis the us dollar and relative prices however when we use the lagrange multiplier panel structural break cointegration test we find strong evidence of panel cointegration providing evidence for ppp

competing compatibility standards and network externalities in the pc software market this paper is an empirical study of the value of four file compatibility standards for transferring data in the personal computer software market the results are that only the lotus file compatibility standard is significant in explaining price variations and it is significant in both the spreadsheet and database management system markets this supports the hypothesis that the personal computer software market exhibits complementary network externalities copyright 1995 by mit press

network effects without network externalities abstract the network externalities hypothesis postulates that consumers prefer to purchase brands which are bought by more consumers compared with brands with a low market share in this paper we show that increasing returns to scale in the production of complementary products can substitute for the network externalities assumption we develop a model for the computer industry in which the production of complementary software requires a large fixed cost of development relative to the cost of duplicating and marketing the software the increasing returns to scale in the production of software yields consumers behavior which is very similar to consumers who have preferences exhibiting network externalities

a panel project on purchasing power parity mean reversion within and between countries abstract previous time series studies have shown evidence of mean reversion in real exchange rates deviations from purchasing power parity ppp appear to have half lives of approximately four years however the long samples required for statistical significance are unavailable for most currencies and are potentially inappropriate because of regime changes in this study we re examine deviations from ppp using a panel of 150 countries and 45 annual post wwii observations our panel shows strong evidence of mean reversion that is similar to that from long time series ppp deviations are eroded at a rate of approximately 15 annually i e their half life is around four years such findings can be masked in time series data but are relatively easy to find in cross sections

on the optimality of cyclical employment policies a two state variable continuous time control model of optimal employment of a profit maximizing firm with convex labour adjustment costs is considered the model is analyzed numerically it is shown that a cyclical hiring and firing policy is optimal

nonlinear mean reversion in real exchange rates abstract this paper modifies a unit root test procedure in the nonlinear star framework recently advanced by kapetanios et al journal of econometrics 2001 in press using a detrending methodology suggested by schmidt and phillips oxford bulletin of economics and statistics 54 1992 257 we derive an alternative unit root test and apply it to the bilateral real exchange rates for the g7 countries we find that the use of our test is able to uncover evidence of nonlinear mean reversion for most cases whereas the standard dickey fuller test based on the linear model cannot

nominal exchange rate regimes and the real exchange rate abstract two assumptions about the real exchange rate are common in the literature on international finance 1 the real exchange rate is a random walk 2 the time series properties of the real exchange rate depend on the nominal exchange rate regime this paper presents evidence that indicates that the random walk behavior of the real exchange rate is only a characteristic of the post world war ii period moreover our findings also suggest that what is crucial to the real exchange rate behavior is the particular historical period rather than the nominal exchange rate arrangement

paying for atm usage good for consumers bad for banks we compare the effects of the three most common atm pricing regimes on consumers welfare and banks profits we consider cases where the atm usage is free where customers pay a foreign fee to their bank and where they pay a foreign fee and a surcharge paradoxically when banks set an additional fee profits are decreased besides consumers welfare is higher when atm usage is not free surcharges enhance atm deployment so that consumers prefer paying surcharges when reaching cash is costly our results also shed light on the australian reform that consists in removing the interchange fee

cointegration tests of purchasing power parity in africa abstract despite two decades of implementing economic reforms there is still a significant gap between official and black market exchange rates in africa african policy makers continue to implement exchange rate policies based largely on the assumption that purchasing power parity ppp holds this paper examines whether there is empirical support for ppp in africa we used johansen s cointegration technique and error correction modeling on annual data for black market exchange rates and cpi in 30 countries covering 1960 97 we found strong support for the ppp doctrine as a useful guide for exchange rate policy reform in africa

the purchasing power parity debate originally propounded by the 16th century scholars of the university of salamanca the concept of purchasing power parity ppp was revived in the interwar period in the context of the debate concerning the appropriate level at which to re establish international exchange rate parities broadly accepted as a long run equilibrium condition in the post war period it first was advocated as a short run equilibrium by many international economists in the first few years following the breakdown of the bretton woods system in the early 1970s and then increasingly came under attack on both theoretical and empirical grounds from the late 1970s to the mid 1990s accordingly over the last three decades a large literature has built up that examines how much the data deviated from theory and the fruits of this research have provided a deeper understanding of how well ppp applies in both the short run and the long run since the mid 1990s larger datasets and nonlinear econometric methods in particular have improved estimation as deviations narrowed between real exchange rates and ppp so did the gap narrow between theory and data and some degree of confidence in long run ppp began to emerge again in this respect the idea of long run ppp now enjoys perhaps its strongest support in more than 30 years a distinct reversion in economic thought

complex nonlinear dynamics and computational methods in the summer of 1997 berc rustem asked us whether we would be interested in editing a special issue of the journal of economic dynamics control on complex nonlinear dynamics and computational methods we were enthusiastic about the idea and soon started soliciting papers on these themes this issue contains 19 contributions by some experts in the eld and should provide the reader with an impression of the current s dechert 1996 goodwin 1990 hommes 1991 lorenz 1993 medio 1992 puu 1997 rosser 1991 and de vilder 1995 for more discussions concerning this controversy is the main source of economic uctuations to be found in exogenous random shocks to an inherently stable linear economic system or can nonlinear economic laws of motion explain a signi cant part of observed uctuations in output growth rates capital stocks inventories stock prices exchange rates and other economic or nancial variables this controversy dates back to the 1930s and the 1940s when frisch slutsky and tinbergen a o proposed their propagation mechanism subject to exterior random impulses as a way of modeling business cycles in contrast e g kaldor goodwin and hicks argued that the

systems competition and network effects this paper discusses firm behavior market performance and the public and private institutions that arise in systems markets i e markets where consumers use compatible components together to generate benefits in such markets which include communications networks and hardware software networks popular products are inherently more valuable these network effects can drive corporate strategies and are critical in understanding innovation in many high technology markets the discussion here emphasizes the dynamics of consumer adoption decisions in the presence of network effects competition between incompatible systems and how suppliers choose which components are compatible and which are not

an empirical examination of long run purchasing power parity using cointegration techniques this paper presents an empirical analysis of long run purchasing power parity ppp for five major exchange rates using recently developed econometric techniques on the cointegration of economic time series our empirical results are extremely unfavourable to the ppp hypothesis as a long run equilibrium condition even with an allowance made for measurement error and or tranportation costs in particular we are unable to reject the hypothesis of non cointegration of the exchange rate and relative prices for any of the countries concerned far from finding a stable long run proportionality between exchange rates and relative prices our results therefore suggest that they tend to drift apart without bound

long waves and short cycles in a model of endogenous financial fragility this paper presents a stock flow consistent macroeconomic model in which financial fragility in firm and household sectors evolves endogenously through the interaction between real and financial sectors changes in firms and households financial practices produce long waves the hopf bifurcation theorem is applied to clarify the conditions for the existence of limit cycles and simulations illustrate stable limit cycles the long waves are characterized by periodic economic crises following long expansions short cycles generated by the interaction between effective demand and labor market dynamics fluctuate around the long waves

mean reversion in bilateral real exchange rates evidence from the malaysian ringgit this study examines behaviour of the consumer price index cpi based real exchange rates rers of the ringgit against the currencies of malaysia s major trading partners the empirical results which are derived from newly developed tests advocated by lee and strazicich ls 2003 and narayan and popp np 2010 that allow for two breaks in the series provide conflicting results we obtain weaker support for purchasing power parity ppp using the narayan and popp 2010 test by truncating the sampling period into two sub periods we find that ppp holds for majority of the malaysia s bilateral exchange rate vis a vis its major trading partners during the pre crisis period the 1997 currency crisis however has weakened the evidence in favour of ppp hypothesis in the strict sense