economics and the international trade commission negotiated during the 1980s and the u s semiconductor agreement with japan because the u s antidumping and antisubsidy laws are now one of the most important means used to restrict imports the administration of these laws has come under considerable scrutiny many observers are concerned that these laws are being administered in a way which favors u s industries in this paper i attempt to address some of these concerns by determining the extent to which the administration of the u s unfair trade laws is based on the economic criteria specified in the unfair trade legislation in particular this study examines the importance of economic criteria in the antidumping and antisubsidy decisions of the international trade commission itc the itc is one of the most important agencies responsible for administering the u s unfair trade laws and its role extends beyond these laws into other areas including the escape clause the administrative role of the itc in unfair trade cases is to determine whether unfairly traded imports are a cause of material injury to a domestic industry many other authors have examined the basis for itc decisions the results of baldwin 3 and goldstein and lenway 8 provide support for the hypothesis that the itc uses at least some of the legislated economic criteria appropriately both studies examine the escape clause decisions of the itc and find that industries with declining profitability are more likely to receive favorable itc decisions goldstein and lenway 8 also find that the itc is immune to congressional pressures for protection both studies however focus solely on escape clause decisions which represent only a small fraction of itc decisions and do not involve allegations of unfair trade escape clause actions are also different from other itc decisions in that the president must ultimately decide whether relief is warranted

gasoline taxes and revenue volatility an application to california this paper examines how applying different combinations of excise and sales taxes on motor fuels impact the volatility of retail fuel prices and tax revenues two features of gasoline and diesel markets make the choice of tax mechanism a unique problem first prices are very volatile second demand for motor fuels is extremely inelastic as a result fuel expenditures vary substantially over time tying state revenues to these expenditures as is the case with a sales tax results in a volatile stream of revenue which imposes real costs on agents in an economy on july 1 2010 california enacted assembly bill x8 6 the gas tax swap increasing the excise tax and decreasing the sales tax on gasoline purchases while the initial motivation behind the revenue neutral swap was to provide the state with greater flexibility within its budget we highlight that this change has two potentially overlooked benefits it reduces retail fuel price volatility and tax revenue volatility simulating the monthly fuel prices and tax revenues under alternative tax policies we quantify the potential reductions in revenue volatility the results reveal that greater benefits can be achieved by going beyond the tax swap and eliminating the gasoline sales tax entirely

the quantitative analytics of the basic neomonetarist model this paper constructs a dynamic macroeconomic model with less than perfect price flexibility which has a classical side consistent with real business cycle theory augmented by investment adjustment costs increasing returns to scale and a new flexible formalization of imperfect competition something akin to the classical dichotomy is justified by a mode of approximation appropriate for a model in which one state variable adjusts quickly while another state variable adjusts slowly even with investment adjustment costs monetary expansions are found to raise the real interest rate the determinants of real rigidity and the macroeconomic rate of price adjustment are investigated copyright 1995 by ohio state university press

is protection for sale evidence on the grossman helpman theory of endogenous protection grossman and helpman 1994 present a theory of endogenous protection by explicitly modeling government industry interactions for which mere black box models previously existed they obtain a ramsey pricing type solution to the provision of protection which emphasizes the role of inverse import penetration ratios and import elasticities on the lobbying side the model makes predictions about lobbying competition and lobbying spending according to deadweight costs from protection the model not only makes for richer theory in terms of rigor and elegance but its predictions are directly testable whether the grossman helman model stands up to real world data is investigated in this paper predictions from both the protection side and lobbying side are tested using cross sectional u s nontariff barrier data we also compare the second generation grossman helpman model with a more traditional specification our results call for serious consideration of this model in the political economy literature

who provides the capital for chinese growth the public or the private sector we focus on the role of the government in the provision of investment in china through the medium of a dynamic stochastic general equilibrium model of the economy in which the form of the production function reflects this governmental role using indirect inference we estimate and test for the elasticity of substitution between government and nongovernment capital in both constant elasticity of substitution ces and cobb douglas technologies the results underscore the strong substitution relationship between government and nongovernment capital from 1949 supporting ces rather than the cobb douglas technology they also show that the orientation of public investment changed after the start of the socialist market economy in 1992 government capital became more complementary to nongovernment capital as it focused more on infrastructure and withdrew from industrial production intervening only in times of crisis for stabilization purposes indirectly via the state banks

a monetary policy strategy in good and bad times lessons from the recent past we evaluate the ecb s monetary policy strategy against some of the underlying economic features of the eurozone in normal times and during the financial crisis we show that in the years preceding the crisis the ecb s emphasis on monetary indicators and deliberate avoidance of excessive activism were justified by the underlying macroeconomic conditions that the ecb faced in the eurozone and contributed to avoid more volatile patterns of inflation and economic activity after the collapse of financial intermediation in late 2008 the strategy of the ecb was to adopt several non standard policy measures according to our quantitative evaluation of the impact of the main non standard policies decided in october 2008 and in may 2009 which notably did not include entering commitments regarding the future path of the policy rate such measures have significantly contributed to preserving price stability and forestalling a more disruptive collapse of the macroeconomy stephan fahr roberto motto massimo rostagno frank smets and oreste tristani

the emergence of rural transport strategies in response to rising fuel costs abstract rising and sometimes volatile fuel prices pose a challenge for rural organizations reliant on long distance transport to understand the coping mechanisms used by such organizations we survey rural business strategies in israel where fuel prices are high and urban development is concentrated in the country s geographic center the businesses surveyed are operated by kibbutzim historically collective communities that are now in various stages of privatization analysis of the transport strategies employed by nearly 100 organizations in three regions of varying remoteness and isolation shows that firms rely on distinct strategies such as localization and high value density localization was found to be prevalent in all regions as it requires little capital investment strategies exploiting high value density including information based services were prevalent in remote and isolated regions where sensitivity to transport costs is acute non remote firms were less inclined toward strategic adaptation preferring non disruptive changes such as cheaper shipping modes the development implications of these transport strategies are consistent with rural economic trends observed throughout the developed world if transport costs continue to rise rural firms may shrink the radius of their sales and labor pools or search for more lucrative products to reduce their relative transport costs

a long commodity cycle model of the world economy over a century and a half making bricks with little straw abstract this paper explores the world business cycle using unfiltered data from 1870 and looks for a theory that could account for the long wave commodity cycle in the world economy we build a simple dsge model that includes a long time to build constraint in the commodity sector we find that this model can produce long cycles in output and commodity prices as introduced by kontradieff 1925 and schumpeter 1934 our findings show that these long business cycles are produced by the long gestation of commodity capacity which causes very large swings in commodity prices

tracing the causes of the banking crisis we add the bernanke gertler gilchrist model to a modified version of the smets wouters model of the u s in order to explore the causes of the banking crisis the innovation of this article is estimating the model using unfiltered data allowing for non stationary shocks in order to replicate how the model predicts the crisis we find that traditional shocks account for most of the fluctuations in macroeconomic variables the non stationarity of the productivity shock plays a key role crises occur when there is a run of bad shocks based on this sample they occur on average once every 64 years and when they occur around 10 are accompanied by financial crisis financial shocks on their own even when extreme do not cause crises provided the government acts swiftly to counteract such a shock as happened in this sample

gasoline taxes or efficiency standards a heterogeneous household demand analysis abstract using detailed consumer expenditure survey data and a flexible semiparametric dynamic demand model this paper estimates the price elasticity and fuel efficiency elasticity of gasoline demand at the household level the goal is to assess the effectiveness of gasoline taxes and vehicle fuel efficiency standards on fuel consumption the results reveal substantial interaction between vehicle fuel efficiency and the price elasticity of gasoline demand the improvement of vehicle fuel efficiency leads to lower price elasticity and weakens consumers sensitivity to gasoline price changes the offsetting effect also differs across households due to demographic heterogeneity these findings imply that when gasoline taxes are in place tightening efficiency standards will partially offset the strength of taxes on reducing fuel consumption

lifecycle analysis of gasoline expenditure patterns abstract the work presented here demonstrates the existence of statistically identifiable groups of consumers within the population with differentiable gasoline expenditure levels the existence of these differences in gasoline expenditure levels is demonstrated through examination of urban consumers in the southern region of the usa and us rural consumers as a proxy for southern regional rural consumers current work in the analysis of energy end use patterns indicates that changes in socioeconomic characteristics can lead to substantial changes in the demand for energy the groups identified in this work have been linked to a developmental description of the formation and maturation of the family unit known as a lifecycle the majority of previous studies of consumer demand for gasoline have been performed with aggregate data on a state regional or national basis as a result household characteristics such as age distribution within the household which have been shown to play an important role in the determination of levels of other transport services have not been included in previous analyses of the derived household demand for gasoline incorporating these factors into an analysis should be useful from a policy perspective as well as from the perspective of improving forecast reliability

zombie lending and depressed restructuring in japan this paper explores the role that misdirected bank lending played in prolonging the japanese macroeconomic stagnation that began in the early 1990s the investigation focuses on the wide spread practice of japanese banks of continuing to lend to otherwise insolvent firms we docu ment the prevalence of this forbearance lending and show its distorting effects on healthy firms that were competing with the impaired firms the paper by hoshi 2000 was the first to call attention to this phenomenon and its ramifi

car buyers and fuel economy abstract this research is designed to help researchers and policy makers ground their work in the reality of how us consumers are thinking and behaving with respect to automotive fuel economy our data are from semi structured interviews with 57 households across nine lifestyle sectors we found no household that analyzed their fuel costs in a systematic way in their automobile or gasoline purchases almost none of these households track gasoline costs over time or consider them explicitly in household budgets these households may know the cost of their last tank of gasoline and the unit price of gasoline on that day but this accurate information is rapidly forgotten and replaced by typical information one effect of this lack of knowledge and information is that when consumers buy a vehicle they do not have the basic building blocks of knowledge assumed by the model of economically rational decision making and they make large errors estimating gasoline costs and savings over time moreover we find that consumer value for fuel economy is not only about private cost savings fuel economy can be a symbolic value as well for example among drivers who view resource conservation or thrift as important values to communicate consumers also assign non monetary meaning to fuel prices for example seeing rising prices as evidence of conspiracy this research suggests that consumer responses to fuel economy technology and changes in fuel prices are more complex than economic assumptions suggest the us department of energy and the energy foundation supported this research the authors are solely responsible for the content and conclusions presented

a bayesian approach to optimal monetary policy with parameter and model uncertainty abstract this paper undertakes a bayesian analysis of optimal monetary policy for the u k we estimate a suite of monetary policy models that include both forward and backward looking representations as well as large and small scale models we find an optimal simple taylor type rule that accounts for both model and parameter uncertainty for the most part backward looking models are highly fault tolerant with respect to policies optimized for forward looking representations while forward looking models have low fault tolerance with respect to policies optimized for backward looking representations in addition backward looking models often have lower posterior probabilities than forward looking models bayesian policies therefore have characteristics suitable for inflation and output stabilization in forward looking models

monetary policy and bank lending in the euro area is there a stock market channel or an interest rate channel abstract in this paper i compare a traditional demand oriented model of bank lending with its focus on short term interest rates in the money market to a non traditional capital budgeting model of bank lending based on movements in share valuations for the euro area using non nested hypothesis tests omitted variables tests and granger causality tests i reject the traditional demand oriented model of bank lending and fail to reject the capital budgeting model of bank lending for monetary financial institutions mfi s in the euro area even though europe is a bank based financial system it appears the stock market plays a key role in the lending decisions and allocation of resources in europe one possible policy implication of this research is that the central bank should try and stabilize stock prices in order to achieve their goal of stabilizing bank lending and the economy

the macroeconomic effects of large scale asset purchase programmes the effects of asset purchase programs on macroeconomic variables are likely to be moderate we reach this conclusion after simulating the impact of the federal reserve s second large scale asset purchase program lsap ii in a dsge model enriched with a preferred habitat framework and estimated on u s data our simulations suggest that such a program increases gdp growth by less than half a percentage point although the effect on the level of gdp is very persistent the program s marginal contribution to infl ation is very small one key reason for our fi ndings is that we estimate a small degree of fi nancial market segmentation if we enrich the set of observables with a measure of long term debt the semi elasticity of the risk premium to the amount of debt in privatesector hands is substantially smaller than that reported in the recent empirical literature in this case our baseline estimates of the effects of lsap ii on the macroeconomy decrease by at least a factor of two throughout the analysis a commitment to an extended period at the zero lower bound for nominal interest rates increases the effects of asset purchase programs on gdp growth and infl ation

are flexible taxation mechanisms effective in stabilizing fuel prices an evaluation considering wholesale fuel markets in this paper we study the incidence of specific taxes in the italian fuel markets and exploit these findings to simulate the effects of fiscal policies aimed at mitigating oil price fluctuations we estimate several reduced form specifications using as dependent variables the equilibrium wholesale prices for gasoline and motor diesel over the period 1996 2007 in particular we assess the impact on wholesale gasoline and motor diesel prices stemming from the creation of an automatic fiscal mechanism consisting of reductions in specific taxes matching the rise in oil prices our simulations suggest that flexible taxation mechanisms could not be a proper policy for stabilizing price levels in fuel markets a more effective control on prices can be obtained by focusing on the market structure of these industries where antitrust authority could play a significant role

limited information estimation and evaluation of dsge models we advance the proposition that dynamic stochastic general equilibrium dsge models should not only be estimated and evaluated with full information methods these require that the complete system of equations be specified properly some limited information analysis which focuses upon specific equations is therefore likely to be a useful complement to full system analysis two major problems occur when implementing limited information methods these are the presence of forward looking expectations in the system as well as unobservable non stationary variables we present methods for dealing with both of these difficulties and illustrate the interaction between full and limited information methods using a well known model copyright 2009 john wiley sons ltd

is housing collateral important to the business cycle evidence from china abstract this paper investigates whether housing collateral is important to the business cycle in china we develop two models one without housing collateral as benchmark and one variant allowing for it indirect inference procedure tests these two models compatibility with the data we find that the benchmark model passes the test while the collateral model is strongly rejected according to the benchmark model shocks from the housing market have limited impact on the chinese business cycle by contrast the exogenous spending shock from government and net exports the monetary policy shock and the goods sector cost productivity shock all in turn most likely connected to world business cycle shocks especially the global financial crisis are found to be the main drivers

the role of central bank transparency for guiding private sector forecasts central banks have become remarkably more transparent over the last few decades in this paper we study the effects of this evolution focusing on whether enhanced central bank transparency lowers dispersion among professional forecasters of key economic variables we use a large set of proxies for central bank transparency in 12 advanced economies we find evidence for a sizeable effect e g by announcing a quantified inflation objective or by publishing inflation and output forecasts however there are decreasing marginal effects to increases in transparency and the disagreement among the expectations of the general public is not affected this suggests that there are possible limits to transparency

bureaucratic discretion or congressional control regulatory policymaking by the federal trade commission this paper extends stigler and peltzman s approach to regulation by incorporating a legislature the model yields comparative statics results and hence testable implications the paper then tests between two opposing approaches about regulatory agency behavior the first assumes agencies operate independently of the legislature and hence exercise discretion the second assumes that congress controls agency decisions the recent behavior of the federal trade commission provides the empirical setting substantial evidence is found for the specific predictions of the model including the hypothesis of systematic congressional influence over ftc decisions

estimates from a consumer demand system implications for the incidence of environmental taxes abstract most studies suggest that environmental taxes are regressive making them less attractive policy options we consider the distributional effects of a gasoline tax increase using four incidence measures and under three scenarios for gas tax revenue use to incorporate behavioral responses we use consumer expenditure survey data to estimate a consumer demand system that includes gasoline other goods and leisure our estimates confirm that when revenues are not recycled a gasoline tax is regressive use of incidence measures that ignore demand responses however will substantially overstate this regressivity in contrast the differences between the equivalent variation and easier to implement consumer surplus measures are relatively small in addition our results suggest that using the additional gas tax revenue to fund labor tax cuts makes the policy substantially less regressive while using the revenue to fund lump sum transfers actually makes it progressive

how much nominal rigidity is there in the us economy testing a new keynesian dsge model using indirect inference we evaluate the smets wouters new keynesian model of the us postwar period using indirect inference the bootstrap and a var representation of the data we find that the model is strongly rejected while an alternative new classical version of the model fares no better adding limited nominal rigidity to it produces a weighted model version closest to the data but on data from 1984 onwards the great moderation the best model version is one with a high degree of nominal rigidity close to new keynesian our results are robust to a variety of methodological and numerical issues

the role of energy prices in the great recession a two sector model with unfiltered data we investigate the role of energy shocks during the great recession we study the behaviour of the uk energy and non energy intensive sectors firms in a real business cycle rbc model using unfiltered data the model is econometrically estimated and tested by indirect inference output contraction during the great recession was largely caused by energy price and sector specific productivity shocks all of which are non stationary and hence tend to dominate the sample variance decomposition we also found that the channel by which the energy price shock reduces output in the model is via the terms of trade these fall permanently when world energy prices increase and as substitutes for energy inputs are strictly limited there are few reactions via production channels therefore there is no other way to balance the deteriorating current account than through lower domestic absorption

firms governments and wto adjudication japan s selection of wto disputes what explains the selection of cases for wto adjudication this article explores the business conditions under which industries lobby their home government to use the wto adjudication process and the political factors that influence government decisions it explains the industry pattern of selection for international trade disputes as a function of the velocity of the business environment while wto adjudication is seen as costly and slow a positive ruling brings broad benefits in terms of deterrence against future discrimination firms in static industries will invest in wto dispute settlement to achieve these benefits but firms in industries shaped by dynamic competition have high opportunity costs that make them less willing to pursue adjudication this argument accounts for why there are fewer wto cases about electronics industry issues than there are likely incidences of protectionist measures since japan is a leading exporter and provides a government report with unique data on potential wto disputes it was chosen to test the argument in greater depth interviews with japanese business officials and statistical analysis of an original data set provide support for the argument the authors conclude that the passive attitude toward wto adjudication by japan s largest export industry electronics and the sensitivity of japan s diplomatic relations with china have constrained the cases that japan files these findings suggest that the effectiveness of the wto for dispute settlement is conditional upon the time horizon of the industry and the political relations among members

what does a financial shock do first international evidence in this paper we attempt to evaluate the quantitative impact of financial shocks on key indicators of real activity and financial conditions we focus on financial shocks as they have received wide attention in the recent literature and in the policy debate after the global financial crisis we estimate a panel var for 21 advanced economies based on quarterly data between 1985 and 2011 where financial shocks are identified through sign restrictions we find robust evidence that financial shocks can be separately identified from other shock types and that they exert a significant influence on key macroeconomic variables such as gdp and particularly investment but it is unclear whether these shocks are demand or supply shocks from the standpoint of their macroeconomic impact the financial development and structure of a given country is found not to matter much for the intensity of the propagation of financial shocks moreover we generally find that these shocks play a role not only in crisis times but also in normal conditions finally we discuss the implications of our findings for monetary policy fabio fornari and livio stracca

efetividade do instrumento antidumping no brasil entre 1990 e 2007 the aim of this study was to evaluate the effectiveness of anti dumping instrument in brazil two aspects the relationship between antidumping filings and macroeconomic factors and the effects of macroeconomic variables and industry size on the likelihood of petitioner law enforcement antidumping the results showed that macroeconomic variables have no effect on the number of antidumping filings for the brazilian economy from 1990 to 2007 moreover result supports the hypothesis that adverse scenarios in the national economy and the specific characteristics of sectors petitioners for the increased probability of conclude by the application of antidumping law reducing its effectiveness

gasoline and diesel demand in the eu implications for the 2030 emission goal abstract methodologically consistent demand estimates are necessary to analyze and forecast the effect of a common fuel policy across the eu 28 this study estimates short run and long run price and income elasticities for gasoline and diesel demands using the ardl bounds approach that also tests the existence of a long run relationship using data from 1978 to 2013 the results show that elasticity estimates between the eu 28 countries vary and the estimated long run elasticities are higher than their short run counterparts which is in line with expectations based on the existing literature the short run and long run income elasticities of gasoline and diesel demand are found to be more elastic than their price equivalents implying that if a charge on fuel is designed to decrease emissions by increasing the price the charge needs to rise at a higher rate than income an analysis of the eu s 2030 emission and fuel consumption reduction targets using the estimated long run elasticities shows that with the current tax scheme it cannot be guaranteed that emission targets will be achieved and thus a more stringent fuel tax policy is essential

how important is the credit channel an empirical study of the us banking crisis we examine whether by adding a credit channel to the standard new keynesian model we can account better for the behaviour of us macroeconomic data up to and including the banking crisis we use the method of indirect inference which evaluates statistically how far a model s simulated behaviour mimics the behaviour of the data we find that the model with credit dominates the standard model by a substantial margin credit shocks are the main contributor to the variation in the output gap during the crisis

monetary policy in exceptional times this paper describes the way in which the european central bank ecb the federal reserve and the bank of england conducted monetary policy since the beginning of the financial crisis in august 2007 we argue that both quantitative easing and the other non standard measures introduced by central banks that changed the composition of the asset side of their balance sheets so called qualitative easing acted mainly through their effects on interest rates and in particular on money market spreads rather than solely through quantity effects in terms of the money supply we perform a quantitative exercise on the euro area which estimates the effect of the reduction of these spreads to the broader economy michele lenza huw pill and lucrezia reichlin

driving for fun comparing the effect of fuel prices on weekday and weekend fuel consumption abstract focusing on individual motorists in car owning households in germany this paper investigates the determinants of automobile travel with the specific aim of quantifying the effects of fuel prices and person level attributes on travel conducted over a five day week and weekend our analysis is predicated on the notion that car use is an individual decision albeit one that is dependent on intra household allocation processes thereby building on a growing body of literature that has identified the importance of socioeconomic factors such as employment status gender and the presence of children in determining both access to and use of the car to capture this two stage decision process we employ the two part model which consists of probit and ols estimators and derive elasticity estimates that incorporate both the discrete and continuous choices pertaining to car use with fuel price elasticity estimates ranging between 0 45 and 0 50 our results suggest raising prices via fuel taxes to be a promising energy conservation and climate protection measure

the political economy of administered protection trade restrictions are hardly ever voted directly by congress though the threat of direct congressional action is frequently present pressure for protection is usually applied through the major instruments for the administrative regulation of imports the antidumping and countervailing duty procedures and the escape clause mechanism in this paper we will examine these instruments for the administrative regulation of imports the form of the paper is not novel a theory of how these mechanisms work is developed then operational implications of this theory are deduced and tested over the record of countervailing duty antidumping and escape clause cases decided from 1975 through 1979 this is the period over which the trade act of 1974 was in force because the nature of these mechanisms is relatively unfamiliar a relatively large amount of institutional information is provided

impacts of trade and macroeconomic linkages on canadian agriculture implications of trade and macroeconomic policies on the performance of the canadian agricultural sector were analyzed using a structural econometric model results indicated that had canada been more integrated with the world economy its volume of trade would have been 3 higher than its actual level and much greater price incentives for agriculture would have occurred

should central banks respond to movements in asset prices in recent decades asset booms and busts have been important factors in macroeconomic fluctuations in both industrial and developing countries in light of this experience how if at all should central bankers respond to asset price volatility we have addressed this issue in previous work bernanke and gertler 1999 the context of our earlier study was the relatively new but increasingly popular monetary policy framework known as inflation targeting see e g bernanke and frederic mishkin 1997 in an inflation targeting framework publicly announced medium term inflation targets provide a nominal anchor for monetary policy while allowing the central bank some flexibility to help stabilize the real economy in the short run the inflation targeting approach gives a specific answer to the question of how central bankers should respond to asset prices changes in asset prices should affect monetary policy only to the extent that they affect the central bank s forecast of inflation to a first approximation once the predictive content of asset prices for inflation has been accounted for there should be no additional response of monetary policy to assetprice fluctuations in use now for about a decade inflationtargeting has generally performed well in practice however so far this approach has not often been stress tested by large swings in asset prices our earlier research employed simulations of a small calibrated macroeconomic model to examine how an inflation targeting policy defined as one in which the central bank s instrument interest rate responds primarily to changes in expected inflation might fare in the face of a boom and bust cycle in asset prices we found that an aggressive inflationtargeting policy rule in our simulations one in which the coefficient relating the instrument interest rate to expected inflation is 2 0 substantially stabilizes both output and inflation in scenarios in which a bubble in stock prices develops and then collapses as well as in scenarios in which technology shocks drive stock prices intuitively inflation targeting central banks automatically accommodate productivity gains that lift stock prices while offsetting purely speculative increases or decreases in stock values whose primary effects are through aggregate demand conditional on a strong policy response to expected inflation we found little if any additional gains from allowing an independent response of central bank policy to the level of asset prices in our view there are good reasons outside of our formal model to worry about attempts by central banks to influence asset prices including the fact that as history has shown the effects of such attempts on market psychology are dangerously unpredictable hence we concluded that inflationtargeting central banks need not respond to asset prices except insofar as they affect the inflation forecast in the spirit of recent work on robust control the exercises in our earlier paper analyzed the performance of policy rules in worst case discussants robert shiller yale university glenn rudebusch federal reserve bank of san francisco kenneth rogoff harvard university

consumer and competitor reactions evidence from a field experiment abstract in response to a price change by a single seller it is common for the density of sellers in the market to influence both the quantity response of consumers and the price response of other sellers using field experiment data collected around a series of exogenously imposed price changes we find that an individual retailer with a larger number of competitors faces a more responsive demand this finding is fundamental to a predicted inverse relationship between market prices and the number of competitors we also examine the reaction of rival stations to exogenous price changes and find that the magnitude of a competitor s response is inversely related to the density of stations in the market

modeling gasoline demand in the united states a flexible semiparametric approach abstract the focus of this paper is on the modeling and estimation of quarterly state level gasoline demand in the united states the existing literature may not appropriately evaluate the price elasticity and income elasticity of gasoline demand most studies fail to address the possible heterogeneity in gasoline demand elasticities that may arise from a variety of sources the endogeneity issue of gasoline price has remained redundant throughout the literature i address these challenges using a flexible demand model and a recently developed estimation technique the econometric approach allows for functional coefficients to accommodate the heterogeneity in demand elasticities several instrumental variables are used to investigate the endogeneity of gasoline price the estimation results provide strong evidence of heterogeneous gasoline demand elasticities across states and over time some state level attributes along with income and macroeconomic shocks are the potential sources of heterogeneity

shocks structures or monetary policies the euro area and us after 2001 abstract the us federal reserve cut interest rates more vigorously in the recent recession than the european central bank did by comparison with the fed the ecb followed a more measured course of action we use an estimated dynamic general equilibrium model with financial frictions to show that comparisons based on such simple metrics as the variance of policy rates are misleading we find that because there is greater inertia in the ecb s policy rule the ecb s policy actions actually had a greater stabilizing effect than did those of the fed as a consequence a potentially severe recession turned out to be only a slowdown and inflation never departed from levels consistent with the ecb s quantitative definition of price stability other factors that account for the different economic outcomes in the euro area and us include differences in shocks and differences in the degree of wage and price flexibility

a bayesian sampling approach to measuring the price responsiveness of gasoline demand using a constrained partially linear model partial linear models provide an intuitively appealing way to examine gasoline demand because one can examine how response to price varies according to the price level and people s income however despite their intuitive appeal partial linear models have tended to produce implausible and or erratic price effects blundell et al 2012 propose a solution to this problem that involves using slutsky shape restrictions to improve the precision of the nonparametric estimate of the demand function they propose estimating a constrained partially linear model through three steps where the weights are optimized by minimizing an objective function under the slutsky constraint bandwidths are selected through least squares cross validation and linear coefficients are estimated using profile least squares a limitation of their three step estimation method is that bandwidths are selected based on pre estimated parameters we improve on the blundell et al 2012 solution in that we derive a posterior and develop a posterior simulation algorithm to simultaneously estimate the linear coefficients bandwidths in the kernel estimator and the weights imposed by the slutsky condition with our proposed sampling algorithm we estimate a constrained partially linear model of household gasoline demand employing household survey data for the united states for 1991 and 2001 and for canada for 2006 2009 and find plausible price effects

heterogeneity in the rebound effect further evidence for germany rebound effects measure the behaviorally induced offset in the reduction of energy consumption following efficiency improvements using both panel estimation and quantile regression methods on household travel diary data collected in germany between 1997 and 2009 this study investigates the heterogeneity of the rebound effect in private transport with the average rebound effect being in the range of 57 to 62 our results are in line with a recent german study by frondel peters and vance 2008 but are substantially larger than those obtained from other studies furthermore our quantile regression results indicate that the magnitude of estimated fuel price elasticities from which rebound effects can be derived depends inversely on the household s driving intensity households with low vehicle mileage exhibit fuel price elasticities and hence rebound effects that are significantly larger than those for households with high vehicle mileage

the effect of population density road network density and congestion on household gasoline consumption in u s urban areas abstract this paper applies both semiparametric and parametric approaches to explore the effect of population density freeway road density and congestion on household gasoline consumption in u s urban areas while controlling for household demographic and economic characteristics regression results indicate that households living in those urban areas with higher freeway densities higher levels of congestion or lower population densities consume more gasoline

inflation risk premia in the term structure of interest rates this paper estimates the size and dynamics of inflation risk premia in the euro area based on a joint model of macroeconomic and term structure dynamics information from both nominal and index linked yields is used in the empirical analysis our results indicate that the inflation risk premium on euro area 10 year nominal yields was approximately equal to 20 basis points on average over the 1999 2007 period the inflation premium has also been subject to moderate but statistically significant fluctuations for the post 2003 period in which reliable index linked bond prices are available our results suggest that increases in the raw break even inflation rate above 2 the upper bound of the european central bank s definition for price stability have mostly reflected variations in the inflation risk premium while long term inflation expectations have remained well anchored

excise tax avoidance the case of state cigarette taxes we conduct an applied welfare economics analysis of cigarette tax avoidance we develop an extension of the standard formula for the optimal pigouvian corrective tax to incorporate the possibility that consumers avoid the tax by making purchases in nearby lower tax jurisdictions to provide a key parameter for our formula we estimate a structural endogenous switching regression model of border crossing and cigarette prices in illustrative calculations we find that for many states after taking into account tax avoidance the optimal tax is at least 20 smaller than the standard pigouvian tax that simply internalizes external costs our empirical estimate that tax avoidance strongly responds to the price differential is the main reason for this result we also use our results to examine the benefits of replacing avoidable state excise taxes with a harder to avoid federal excise tax on cigarettes

liquidity provision as a monetary policy tool the ecb s non standard measures after the financial crisis abstract we study the macroeconomic consequences of the money market tensions associated with the financial crisis in the euro area in a structural var we identify a liquidity shock rooted in the interbank market and use its impulse response functions to calibrate key parameters of a smets and wouters 2003 closed economy model augmented with a banking sector a la gertler and kiyotaki 2010 we highlight two main results first an identified liquidity shock causes a sizable and persistent fall in investment the shock can account for one third of the observed large fall in euro area aggregate investment in 2008 09 second the liquidity injected in the market by the ecb played an important role in attenuating the macroeconomic impact of the shock according to our counterfactual simulations based on the structural model in the absence of ecb liquidity injections interbank spreads would have been at least 200 basis points higher and their adverse impact on investment would have been more than twice as severe

principles of analysis of internal structures of aggregate demands demand estimation problem arises each time when there is need for forecasting of the sales volume optimal price settlement for profit maximization or for empirical studies of the market for demand because there is a relationship between price and quantity demanded it is important to understand the impact of pricing on sales by estimating the demand curve for the product the current paper introduces new method of analysis of demand internal structure and compound nature depended on the contribution of various groups of customers direct and inverse problem of estimation of elementary and aggregate demands parameters are defined aggregate demand structure is represented as a multidimensional dummy variables regression model the theoretical results are verified by means of corresponding numerical example

macroeconomic determinants of the world trade disputes this article is whether and how the world macroeconomic environments influence the world trade disputes we use two pronged approach first we try to answer the question whether and how global macroeconomic environments are attached to the count of the world trade disputes even if the traditional literature captures it at the national level global picture needs to be completed the second question we address is that given the set of trade dispute initiating countries whether and how differently high middle and low income countries respond to their macroeconomic environments in their decision makings of trade disputes initiations the universe in the second question is a selected set of the filing countries only not all countries on this planet one can capture the behaviours of the countries involved in the trade disputes under certain macroeconomic circumstances the period is from 1995 to 2008 covering all records of trade disputes since the birth of the world trade organization wto

resolving the public sector wage premium puzzle by indirect inference this paper investigates the public sector wage premium pswp in the uk using a microfounded economic model and indirect inference ii to answer the question whether there is public sector wage p

analysing gasoline demand elasticities a survey this paper is a survey of studies on gasoline demand although there are very many dxerent studies in this eld which sometimes appear to arrive at contradictory results we find that with proper stratification of studies by model and data type much of the contict turns to consensus in this survey we classtfy studies by data type and by ten d erent categories of model and with the exception of estimates on seasonal data which tend to be unstable and of certain inappropriate model formulations we find a fair degree of agreement concerning average short run and even long run income and price elasticities

the effectiveness of non standard monetary policy in addressing liquidity risk during the financial crisis the experiences of the federal reserve and the european central bank abstract a number of studies sought to measure the effects of non standard policy on bank funding markets this paper carries those estimates a step further by looking at the effects of bank funding market stress on the volume of bank lending by separately modeling loan supply and demand we determine how non standard central bank measures affected bank lending by reducing stress in bank funding markets our results suggest that non standard policy measures lowered bank funding volatility in the us and the euro area lower bank funding volatility in turn increased loan supply in both regions contributing to sustained lending activity

firm participation in steel industry lobbying firm participation in steel industry lobbying i introduction what are the causes of recent protectionist pressure exerted by u s import competing firms studies by coughlin terza and khalifah 1989 feigenbaum and willett 1985 and takacs 1981 examine the empirical relationship between macroeconomic conditions and the aggregate frequency of escape clause petitions file by u s manufacturing firms although the results are mixed as to whether international macroeconomic performance influences the demand for protection the studies indicate that domestic macroeconomic conditions significantly influence the frequency of escape clause petitions 1 as important as these are to understanding the underlying sources of protectionist pressure they do not address another equally important aspect of protectionist pressure the determinants of a single industry s demand for protection the fact that most protectionist pressure results from actions taken by individual industries underscores the importance of understanding the determinants of industry pressure indeed most trade legislation is designed to respond to the problems of individuals sectors of the economy in this paper we empirically examine the microeconomic determinants of the protectionist pressure exerted by the u s steel industry in antidumping and countervailing duty cases from 1982 after the trigger price mechanism was abolished to 1986 the steel industry is a particularly attractive subject for empirical analysis since no other industry pushed more aggressively for protection during the 1980s in recognizing that the degree of pressure exerted by an industry is the aggregate result of decisions made by individual firms to contribute to a collective action the microeconomic approach offers two advantages over previous studies 2 first to explain industry pressure we model the decision of the representative firm taking into account the incentives that a firm faces in a collective setting for example we recognize that the benefits of antidumping and countervailing duties have characteristics of a public good so that individual firms may have an incentive to free ride a proposition supported by the empirical results second we specify microeconomic variables that reflect the economic conditions facing the representative firm in the steel industry rather than macroeconomic variables which may not accurately measure the economic performance of specific industries or the international pressures they face in contrast to previous studies which found a significant relationship between macroeconomic performance and aggregate pressure we do not find that the steel industry s economic performance influences the degree of industry pressure our second objective is to examine the policy implications of free riding by testing the relationship between the effectiveness of a coalition of firms and the degree of protection actually received if an effective coalition of firms can influence the policy outcome then antidumping and countervailing duties are more likely to be provided to segments of the steel industry that can minimize the free rider problem since these segments are not necessarily those that absorb the greatest injury u s trade policy may not be meeting its goal of providing greater relief to firms most injured by dumped or subsidized imports the results confirm the proposition that segments of the steel industry which are injured by dumped or subsidized imports and which can organize an effective coalition do in fact receive greater protection than those segments that are merely injured ii the representative firm s decision to contribute to a less than fair value action to obtain protection from alleged less than fair value lfv imports imports that are either dumped by foreign firms or subsidized by foreign governments firms representing a domestic industry must file a complaint of foreign dumping or export subsidization with the international trade administration ita which then determines the magniture of dumping or subsidization

elasticities of transport fuels at times of economic crisis an empirical analysis for spain abstract this paper provides an updated calculation of the price and income responsiveness of spanish consumers of transport fuels with an explicit exploration of the effects of the recent economic crisis we examine separate gasoline and diesel demand models using a set of estimators on a panel of 16 spanish regions over the period 1999 2015 the paper confirms the persistence of low own price elasticities both for diesel and gasoline in the short and long runs it also shows that the crisis of 2008 2013 slightly increased the price elasticity of demand for transport fuels with a higher effect on diesel than on gasoline by contrary the crisis slightly reduced the income elasticity of transport fuel demand given the intensity and length of the economic recession in spain the results of this paper may be useful to anticipate the effects of domestic public policies that impact transport fuel prices as well as to advance some of the potential consequences of crises elsewhere

injury based protection with auditing under imperfect information 1 introduction this article focuses on the use of signals to limit distortionary protection when a domestic firm has private information about injury from foreign competition we assume that a domestic authority is mandated to use trade policy to maintain domestic production while minimizing costs to domestic consumers the presence of asymmetric information about domestic production costs means that the firm will have an incentive to overstate the harm it is suffering from imports we analyze how the authority can use an incentive device to punish a firm if a costly audit determines that the firm has overstated its injury an incentive compatible mechanism is derived consisting of a probability of audit a tariff and a penalty that will insure that the firm does not retain informational rents associated with the private information this basic problem of an authority assessing domestic injury arises in a number of critical trade policy contexts the two most prominent examples in the world trade organization wto system are safeguard mechanisms and unfair trade remedies i e antidumping and countervailing duty investigations in both types of administered protection cases a domestic trade authority must determine whether injury beyond some critical level has occurred before wto consistent protection can be imposed the information used to evaluate injury is provided by the affected domestic industry which has an obvious incentive to overstate the harm caused by foreign competition given that these types of contingent protection procedures are the single most important form of protection under the wto system potential misuse of private information is of great importance there are two strands of relevant literature the first considers strategic behavior in the specific context of administered protection the second concerns information asymmetries in more general trade policy outcomes the former strand has focused on strategic behavior between firms to exploit administered protection procedures prusa 1992 shows how antidumping cases in home and foreign firms can manipulate contingent protection to enforce collusion staiger and wolak 1991 study how antidumping acts as a cartel enforcing device in a noncooperative infinitely repeated game framework in a two period noncooperative game framework with uncertainty prusa 1994 shows that the home firm might feign first period injury in order to get the protection in the second period this may induce foreign firms to raise their export prices and to lower their own domestic market price as shown by fischer 1992 firms will try to act strategically to increase the endogenous probability of protection leidy and hoekman 1991 and leidy 1994 extend this concept more broadly to contingent protection and call it spurious injury the second strand of the literature focuses more broadly on incomplete information in trade policy collie and hviid 1994 investigate rent extraction from a foreign monopolist with incomplete information about domestic demand qiu 1994 and brainard and martimort 1997 investigate strategic trade policy with incomplete information about the domestic cournot firm s costs herander and kamp 1999 consider how incomplete information about the domestic cost structure can affect the outcomes of quantitative restrictions while collie and hviid 1994 herander and kamp 1999 and qiu 1994 use a signaling game framework brainard and martimort 1997 develop their approach within an incentive contracts context this article s approach is based on both incentives and signals we follow partially the approach of kohler and moore 1998 who analyze the same information asymmetries but use transfers to the domestic firm to elicit truth telling the present analysis takes perhaps a more realistic tack by considering how an authority can audit information provided by the firm to eliminate misrepresentation of injury

gasoline demand and car choice estimating gasoline demand using household information in recent years calls for carbon taxes as a policy tool to combat global warming have kept a discussion of the price and income elasticities of gasoline demand alive to date gasoline demand elasticity estimates are almost exclusively based on aggregate data that are subject to aggregation problems and make distributional concerns impossible to address by using household level data from the panel study of income dynamics psid and imputed fuel efficiency measures and gasoline prices i estimate household demand for gasoline and the corresponding price and income demand elasticities an attempt is made to include data on the car stock in the estimation since car portfolio and gasoline demand decisions are closely related empirical results from a selection corrected gasoline demand regression suggest low short run price and income elasticities and clear differences in gasoline demand across the population these results suggest that a gasoline tax is not likely to result in large decreases in gasoline consumption while potentially imposing hardship on identifiable segments of the population

a meta analysis of the price elasticity of gasoline demand a sur approach abstract automobile gasoline demand can be expressed as a multiplicative function of fuel efficiency mileage per car and car ownership this implies a linear relationship between the price elasticity of total fuel demand and the price elasticities of fuel efficiency mileage per car and car ownership in this meta analytical study we aim to investigate and explain the variation in empirical estimates of the price elasticity of gasoline demand a methodological novelty is that we use the linear relationship between the elasticities to develop a meta analytical estimation approach based on a seemingly unrelated regression sur model with cross equation restrictions this approach enables us to combine observations of different elasticities and thus increase our sample size furthermore it allows for a more detailed interpretation of our meta regression results the empirical results of the study demonstrate that the sur approach leads to more precise results i e lower standard errors than a standard meta analytical approach we find that with mean short run and long run price elasticities of 0 34 and 0 84 respectively the demand for gasoline is not very price sensitive both in the short and the long run the impact of a change in the gasoline price on demand is mainly driven by responses in fuel efficiency and mileage per car and to a slightly lesser degree by changes in car ownership furthermore we find that study characteristics relating to the geographic area studied the year of the study the type of data used the time horizon and the functional specification of the demand equation have a significant impact on the estimated value of the price elasticity of gasoline demand

a semiparametric model of household gasoline demand gasoline demand studies typically generate a single price and income elasticity for a country it is however possible that these elasticities may differ among various socio economic groups at the same time parametric gasoline demand models may not be flexible enough to capture the changes in price elasticities with different levels of income this paper models us gasoline demand using more flexible semiparametric techniques accommodating the possibility of differences in responses among households the econometric model employs a non parametric bivariate smoothing for price and income and a parametric representation of other explanatory variables possible heterogeneity in price and income elasticities is modelled through interacting price and income with demographic variables results show that price responses do vary with demographic variables such as income multiple vehicle holding presence of multiple wage earners or rural or urban residential locations households responses to a price change decrease with higher income multiple vehicle and multiple earner households also show higher sensitivity to a price change households located in urban areas reduce consumption more than those in rural areas in response to an increase in price comparison of the flexible semiparametric model with a parametric translog model however reveals no significant differences between results and the parametric models have the advantage of lower computational requirements and better interpretability

metaanalisis de las elasticidades ingreso y precio de la demanda de energia algunas implicaciones de politica publica para america latina the aim of this paper is to analyze the variation in empirical estimates of the income and price elasticities of energy demand the evidence presented through a meta analysis allows identification of the weighted average of the income and price elasticities shows that the estimates are very heterogeneous that there is publication bias and that factors such as region energy sector among others affect its volatility the evidence also indicates that income elasticity in latin america is greater than in the oecd countries and that the price elasticity of energy demand is lower in latin america than in the oecd countries therefore continued economic growth in latin america will be accompanied by a growth in energy demand moreover the establishment of a tax in latin america under the current elasticities is less effective and will be insufficient to control the increase in energy consumption

can public spending boost private consumption this paper analyses the effects on private consumption from an increase in productive and unproductive public spending a new keynesian model incorporating price and wage rigidities monetary policy and various fiscal rules is developed and estimated using bayesian techniques to capture the key cyclical characteristics of the us economy we find that price and wage rigidities along with a positive shock to the part of public spending that is productive are suficient to boost private consumption moreover we show that this initial positive reaction of private consumption is adequate to create a positive present value consumption multiplier for more than five years finally we show that our main results remain robust to changes in the monetary rule and the various methods of deficit financing

heterogeneous transmission mechanism monetary policy and financial fragility in the eurozone the eurozone economic activity and banking sector have shown substantial fragility over the last years with remarkable country heterogeneity using detailed data on lending conditions and standards we analyse along several key dimensions of heterogeneity how financial fragility has affected the transmission mechanism of the single eurozone monetary policy the analysis shows that the monetary transmission mechanism is time varying and influenced by the financial fragility of the sovereigns banks firms and households the impact of monetary policy on aggregate output is stronger during the financial crisis especially in countries facing increased sovereign financial distress this amplification mechanism moreover operates through the credit channel both the bank lending and the non financial borrower balance sheet channels our results suggest that the bank lending channel has been to a large extent neutralized by the ecb non standard monetary policy interventions but the policy framework until the end of 2011 was insufficient to overcome credit availability problems stemming from deteriorated firm net worth and risk conditions especially for small firms in countries under stress matteo ciccarelli angela maddaloni and jose luis peydro

priors from general equilibrium models for vars abstract this paper uses a simple new keynesian dynamic stochastic general equilibrium model as a prior for a vector autoregression shows that the resulting model is competitive with standard benchmarks in terms of forecasting and can be used for policy analysis jel classification c11 c32 c53 key words bayesian analysis dsge models forecasting vector autoregressions 1 introduction dynamic stochastic general equilibrium dsge models are popular nowadays in macroeconomics they are taught in virtually every economics ph d program and represent a predominant share of publications in the field yet when it comes to policy making these models are scarcely used at least from a quantitative point of view the main quantitative workhorse for policy making at the federal reserve system is frb us a macro econometric model built in the cowles foundation tradition a style of macroeconomics that is no longer taught in many ph d programs 1 in their decision process fed policy makers rely heavily on forecasting they want to know the expected path of inflation in the next few quarters and by how much a 50 basis point increase in the federal funds rate would affect that path frb us offers answers to these questions answers that many macroeconomists would regard with suspicion given both the lucas 1976 critique and the fact that in general the restrictions imposed by cowles foundation models are at odds with dynamic general equilibrium macroeconomics sims 1980 general equilibrium models on the other hand have a hard time providing alternative answers the fact that these models are perceived to do badly in terms of forecasting as they are scarcely parameterized is perhaps one of the reasons why they are not at the forefront of policy making while progress is being made in the development of dsge models that deliver acceptable forecasts e g smets and wouters 2003 this paper proposes an approach that combines a stylized general equilibrium model with a vector autoregression var to obtain a specification that both forecasts well and is usable for policy analysis specifically the approach involves using prior information coming from a dsge model in the estimation of a vector autoregression loosely speaking this prior can be thought of as the result of the following exercise i simulate time series data from the dsge model ii fit a var to these data in practice we replace the sample moments of the simulated data by population moments computed from the dsge model solution since the dsge model depends on unknown structural parameters we use a hierarchical prior in our analysis by placing a distribution on the dsge model parameters a tightness parameter controls the weight of the dsge model prior relative to the weight of the actual sample markov chain monte carlo methods are used to generate draws from the joint posterior distribution of the var and dsge model parameters the paper shows that the approach makes even a fairly stylized new keynesian dsge model competitive with standard benchmarks in terms of forecasting real output growth inflation and the nominal interest rate the three variables that are of most interest to policy makers 2 up to this point our procedure borrows from the work of dejong ingram and whiteman 1993 and ingram and whiteman 1994 who are the first to use priors from dsge models for vars ingram and whiteman showed that prior information from the bare bones stochastic growth model of king plosser and rebelo 1988 is helpful in forecasting real economic activity such as output consumption investment and hours worked in addition to documenting the forecasting performance of a trivariate var with a prior derived from a monetary dsge model this paper makes two contributions that significantly extend the earlier work first we show formally how posterior inference for the var parameters can be translated into posterior inference for dsge model parameters

credit and liquidity in interbank rates a quadratic approach a bank that lends on the unsecured market requires compensations for facing the default risk of the borrowing bank credit risk and the risk associated to its own future funding needs liquidity risk in this paper we propose a quadratic term structure model of the spreads between unsecured and risk free interbank rates our no arbitrage econometric framework allows us to decompose the term structure of spreads into credit and liquidity components and to identify risk premia associated with each of these two risks our results suggest that over the period 2012 2013 most of the reduction in interbank spreads comes from a decrease in liquidity related risk components

on the fit of new keynesian models this article provides new tools for the evaluation of dynamic stochastic general equilibrium dsge models and applies them to a large scale new keynesian model we approximate the dsge model by a vector autoregression and then systematically relax the implied cross equation restrictions and document how the model fit changes we also compare the dsge model s impulse responses to structural shocks with those obtained after relaxing its restrictions we find that the degree of misspecification in this large scale dsge model is no longer so large as to prevent its use in day to day policy analysis yet is not small enough to be ignored

how important are the international financial market imperfections for the foreign exchange rate dynamics a study of the sterling exchange rate the uk has been a net debtor over the past two decades and the sterling exchange rates are sensitive to any chaos that might occur in the financial market this paper examines the importance of the international financial imperfections in the sterling exchange rate dynamics we build a small open economy dsge model with the constrained international financial institutions that intermediate capital flows and derive tractable analytical solutions the constraint works to introduce a wedge between lending and borrowing rates which compensates financiers for their currency risk taking the model has been estimated by using a simulation based indirect inference approach which provides a natural framework for testing the hypothesis implied by the model we find that the model cannot be rejected by the uk data shocks to financial forces are the main driving forces behind the large and sudden depreciation of the sterling exchange rates in the aftermath of the collapse of lehman brothers and the brexit vote furthermore the optimal policy rules have been proposed

stabilisation policy rational expectations and price level versus inflation targeting a survey we survey literature comparing inflation targeting it and price level targeting pt as macroeconomic stabilisation policies our focus is on new keynesian models and areas that have seen significant developments since ambler s 2009 price level targeting and stabilisation policy a survey journal of economic surveys 23 5 974 997 survey optimal monetary policy the zero lower bound financial frictions and transition costs of adopting a pt regime ambler s conclusion that pt improves social welfare in new keynesian models is fairly robust but we note an interesting split in the literature pt consistently outperforms it in models where policymakers commit to simple taylor type rules but results in favour of pt when policymakers minimise loss functions are overturned with small deviations from the baseline model since the beneficial effects of pt appear to hang on the joint assumption that agents are rational and the economy new keynesian we discuss survey and experimental evidence on rational expectations and the applied macro literature on the empirical performance of new keynesian models overall the evidence is not clear cut but we note that new keynesian models can pass formal statistical tests against macro data and that models with rational expectations outperform those with behavioural expectations i e heuristics in direct statistical tests we therefore argue that policymakers should continue to pay attention to pt

the efficient estimation of econometric models with rational expectations the efficient estimation of econometric models with rational expectations by the substitution method usually entails the use of a non linear simultaneous equations estimator and hence is not very attractive computationally it is shown that for a wide class of problems efficient estimates can also be obtained with standard estimation methods if instead an errors in variables approach is used for many other problems although not providing fully efficient estimates because rationality is not imposed the errors in variables method will still have a strong appeal because otherwise it uses all of the structural information in the model unlike the substitution method when an incomplete information set is used it guarantees consistent estimates and it is easy to compute

distributional effects of alternative vehicle pollution control policies abstract previous work shows that policies that subsidize new vehicles and tax size miles or gasoline efficiently reduce pollution less is known about their distributional effects this paper examines distributional effects by estimating the joint demand for vehicles and miles using the consumer expenditure survey greater price responsiveness among low income households enhances progressivity of gas or miles taxes across lower incomes and mitigates regressivity across upper incomes taxes on engine size or subsidies to new vehicles are significantly more regressive than gas or miles taxes

have we underestimated the likelihood and severity of zero lower bound events prior to the financial crisis most economists probably did not view the zero lower bound zlb as a major problem for central banks using a range of structural and statistical models we find that previous research understated the zlb threat by ignoring uncertainty about model parameters and latent variables focusing too much on the great moderation experience and relying on structural models whose dynamics cannot generate sustained zlb episodes our analysis also suggests that the federal reserve s asset purchases while materially improving macroeconomic conditions did not prevent the zlb constraint from having first order adverse effects on real activity and inflation