why voluntary export restraints are voluntary the paper presents an analysis of the effect upon an oligopolistic equilibrium of introducing a voluntary export restraint ver upon an importing firm a ver set at the free trade level of imports is shown to raise the profits of all firms within the industry the result follows as the imposition of a ver upon a free trade nash price competition forces the domestic firm to become an industry price leader the ver raises industry prices by facilitating collusion and lowers consumer welfare pourquoi les restrictions volontaires d 1 exportation sont volontaires ce memoire presente une analyse des effets de l introduction de restrictions volontaires a l exportation rve sur une entreprise qui importe dans un monde en equilibre oligopolistique on montre que l introduction de rve approximant le niveau des importations en regime de libre echange devrait augmenter les profits de toutes les entreprises dans l industrie cela decoule du fait que l imposition de rve sur un univers de concurrence par les prix a la nash en regime de libre echange force l entreprise domestique a devenir le leader en prix l introduction de rve augmente le niveau des prix de l industrie en facilitant la collusion et de ce fait reduit le niveau de bien etre des consomrnateurs

structural break nonlinearity and asymmetry a re examination of ppp proposition in this study we examine the validity of the ppp proposition for 28 european countries for this purpose we propose a new unit root test procedure that allows for both gradual structural breaks a

real exchange rates and relative prices an empirical investigation abstract this paper uncovers a striking empirical regularity the consumer price of a good relative to a different good within a country tends to be much less variable than the price of that good relative to a similar good in another country this fact seems to hold for all goods except very simple homogeneous products models of real exchange rates are likely to have predictions regarding this relation so this fact may provide a useful gauge for discriminating among models

price discrimination by u s and german exporters the insensitivity of the u s trade balance to the sharp depreciation of the dollar in the past three years has revived interest in the relationship between exchange rates and the trade balance a central issue in most analyses of the relation between the current account and the exchange rate concerns the price adjustment process the simple integrated competitive market model predicts that local currency prices should change in proportion to the nominal exchange rate for a country too small to influence world prices the relationship between local currency import prices and exchange rates has been referred to as the pass through relationship in the empirical literature in international economics if the proportional relationship between import prices and exchange rates holds pass through is said to be complete accounts of recent u s experience cite the failure of dollar prices of imported goods to rise in proportion to exchange rates i e incomplete pass through as an important factor in explaining the persistence of the trade deficit unfortunately observations on pass through alone provide limited insight into the behavior of markets since incomplete pass through is consistent with at least two fundamentally different paradigms one is the standard competitive model of trade in which the law of one price holds but exchange rate fluctuations are associated with large changes in import demand due to other factors for example if dollar appreciation is correlated with increases in world demand and industry marginal cost is increasing then pass through will be less than complete the other is an imperfectly competitive model in which exporters are capable of price discriminating across destination markets a phenomenon paul krugman 1987 has labeled pricing to market in this model incomplete pass through is typically associated with fluctuations in the markup of price over marginal cost on exports 2 these fluctuations in markups are believed to be countryspecific they do not reflect the behavior of prices to other export destinations both models are plausible explanations of recent u s experience unfortunately it is impossible to distinguish between these competing models using only information on import prices and exchange rates for a single country in order to distinguish between the competing models an empirical analysis of goods prices and exchange rates must be capable of measuring either marginal cost or the markup over marginal cost either of these tasks poses formidable empirical problems much of the empirical literature in industrial organization has been concerned with precisely these issues since markups are an important measure of the competitiveness of industries

purchasing power parity over two centuries trends and nonlinearity in two recent contributions lothian and taylor and cuddington and liang produced empirical evidence that annual data for the dollar sterling real exchange rate spanning two centuries exhibited a non linear deterministic trend this trend could be proxying harrod balassa samuelson effects lothian and taylor showed that a linear stationary autoregressive mode which embodied a cubic trend implied much faster mean reversion of the real exchange rate to shocks than a model that excluded the trend this article shows that both non linearity and a deterministic trend can be allowed for in a theoretically appealing manner and that the fitted models provide a parsimonious explanation of both the dollar sterling and franc sterling real exchange rates over the two centuries of data generalized impulse response function analysis of the models demonstrates that the speed of adjustment to shocks can be even faster when trends are considered

potential pitfalls in determining multiple structural changes with an application to purchasing power parity we investigate the empirical performance of the bai and perron multiple structural change tests and show that the use of their critical values may cause severe size distortions in persistent series to correct these size distortions while maintaining a good power we implement the bai structural change test and extend it in two directions developing a new procedure to choose the number of breaks and a restricted version that specifically models breaks that imply mean or trend reversion using our new methodologies we reconcile the results of unit root tests with those of tests for structural change when testing for long run purchasing power parity

purchasing power parity over two centuries abstract this paper re examines the purchasing power parity hypothesis for the dollar sterling exchange rate using the two centuries of data from lothian and taylor lt 1996 real exchange rate behavior the recent float from the perspective of the past two centuries journal of political economy 104 3 488 509 unlike lt we conclude that the dollar sterling rer is nonstationary implying a rejection of the long run ppp hypothesis the differences in our conclusions are explained by 1 sensitivity of adf unit root tests to the choice of lag length and or 2 the presence of significant time trends in the adf or phillips perron unit root test equations

quota induced cycles we present a new framework to compare the dynamic effect of tariffs and quotas in the presence of oligopoly suppose that the domestic and the foreign firm play a quantity setting game over time in a perfectly stationary economy a markov perfect equilibrium has the foreign firm exporting at the constant rate under a tariff in contrast under the quota the rate of exports changes monotonically over the course of each year causing seasonal fluctuations in domestic production quota induced cycles can make dynamic market segmentation possible and raise profits for both the firms above what they earn under the equal import tariff

real exchange rate behavior the recent float from the perspective of the past two centuries using annual data spanning two centuries for dollar sterling and franc sterling real exchange rates we find strong evidence of mean reverting real exchange rate behavior using simple stationary autoregressive models estimated on prefloat data we easily outperform nonstationary real exchange rate models in dynamic forecasting exercises over the recent float such stationary univariate equations explain 60 80 percent of the in sample variation in real exchange rates although the degree of short run persistence may be high the econometric estimates imply a half life of shocks to the real exchange rate of about 6 years for dollar sterling and a little under 3 years for franc sterling

explaining time variation in geographic price dispersion the pattern of price dispersion significantly varies over time and across locations using a detailed dataset with product level retail prices we examine the role of time varying factors in shapin

pass through of exchange rates and purchasing power parity abstract in this paper we develop and test two hypotheses about purchasing power parity ppp the first is that changes in the price of traded goods relative to domestic substitutes will affect the ppp relation due to the partial pass through of exchange rates the second is that ppp should hold on forward rather than spot exchange rates due to hedging by firms which implies that the interest rate differential should enter the ppp relation for spot rates using quarterly data for several countries we find support for both these hypotheses though the magnitude of the interest rate effect is very small

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

exchange rates and traded goods prices abstract this paper presents a partial equilibrium model of the determination of domestic and export prices by a monopolistic competitive firm the model stresses the role of exchange rate uncertainty and expectations the most important result of the analysis is that the stochastic properties of deviations from the law of one price are crucially affected by the currency of denomination of export prices using data on domestic and dollar export prices of japanese goods i find that deviations from the law of one price are due to exchange rate surprises but also to price staggering and ex ante price discrimination

purchasing power parity over two centuries strengthening the case for real exchange rate stability a reply to cuddington and liang cuddington and liang 2000 purchasing power parity over two centuries journal of international money and finance 19 751 755 examine the long span of sterling dollar real exchange rate data of lothian and taylor 1996 real exchange rate behavior the recent float from the perspective of the past two centuries journal of political economy 104 488 509 and claim to reject long run purchasing power parity by fitting time trends or by considering very high order autoregresssive representations this reply demonstrates however that the central claims of lothian and taylor are in fact strengthened by the implications of cuddington and liang s analysis in that while the economic importance of introducing trend terms is slight this leads to a faster estimated speed of mean reversion c 2000 elsevier science ltd all rights reserved jel classification f31 f41 c22

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

on the equivalence of tariffs and quotas under duopoly abstract the purpose of this paper is to use a conjectural variation approach to examine the equivalence of tariffs and quotas set so as to result in the same equilibrium quantity of imports we have demonstrated that whether tariffs and quotas are equivalent depends crucially upon the particular value of the conjectural variations specifically in the case of equal import tariffs and quotas the equivalence holds only in the cournot case otherwise the domestic price is lower or higher under quotas depending upon whether competition is less or more competitive than cournot

quotas as options quota licenses are options their price is given by expected discounted future value which hangs on the possibility that the quota may bind a number of auxiliary administrative details of quota systems are also analyzed in this context the presence of use it or lose it requirements and of restrictions on rate of usage of the annual quota can be seen as attempts to offset the implied protection on below limit imports they are shown to be inefficient recognition of the option valuation of quota licenses is rich with suggestions for future work on evaluation of quotas and comparisons with alternative schemes for protection

does electoral competition affect politicians trade policy preferences evidence from japan this study examines the effect of electoral competition on politicians trade policy preferences using candidate observations from the house of representatives in japan s 2012 general election the study clarifies the effects of constituency size and the electoral strength of constituencies on candidates political stances the empirical results provide evidence that politicians preferences for trade policy are sensitive to electoral pressure but their reactions differ depending on the characteristics of each constituency the results reveal that for a broad constituency with a large concentration of agricultural workers election candidates are more likely to support protectionism than their counterparts running in a narrow constituency for city district election candidates electoral strength measured by the vote margin significantly affects their trade policy preferences candidates in close elections are more likely to be protectionist than candidates elected by a substantial majority suggesting that electoral pressures deter politicians from supporting trade liberalization

unilateral production restrictions in a dynamic duopoly abstract this paper examines a dynamic game of exploitation of a productive asset by a duopoly a closed loop nash equilibrium of the game is constructed and used to analyze the effects of a unilateral production restriction surprisingly such unilateral action may result in a decrease of the long run asset s stock we also exhibit production restrictions that can result simultaneously in an increase of the asset s stock and the long run profits of the firm that is being imposed the production restriction moreover a unilateral decrease of the production of one firm can induce its rival to also decrease its production

testing long run purchasing power parity under exchange rate targeting abstract the present paper exploits the idea that empirical estimates of the long run ppp relationship may compound two distinct influences coming from the behavior of market participants and policy makers when the latter are targeting the exchange rate this tends to bias tests of long run ppp against its acceptance the validity of the theoretical arguments is assessed by drawing on the experience of two european union countries greece and france for the post bretton woods period estimation biases due to the omission of policy effects are found to be significant only in the case of greece for france our test results provide evidence bearing on the effectiveness of the competitive disinflation strategy pursued by the french authorities