the choice of an optimum currency peg for a small open country abstract this paper explores the choice of an optimal exchange rate system in a monetary context with rational expectations it is related to the problem of the choice of an exchange rate regime heller 1978 and some trade oriented solutions black 1976 branson and katseli papaefstratiou 1978 lipschitz 1979 lipschitz and sundararajan 1980 but differs from these in that broad monetary considerations are stressed it assumes that a country must choose to peg to one of two major currencies or to a basket of the two but cannot float independently for optimum currency reasons mundell 1961 mckinnon 1963 in particular the approach puts the accent on the notion of international competition between national monies tullock 1973 klein 1975 in a rational expectations framework with national money demands and supplies causing changes in relative prices connolly and taylor 1979 dornbusch 1978 the specific question asked is to which if any of two reserve currencies say the us dollar and the pound sterling should a small open country peg in order to best insure domestic monetary stability e g stable home prices or in general is a basket peg composed of the two currencies preferable to a single currency peg

maximum likelihood estimation of cointegration in exchange rate models for seven inflationary oecd countries abstract we apply the johansen technique to estimate cointegration in a monetary exchange rate model modified for real exchange rate fluctuations and applied to seven inflationary oecd countries we generally find one or more cointegrating vectors and the signs of their coefficients are broadly consistent with the modified monetary model the adjustment coefficients are also examined our statistical testing is based on bootstrapping and generates much more conservative rejection criteria than the use of asymptotic critical values even after a substantial degree of freedom correction power estimates are also presented finally we conclude that the monetary model unmodified for real exchange rate fluctuations would be inadequate

exchange rates inflation and money supply in turkey abstract a radical reform package has been implemented in turkey in the post 1980 era involving simultaneously short run adjustment and transition to an outward oriented regime a major area where the programme has failed to register a significant success has been in the sphere of inflation high and volatile rates of inflation continue to be a characteristic feature of the turkish economy this paper seeks to explain the persistence of this phenomenon with reference to the interactions between exchange rate price level and money supply the study employs monthly data and the period under consideration is january 1981 to december 1987 distinguished by managed exchange rate flexibility results of a four variable vector autoregressive model are presented and analyzed these in turn provide the basis for a small scale model in which high powered money price level exports and the exchange rate are simultaneously explained judged in terms of its overall fit the model appears to be quite successful in accounting for the persistence phenomenon in the post 1980 period

the speculative attack on the peso and the real exchange rate argentina 1979 1981 abstract this article applies a speculative attack model to argentina during its pre announced exchange rate system from january 1 1979 to june 30 1981 the model attempts to verify a rule whereby if domestic credit growth exceeds the rate of currency depreciation two things occur first the domestic price of non traded goods rises relative to the price of traded goods second foreign reserves decline until a point when a sudden speculative attack depletes remaining reserves causes a precipitous fall in the relative price of non tradables and forces the country onto a floating exchange rate regime in some important respects the model captures the argentinian experience yet in other respects if fails to do so

new hedonic technique for estimating attribute demand an application to the demand for automobile fuel efficiency a new hedonic procedure is applied to estimate the effects of gasoline price on the demand for automobile attributes and fuel efficiency direct application of a comparative statics analysis circumvents the problems of identification and severe multicollinearity affecting previous hedonic studies the results indicate that the effect of induced changes in automobile attributes in response to increases in the price of gasoline is to substantially increase fuel efficiency the estimated elasticities of fuel efficiency with respect to the price of gasoline imply that the long run own price elasticity of demand for gasoline is greater than unity 31 references

optimum currency pegs for latin america the postwar economic record of latin america from 1950 to 1979 is a mixed one inflation rates range from a low of 3 percent in honduras panama and venezuela to highs of 120 percent in chile 67 percent in argentina and 37 percent in brazil further these rates have been stable in the low inflation countries with a standard deviation s d of about 4 percent while in chile argentina and brazil the standard deviations in the inflation rates were 1 15 percent 95 percent and 20 percent respectively monetary growth rates exhibit the same pattern low and stable in some countries high and unstable in others real growth rates range from lows of 1 percent in uruguay to highs of 9 percent in brazil and mexico for the eighteen latin american countries as a whole the inflation rate since 1950 has averaged 21 percent with a standard deviation of 30 percent monetary growth rates 29 percent s d of 25 percent and real growth rates 5 percent s d of 2 percent one striking fact emerges from a cursory examination of this historical record countries that peg to the u s dollar experience low and stable inflation rates while those that do not exhibit high and unstable inflation rates the choice to peg to the dollar is simultaneously a decision not to inflate more than the united states it is a clear signal regarding the future supply of local money similarly a decision to inflate more than the united states is simultaneously a choice not to have a fixed

strategic aspects of exchange rate policy in a developing country abstract in an economy facing inflation and external deficit the non cooperative behavior of the players introduces an inflationary bias which is eliminated if the government acts as a stackelberg leader the terms of trade is altered only with excess supply in the non traded goods sector through fiscal contraction

a hedonic approach to estimating the supply of variety attributes of a subsistence crop the article extends the household hedonic model by estimating a supply function for variety attributes of a subsistence crop in a developing economy the model is applied to bananas in uganda making use of disaggregated data on variety specific farm gate banana bunch prices and attributes while accounting for the semisubsistence nature of banana producing households the article is motivated by the need to understand the attribute trade offs made by farmers at the farm gate in light of targeted variety improvement efforts and their impact on banana markets whether variety improvement will pay off at the market level requires a more detailed examination of the relative worth of banana attributes within the structure of consumer preferences and production technologies related to bananas in uganda the results confirm the importance of consumption and production attributes in selling behavior quality and bunch size are found to be complements at the farm gate banana bunches that capture a premium at the market will be those that provide bundles of desirable consumption and production attributes simultaneously by revealing important price attribute relationships the findings provide guidance for crop improvement efforts and diversification choices while taking into account implicit market signals for output attributes

the role of elasticity optimism in choosing an optimal currency basket with applications to israel abstract in a world in which exchange rates are floating each country must have some device for measuring the average exchange rate change whatever exchange rate policy it chooses the weight for each currency in computing such an average depends on the objective which exchange rate stabilization or change is expected to achieve if balance of trade stability is the desideratum the optimum weights optimum currency basket are shown to be a function of demand elasticities gnp trade shares etc we derive a loss function measuring the cost of using a wrong basket and compute the value of this function for our optimal israeli basket as a case study

doing good but not that well a dilemma for energy conserving homeowners abstract in this paper the issue of market capitalization of energy efficient buildings is addressed by considering single family housing in sweden and through analyzing as to what extent the market price for a house is influenced by its energy performance are swedish homeowners doing well by doing good we make use of information provided by the swedish energy performance certificates for single family homes matched with data on the corresponding transaction prices household characteristics and attributes of the neighborhood the resulting database covering about 77 000 individual observations is used to analyze the relationship between the price of a house and its energy performance by means of a hedonic model unlike most other studies the energy performance is decomposed into energy consumption and several other variables characterizing the energy system the main question addressed is if there is a price premium for energy efficient housing in sweden our results differ from earlier studies and indicate no price premium related to the energy consumption but substantial premiums for housing attributes that improve the energy efficiency a likely explanation is that prospective buyers of new homes base their expectations about future energy consumption on those attributes rather than on the energy consumption of the previous owner

testing the multilateral version of purchasing power parity an application to burma and jordan under the sdr peg 1981 5 this paper derives the multilateral version of the classical purchasing power parity ppp hypothesis as it applies to the determination of the price level in a small open economy under a basket peg arrangement this is tested under the assumption of constant market clearing as well as that of slow price adjustment in the non traded good sector the result based on burma and jordan the currencies of which were pegged to the special drawing right sdr during 1981 5 supports the validity of the hypothesis namely that the price level in such an economy is determined by the currency share weighted average of the price levels in those countries whose currencies are included in the chosen basket

residential consumption of gas and electricity in the u s the role of prices and income abstract we study the residential demand for electricity and gas working with nationwide household level data that cover recent years namely 1997 2007 our dataset is a mixed panel multi year cross sections of dwellings households in the 50 largest metropolitan areas in the united states as of 2008 we estimate static and dynamic models of electricity and gas demand we find strong household response to energy prices both in the short and long term from the static models we get estimates of the own price elasticity of electricity demand in the 0 860 to 0 667 range while the own price elasticity of gas demand is 0 693 to 0 566 these results are robust to a variety of checks contrary to earlier literature metcalf and hassett 1999 reiss and white 2005 we find no evidence of significantly different elasticities across households with electric and gas heat the price elasticity of electricity demand declines with income but the magnitude of this effect is small these results are in sharp contrast to much of the literature on residential energy consumption in the united states and with the figures used in current government agency practice our results suggest that there might be greater potential for policies which affect energy price than may have been previously appreciated

real exchange rate targeting and inflation in turkey an empirical analysis with policy credibility abstract in this paper we make an empirical investigation into the conflict among objectives under a real exchange rate policy i e between the trade balance and domestic inflation this occurs when the nominal exchange rate is managed to achieve a certain level of the real exchange rate in order to main external competitiveness our empirical analysis draws on the turkish case whereby the exchange rate has been the key policy instrument since the 1980s the results from the simulation experiments with a well defined macromodel where the devaluation expectations are explicitly considered indicate moderate inflationary consequences of a real exchange rate policy based on the relative purchasing power parity ppp rule in turkey moreover a real exchange rate appreciation is found to be contractionary these are common characteristics of the demand determined output case another major conclusion is that the exchange rate policy can provide an anchor for price stability only if it is credible

on the optimal currency peg for developing countries abstract this paper suggests that while crawling peg exchange rates whether active or passive can be a valuable device for maintaining external balance in an inflationary environment they may be inferior to a common currency area in a number of ways particularly with respect to monetary stability and monetary integration evidence is presented on the stability of the french franc zone in west africa and on the now defunct dollar zone in latin america when such zones exist without restrictive exchange controls they should be preserved and strengthened when they exist only de jure with strict exchange controls adopting john williamson s crawling peg solution is superior since it can accommodate the levying of the inflationary tax without causing external imbalance due to a failure to adjust the exchange rate

on becoming more flexible exchange rate regimes in latin america and the caribbean abstract this paper examines the shift from fixed to more flexible exchange rate regimes among countries in latin america and the caribbean in contrast to most traditional approaches the one followed here recognizes that fixed rates can be and often are adjusted but argues that policy makers incur a political cost from devaluation at the same time flexible exchange rates even managed ones may be very volatile with persistent misalignment a stylized model of regime choice is developed based on the perceived losses from exchange rate misalignment incurred under fixed versus more flexible regimes the model is estimated for a sample of 24 countries over the period 1978 1992 and empirical results are quite supportive misalignments proxied by current account deficits and moderate to high rates of inflation were associated with a move to more flexible rates during 1978 1986 misalignment indicators appear to have mattered less during 1987 1992 however there appears to have been a major reduction in the perceived difficulty of managing flexible rates during this period the paper then cautions against attributing differences in economic growth between groups of countries to their exchange regime the central point here is that the endogeneity of regime choice introduces selection biases into the samples of countries with fixed and with more flexible exchange regimes

combining revealed and stated preference methods to value environmental amenities at residential locations this paper combines an established revealed preference method discrete choice he donic analysis and a relatively new stated refer ence method choice based conjoint analysis in order to estimate more accurately the aesthetic benefits generated by the presence and quality of environmental amenities associated with residen tial locations it applies the combined approach to the housing market of fairfield connecticut which contains several environmental amenities and is experiencing an improvement in the quality of its coastal wetlands due to active restoration efforts jel q26

automobile prices and quality did the gasoline price increases change consumer tastes in the u s a hedonic model of automobile prices that takes gasoline costs into account is developed and used to examine whether gasoline price increases especially those related to the 1973 and 1979 oil shocks changed consumer evaluations of the relative qualities of used cars in the u s during 1970 1981 we test the null hypothesis that the characteristics coefficients remained constant over time it is rejected if gasoline costs are excluded from the model but not if they are included alternative approaches are developed to show that the gasoline price increases alone can explain much of the observed changes in the coefficients

inflation and the financing of government expenditure an introductory analysis with an application to turkey this article presents a simple framework to assess the consistency of appropriately defined fiscal deficits with other macroeconomic targets such as inflation it also considers the relation of fiscal deficits to output growth real exchange rate developments and management of internal and external debt finally it considers the implications of relying on interest bearing government debt to postpone the adjustment necessary to restore consistency with inflation targets it demonstrates how the intertemporal budget constraint of the government creates a tradeoff between current and future adjustment real interest rates and output growth rates are shown to determine the terms at which this tradeoff takes place the usefulness of this framework is demonstrated through an analysis of fiscal policy options in turkey in 1985

accelerated gaussian importance sampler with application to dynamic latent variable models summary we propose a new generic and highly efficient accelerated gaussian importance sampler agis for the numerical evaluation of very high dimensional density functions a specific case of interest to us is the evaluation of likelihood functions for a broad class of dynamic latent variable models the feasibility of our method is strikingly illustrated by means of an application to a first order dynamic stochastic volatility model for daily stock returns whose likelihood for an actual sample of size 2022 is evaluated with high numerical accuracy by means of 10 000 monte carlo replications the estimated model parsimoniously dominates arch and garch alternatives one of which includes twelve lags

a study on the implementation of renewable heating technologies in the domestic sector in ireland with implications on consumers decision making abstract the paper critically reviews and explores the impact of renewable energy heat policies to induce technological change in ireland it is in response to the challenge of better understanding the broad effects and attributes of renewable energy policy instruments in ireland and beyond using the irish residential sector as a case study and analysing data of more than 31 600 technology installations under the irish government s greener homes scheme ghs the paper assesses the extent to which policy makers may be informed of the willingness of consumers to adopt these technologies in their homes in doing so it attempts to provide valuable guidance for policy evaluation in relation to renewable energy in the residential sector it represents investment decisions and technological choice by the end user and reflects the growing concern among energy policy markets regarding the representation of user preferences the overall intent is to investigate the implications of analysing different variables and their contribution to making more balanced renewable energy policies it provides a critical analysis of the greener homes scheme the key instrument for implementing ireland s renewable heating policy from 2006 to 2010 established to induce technological change within the residential sector in assessing the impact of the scheme attention focuses on decision frameworks for technological choice and the treatment of market and behavioural failures it considers how consumers have responded to new technological policies aimed at deploying renewable heat technologies and the specific policies aimed at advancing certain technologies over others through a case study investigation the paper explores the relationship and dependencies that influence consumers decision making regarding the choice of renewable energy heating technologies in the domestic sector in ireland consumer preferences and their subsequent investment decisions motives and technological choice are reflected it concludes that while economic factors are important a much broader variety of determinants is required when analysing the process of adoption of technology

a survey of the literature on the optimal peg abstract it is widely agreed that floating is not an appropriate exchange rate policy for most developing countries but in a world of generalized floating the question of exchange rate policy is not resolved by deciding to peg rather than to float it is also necessary to decide to what to peg this is the question of the optimal peg on which a significant literature has emerged since 1976 the present paper provides a survey of that literature section 2 summarizes the principal papers section 3 compares the objectives and rules advocated by different authors section 4 evaluates the alternative approaches arguing that in general the peg should be chosen to stabilize the nominal trade weighted effective exchange rate section 5 considers whether this criterion points to the sdr as a satisfactory peg

is the income elasticity of the willingness to pay for pollution control constant how willingness to pay for environmental quality changes as incomes rise is a central question in several areas of environmental economics this paper explores both theoretically and empirically whether or not the willingness to pay wtp for pollution control varies with income our model indicates that the income elasticity of the marginal wtp for pollution reduction is only constant under very restrictive conditions our empirical analysis tests the null hypothesis that the elasticity of the wtp for pollution control with respect to income is constant employing a multi country contingent valuation study of eutrophication reduction in the baltic sea our findings reject this hypothesis and estimate an income elasticity of the wtp for eutrophication control of 0 1 0 2 for low income respondents and 0 6 0 7 for high income respondents thus our empirical results suggest that the elasticity is not constant but is always less than one this has implications for how benefits transfer exercises and for theoretical explanations of the environmental kuznets curve

riparian buffers and hedonic prices a quasi experimental analysis of residential property values in the neuse river basin riparian buffers the strips of vegetation along banks of rivers and streams have been proposed as a key instrument to protect water quality in the united states riparian buffers impose a restriction on the use of private property limiting harvest and development but buffers can also provide for aesthetic and recreational benefits that may accrue to property owners with data from the neuse river basin in north carolina this study attempts to provide empirical evidence on the effect of a mandatory buffer rule on the value of riparian properties spatial autoregressive hedonic models are estimated within a quasi experimental framework using the imposition of the buffer rule as the treatment and nonriparian properties as a control group results indicate that a riparian property generally commands a high premium we find no evidence however that the mandatory buffer rule has had a significant impact on riparian property values when compared with the control group copyright 2009 oxford university press

beach nourishment as a dynamic capital accumulation problem abstract beach nourishment is a common coastal management strategy used to combat erosion along sandy coastlines it involves building out a beach with sand dredged from another location this paper develops a positive model of beach nourishment and generates testable hypotheses about how the frequency of nourishment responds to property values project costs erosion rates and discounting by treating the decision to nourish as a dynamic capital accumulation problem the model produces new insights about coupled economic geomorphological systems in particular determining whether the frequency of nourishment increases in response to physical and economic forces depends on whether the decay rate of nourishment sand exceeds the discount rate

hedonic amenity valuation and functional form specification this paper uses gis data to develop variables representing the physical extent and visibility of surrounding land use cover features in a hedonic model of a rural suburban residential housing market three equations are estimated to determine if views

the welfare economics of land use planning abstract this paper presents an empirical methodology for the evaluation of the benefits and costs of land use planning the technique is applied in the context of the town and country planning system of the uk and examines the gross and net benefits of land use regulation and their distribution across income groups the results show that the welfare and distributional impacts can be large

estimation of dynamic bivariate mixture models this note compares a bayesian markov chain monte carlo approach implemented by watanabe with a maximum likelihood ml approach based on an efficient importance sampling procedure to estimate dynamic bivariate mixture models in these models stock price volatility and trading volume are jointly directed by the unobservable number of price relevant information arrivals which is specified as a serially correlated random variable it is shown that the efficient importance sampling technique is extremely accurate and that it produces results that differ significantly from those reported by watanabe

external debt inflation and the public sector toward fiscal policy for sustainable growth which tradeoffs are involved in formulating an external debt strategy should expenditure be cut to improve the current account or will this reduce future output growth thus undermining the benefits of any debt reduction are there alternatives that allow satisfactory output growth without jeopardizing creditworthiness how can the necessary surplus of savings over investment be brought about at levels of investment high enough to sustain output growth should the government contribute to the internal adjustment by reducing its deficit macroeconomic targets for inflation and growth and creditworthiness constraints on debt issue impose restrictions on the extent to which deficits can be financed can the government cover the deficit within these targets and constraints the absence of such consistency forebodes future policy change and so undermines the credibility of the adjustment program the author uses empirical work on turkey to illustrate the interactions between fiscal deficits and the macroeconomic variables upon which fiscal consistency hinges

the choice of an optimum exchange currency regime for a small economy an econometric analysis abstract this paper investigates empirically the issue of a fixed versus a flexible exchange currency regime for a small economy the west african monetary union the econometric analysis implements a mundellian trade off between economic development and monetary stability which measures the main cost and benefit of the various exchange currency regimes examined the empirical results indicate that the fixed trade weighted basket peg is optimal by the tower and willet criterion and that it meets some of kenen s criteria for an efficient exchange currency regime

doing well by doing good green office buildings this paper provides the first credible evidence on the economic value of the certification of green buildings in the commercial sector value derived from impersonal market transactions rather than engineering estimates we match publicly available information on the addresses of energy star and leed rated office buildings to a commercial data source detailing the characteristics of u s office buildings and their rental rates we analyze the micro data on 694 certified green buildings and on 7489 other office buildings located within a quarter mile of the certified buildings we find systematic evidence that rents for green offices are about two percent higher than rents for comparable buildings located nearby effective rents i e rents adjusted for the occupancy levels in office buildings are about six percent higher in green buildings than in comparable office buildings nearby at prevailing capitalization rates conversion of the average non green building to an equivalent green building would add more than 5 million in market value these results are robust to the statistical models employed

a critical evaluation of exchange rate policy in turkey abstract this paper reviews and critically evaluates the exchange rate policy followed in turkey in the post 1980 period during which a far reaching program of liberalization has been launched we conclude that the new exchange rate policy has been essential for turkey s regaining its creditworthiness furthermore it has positively contributed to growth of output and exports and to expansion of tradables production relative to nontradables persistence of inflation and weakness of private investment in tradables overshadow the successes recorded in other areas and cast doubt over the sustainability of turkey s outward orientation we argue that the root cause of these problems has been inconsistencies between overall economic policies rather than the exchange rate policy itself we compare the period of real appreciations since late 1998 with the earlier period of real depreciations and draw policy implications

the specification of hedonic indexes for urban housing most studies evaluating the effect on housing prices of regulatory programs for controlling urban growth use econometric methods hedonic price models without considering the research design aspects of the task this article examines the strengths and

the production of housing services and the derived demand for residential energy most studies of residential energy usage treat energy as a final consumer good this study explicitly considers the production of housing service flows from stocks of real estate and flows of operating inputs and considers the demand for residential energy as a factor input the empirical results based upon analysis of a sample of newly constructed dwellings and their occupants are used to evaluate the effects of energy price changes on the price of housing services and on the demand for housing and real estate thus indicating the extent of residential energy conservation in response to higher prices finally the results are used to analyze federal and state tax subsidies for residential energy conservation

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

energy performance ratings and house prices in wales an empirical study this paper investigates the effect of energy performance certificate epc ratings on residential prices in wales drawing on a sample of approximately 192 000 transactions the capitalisation of energy efficiency ratings into house prices is investigated using two approaches the first adopts a cross sectional framework to investigate the effect of epc rating on price the second approach applies a repeat sales methodology to investigate the impact of epc rating on house price appreciation statistically significant positive price premiums are estimated for dwellings in epc bands a b 12 8 and c 3 5 compared to houses in band d for dwellings in band e 3 6 and f 6 5 there are statistically significant discounts such effects may not be the result of energy performance alone in addition to energy cost differences the price effect may be due to additional benefits of energy efficient features an analysis of the private rental segment reveals that in contrast to the general market low epc rated dwellings were not traded at a significant discount this suggests different implicit prices of potential energy savings for landlords and owner occupiers

housing market capitalization of energy saving durable good investments energy conservation in the residential sector depends in large measure upon the willingness of builders and homeowners to invest in the durable goods which result in an energy efficient house since these durable goods generally become attached permanently to the dwelling unit and since ownership of the unit is likely to change within the expected lifetime of the installed equipment the incentive to invest in conservation measures depends upon the efficiency of the housing market in capitalizing the financial benefits of future fuel savings this paper examines housing market efficiency in this regard by first estimating an hedonic price index with the annual fuel bill included as an explicit attribute of the structure then from the estimated hedonic price of a one dollar reduction in annual fuel costs and assumed fuel price escalation rates and remaining lifetimes of the equipment implicit housing market discount rates are calculated the relatively low estimated discount rates indicate that the housing market performs efficiently in capitalizing future fuel savings

unobservables in consumer choice residential energy and the demand for comfort a model of consumption of residential energy in dwellings is developed distinguishing between attributes of housing that provide direct benefits to consumers and attributes that serve as inputs in the production of final goods for example the thermal comfort of dwellings empirical estimates are made of the mode based upon the annual housing survey and the results are used to calculate the effects of changes in energy prices on the consumption of housing residential energy and other goods the analysis suggests that the adjustment process within the housing market permits a great deal of substitution in response to energy price changes copyright 1989 by mit press

domestic airline alliances and consumer welfare this article investigates the consumer welfare consequences of the recent code share agreement between continental airlines and northwest airlines we develop a discrete choice model based on individual flight characteristics this structural model recognizes that consumers i may have heterogeneous preferences for flight attributes and ii may face different prices for the same flight the empirical methodology also deals with the measurement error problem stemming from the absence of consumer level data on prices the estimation results suggest that whereas the code share agreement did not impact consumers significantly on average it increased the average surplus of connecting passengers but decreased the average surplus of nonstop passengers interestingly the magnitude of our welfare results may be attributed in large part to changes in product characteristics other than prices

using contingent pricing analysis to value open space and its duration at residential locations to estimate benefits from open space adjacent to residences this paper blends contingent valuation and conjoint analysis within a housing market context the resulting framework contingent pricing analysis represents the stated preference counterpart to hedonic pricing analysis by asking individuals to state prices for hypothetical housing locations which include an environmental amenity then it asks individuals to state their willingness to pay for a better and longer lasting environmental amenity as an advantage over hedonic pricing analysis it directly isolates willingness to pay results indicate that potentially short lasting open space adds no value while preserved open space adds 5 066 or 5 to housing value

viewscapes and flood hazard coastal housing market response to amenities and risk coastal amenities and risk are so highly correlated that separate identification within the hedonic framework is potentially challenging in this study we construct a three dimensional measure of ocean view viewscape accounting for natural topography and built obstruction that varies independent of risk classification to disentangle these spatially integrated housing characteristics a spatial autoregressive hedonic model is developed to provide consistent estimates of the willingness to pay for coastal amenities and risk our findings suggest that incorporating the gis based view measures can be successful in isolating risk factors from spatial amenities

using contingent valuation to value environmental improvements alternative methods available to economists for valuing non market goods are outlined contingent valuation is then used to value a ban on straw burning

exchange rate based disinflation wage rigidity and capital inflows real exchange rate appreciation usually accompanies stabilization programs based on the exchange rate one thing that causes the real exchange rate to appreciate is the capital inflows that follow liberalization of the capital account and the financial market capital inflows cause the exchange rate to appreciate in part because of the resulting increase in expenditures this appreciation is exacerbated if there is some price rigidity and if control of the money supply is only partial all these conditions existed during chile s experiment with exchange rate based disinflation between 1978 and 1981 simulating what might have been the authors study how exchange rate based disinflation affects expenditures switching and reduction when wages are partially indexed in some segments of the labor market the paper also shows the extent to which a more flexible rule on wage indexing would have offset the adverse impact of lower capital flows on protected sector employment

model of household electricity conservation behavior in this paper the authors develop a model that explains household choice of electricity conservation modes the model is based on the premise that households will adopt those conservation modes that yield benefits greater than perceived costs they find that households differ in the conservation modes they adopt high income households are more likely to adopt expenditure intensive methods while low income households are more likely to adopt time intensive conservation methods the results suggest a possible explanation as to why high income families and residents of single detached homes are observed to save the largest absolute amount of energy a popular explanation is that these households consume the most energy and thus would be most likely to benefit the authors suggest an alternative explanation 37 references 4 tables

real exchange rate variability and the choice of exchange rate regime by developing countries abstract this paper draws together two distinct strands of the exchange rate literature it proposes that real exchange rate variability and the choice of exchange rate regime are jointly determined i test this claim by estimating a simultaneous limited dependent variable model with data from a cross section of developing countries during the recent floating period drawing on the relevant exchange rate literature the paper examines a number of exogenous determinants of exchange rate variability and the choice of exchange rate regime

the econometrics of nonlinear budget sets traditional empirical analysis of consumer demand has usually made the assumption of linear budget sets that is the consumer is assumed to purchase any desired quantity at a constant price subject to a budget constraint the major exception to this framework is the analysis of demand when some goods are rationed 2 in the rationed case the price is constant up to a quantity limit in contrast to the rationed case here i consider the situation where the price varies with the amount of the good purchased empirical situations with nonconstant prices come readily to mind and of course they have received much recent attention from theorists since mirrlees 44 paper on optimal nonlinear taxation the following examples are meant to give a partial listing of cases when nonlinear budget sets occur i electricity prices many electric utilities engage in declining block pricing that is the marginal price of successive kwh s of electricity decrease at a given number of points determined by total demand thus the budget set is piecewise linear houthakker 36 was the first to propose an approach to this problem taylor 51 analyzes the problem at length and hausman kinnucin and mcfadden 31 use an instrumental variables estimator to provide consistent estimates of the demand function

the short run residential demand for electricity the model of short run residential demand for electricity combines price schedule information obtained from the federal energy regulatory commission with household specific data from the 1972 73 consumer expenditure survey to determine the household s level of electricity consumption and relate it to the household s demographic profile and appliance stock the overall short run price elasticity estimate of 0 550 supports existing findings that short run residential electricity demand is price inelastic however the variation in elasticities across end use categories suggests that the overall response is made up of a complex set of responses that vary substantially and significantly across appliances this implies that it may be more efficient to tailor conservation policies to the stock configuration of the population 17 references 6 tables

integration of price depending demand reactions in an optimising energy emission model for the development of co2 mitigation strategies abstract optimising techno economic energy emission models are applied to develop and analyse cost effective co2 mitigation strategies on national and international levels one shortcoming of existing models is the missing integration of behavioural changes due to an increase in energy prices caused by the structural changes in the energy sector in order to reach the political targets for a co2 emission reduction therefore a partial equilibrium approach based on an iterative algorithm is created and applied in a co2 study for the federal republic of germany frg the results show that cost effective energy strategies avoiding co2 emissions have to consider the consumer price reactions

how should structural adjustment programs be designed abstract more than seven years have elapsed since the onset of the generalized debt crisis of 1982 yet the affected countries have still not managed to stabilize their economies these countries must now attempt structural adjustment in the midst of pervasive macroeconomic and political instability structural adjustment packages should be designed with this reality in mind this paper argues that structural adjustment programs should strive for sustainability rather than the economic liberalization that they presently stress illiberal policies which do not damage overall macro stability are preferable to liberal policies which are inherently unsustainable or engender macro instability liberalization programs that are not sustainable are likely to bring few benefits but have high costs in terms of private investment the paper discusses some of the chief implications of this opinion for the design of adjustment programs

taste or reputation what drives market prices in the wine industry estimation of a hedonic model for italian premium wines the aim of this article is to provide new evidence on the factors affecting wine prices on both methodological and factual grounds on the methodological ground this study is the first to apply a general box cox transformation within the context of hedonic models which exploit all the variables objective and sensorial characteristics reputation pointed out by previous literature as relevant in driving market prices on the factual ground the article fills the lack of empirical evidence on the issue for italy one of the leading wine producers by using a large data set on two premium quality wines barolo and barbaresco covering the 1995 1998 vintages our results support the evidence obtained using data from other countries showing that sensorial traits the reputation of wines and producers as well as objective variables are all important factors influencing the consumers willingness to pay more importantly by resorting to a nonnested statistical test vuong 1989 we compare two alternative

stabilization policies in developing countries what have we learned abstract the paper reviews the recent experience with stabilization programmes in latin america in the light of traditional and monetarist models of inflation and the exchange rate the traditional model links both inflation and payments problems to budget deficits the monetarist model too believes that inflation is caused by fiscal deficits but it takes a more optimistic view of stabilization full purchasing power parity and perfect capital mobility make stabilization just a question of the appropriate exchange rate policy and the proper rate of domestic credit creation the traditional view is substantially right as a long run model but it fails in the dynamics the monetarist model is as we know now fundamentally wrong as a short run description of the possibilities of inflation control there is need and room for a paradigm that places emphasis on the debt money mix in financing the budget on the stickiness of inflation rates and on the place of short run real exchange rate and real interest rate variations that these are key features of the transition phase is amply borne out by the devasting and unsuccessful experiences with monetarist stabilization in argentina chile and brazil

exchange rate indicators and optimal currency baskets a macroeconomic analysis with application to developing countries this paper presents a framework for deriving and estimating an optimally weighted exchange rate index within a general equilibrium model the main contribution is a dual one at a theoretical level the paper yields the unambiguous result that the kalman filter technique and turnovsky optimization control technique for deriving optimal weights are equivalent at an empirical level the paper illustrates how the theoretical optimal weights can be translated into empirical weights and estimated within a simple general equilibrium model optimally weighted exchange rate indices are constructed for a group of asian developing countries using a vector autoregressiori model in which the weights are designed to minimize the forecast variance of a target variable real output the properties of the weighted indices are examined and their potential usefulness for exchange rate policy both as economic indicators and as currency baskets is discussed

evaluating participation in african monetary unions a statistical analysis of the cfa zones abstract thirteen african nations are engaged in two monetary unions with france often referred to as the cfa zone despite the acknowledged benefits of zone membership a convertible currency pooled resources and greater monetary and fiscal discipline several observers have questioned whether particular aspects of the zone such as the lack of autonomy of the two central banks and the surrender of the exchange rate as a policy instrument have impeded its members growth this paper addresses that question by testing whether cfa zone countries had different gnp growth rates from selected comparator countries during 1960 1982 results show that cfa countries grew significantly faster than comparator sub saharan african countries but usually slower and often significantly so than the whole sample of developing countries when the comparison is made by subperiod before and after 1973 cfa countries performance vis a vis that of their comparators improved during the 1973 1982 period casting further doubt on the claim that the monetary union is not functioning adequately

optimal currency baskets for small developed economies optimal weights for a currency basket are derived under the assumption that the objective of the policymaker is to minimize fluctuation in the production of traded goods using the formulas derived in the analysis various optimal basket calculations are carried out for finland norway and sweden for all these countries the optimal basket weights for germany and united kingdom are found to be less than the trade share weights the opposite is true for united states moreover the actual weights in the basket of sweden are almost identical to those we have computed as optimal

sensitivity of price elasticity of demand to aggregation unobserved heterogeneity price trends and price endogeneity evidence from u s data abstract price elasticity estimates of residential electricity demand vary widely across the energy economics and policy literature in this paper we seek to explain these findings using three nationwide datasets from the u s the american housing survey forms eia 861 and the residential energy consumption survey we examine the role of the sample period level of aggregation use of panel data use of instrumental variables and inclusion of housing characteristics and capital stock our findings suggest that price elasticities have remained relatively constant over time upon splitting our panel datasets into annual cross sections we do observe a negative relationship between price elasticities and the average price whether prices are rising or falling appears to have little effect on our estimates we also find that aggregating our data can result in both higher and lower price elasticity estimates depending on the dataset used and that controlling for unit level fixed effects with panel data generally results in more inelastic demand functions addressing the endogeneity of price and or measurement error in price with instrumental variables has a small but noticeable effect on the price elasticities finally controlling for housing characteristics and capital stock produces a lower price elasticity

financial policy and speculative runs with a crawling peg argentina 1979 1981 abstract in this paper we present a model of a balance of payments crisis and examine the argentine experiment with a crawling peg between december 1978 and february 1981 the approach taken allows us to examine the evolution of a crisis when a collapse is not perfectly foreseen and yields plausible estimates of one month ahead probabilities of a collapse of the crawling peg the results suggest that the viability of an exchange rate regime depends on the consistency of exchange rate policy with domestic credit policy if the two are not consistent confidence in exchange rate policy is undermined

environmental amenities as a source of market power site specific environmental amenities can provide a source of product differentiating market power using estimates from hedonic price equations and residual demand models our analysis recovers firm specific estimates of price markups as measures of market power and uses these markups to estimate the implied marginal value for access to coastal beaches the application involves rental price and occupancy data for several thousand beach properties along a portion of the north carolina coastline during the 1987 to 1992 rental seasons

the spatial extent of water quality benefits in urban housing markets water quality regulation continues to be controversial as demonstrated by recent litigation between the u s environmental protection agency and the state of florida over nutrient standards while the costs of standards are usually known benefits may be diverse and difficult to identify this study investigates the effects of enhanced water quality on both waterfront and nonwaterfront property prices using hedonic models within an urban market findings indicate 1 the value of increased water quality depends upon the property s location and proximity to waterfront and the surface area of the water body and 2 aggregate benefits to nonwaterfront homes may dominate those realized by waterfront homeowners

a basket peg policy operational issues for developing countries abstract while many developing countries have recently adopted a basket peg there has been little discussion of the operational aspects of such an exchange rate policy this paper will discuss major operational issues that are unique to the implementation of a basket peg policy including the choice of a valuation method the provision of forward facilities the frequency of exchange rate quotations public disclosure of the basket composition the width of margins and the frequency of adjustment in the basket it is argued that in the resolution of many of these issues the trade off between rules and discretion becomes the determining principle

nonlinear budget constraints and consumer demand an application to public programs for residential housing abstract this study presents a methodology for exploiting the nonlinear hedonic nature of housing prices to estimate the compensated demands of households for particular housing attributes the methodology is employed to provide hicksian benefit measures of a particular housing subsidy program typical of those undertaken recently in developing countries

external shocks financial reforms and stabilization attempts in uruguay during 1974 1983 abstract this paper interprets and evaluates uruguay s reforms emphasizing the outcome of financial reforms and attempts to bring down inflation it is shown that domestic interest rate deregulation and the removal of prohibition towards holding dollar denominated assets led to a rise in the ratio of financial assets in gdp and to a shift towards dollar denominated assets causes of the persistent and large spread between peso and dollar interest rates adjusted for the preannounced rate of devaluation tablita are examined the discussion of the stabilization program during 1979 1982 and its aftermath in 1983 shows that setting the tablita at less than the difference between internal and external inflation led to severe imbalances because of remaining redundant protection and price stickness the real exchange rate appreciated sharply for a prolonged period and the trade balance widened until the stabilization episode ended with capital flight when doubts set in about the sustainability of the tablita

exchange rate management and stabilization policies in developing countries abstract we outline three channels via which a devaluation has a direct contractionaly impact on the aggregate supply side of the economy local currency costs of intermediate imports wage indexing in the presence of food imports and reduced volume of real credit to firms contractionary effects via the supply side are more damaging than krugman taylor effects via aggregate demand since a cut in aggregate supply leads to upward pressure on inflation while a cut in aggregate demand tends to abate inflation upward pressure on inflation may over time threaten the increase in competitiveness a nominal devaluation also intends to achieve we also discuss the implications of a substantial foreign debt we demonstrate that a successful devaluation raises the real in terms of domestic goods debt service burden causing a krugman taylor like contractionary effect on aggregate demand we then analyse the effects of a preannounced slowdown of the rate of depreciation our results of course do not imply that a devaluation should never be considered they do suggest however that a devaluation is likely to be an ineffective tool for demand management since it may cut aggregate supply as much or more in the short run

hedonic prices property values and measuring environmental benefits a survey of the issues this paper provides a review of the theoretical basis and the assumptions required in order to use hedonic price equations derived from property value data to obtain measures of the prices and the inverse demand functions for environmental amenities such as air quality it also includes a review and assessment of existing empirical applications of the technique to problems of air and water quality and urban noise

does energy efficiency matter to home buyers an investigation of epc ratings and transaction prices in england abstract this paper investigates whether energy performance ratings as measured by mandatory energy performance certificates epcs are reflected in the sale prices of residential properties this is the first large scale empirical study of this topic in england involving 333 095 dwellings sold at least twice in the period from 1995 to 2012 applying hedonic regression and an augmented repeat sales regression we find a positive relationship between the energy efficiency rating of a dwelling and the transaction price per square metre the price effects of superior energy performance tend to be higher for terraced dwellings and flats compared to detached and semi detached dwellings the evidence is less clear cut for rates of house price growth but remains supportive of a positive association overall the results of this study suggest that energy efficiency labels have a measurable and significant impact on house prices in england

an overview of turkey s experience with economic liberalization and structural adjustment abstract turkey s recovery from its debt crisis during the 1980s provides a good example for study the most successful aspect of turkish experience was the remarkable growth in exports liberal policies were implemented extensively to restructure the economy but in terms of their impact on the real economy the outcome has been disappointing while income distribution deteriorated internal resource mobilization failed to materialize successful growth in exports was only partly influenced by economic policies such as subsidies which fell outside the liberal category under present circumstances where self sustaining growth is increasingly urgent explicit policies targeting private investment have become necessary

the opportunity cost of coastal land use controls an empirical analysis for more than a decade demographers have been documenting the migration of the u s population from interior to coastal states a belief that this trend will persist has led to concern about increased housing and commercial development in coastal areas added development brings water pollution and reduces the natural cover of the coastline many states have responded to this trend with land use controls that limit new residential and commercial development on land adjacent to coastal water controls such as these have essentially three economic efficiency effects first on the positive side is the preservation of coastal open space and reduction of water pollutants benefits enjoyed by residents and visitors second and on the negative side is decreased residential and commercial proximity to the coast fewer households and businesses can locate near the

stabilization with exchange rate management stabilization programs in open economies typically consist of two stages in the first stage the rate of currency devaluation is reduced but the fiscal adjustment does not eliminate the fiscal deficit that causes growth of debt and loss of reserves making a future policy change necessary only later at a second stage is this followed by either an abandonment of exchange rate management or by a sufficiently large cut in the fiscal deficit we study how different second stage policy changes affect economic dynamics during the first stage these changes include tax increases budget cuts on traded and nontraded goods and increases in the growth rate of money

the price variability volume relationship on speculative markets this paper concerns the relationship between the variability of the daily price change and the daily volume of trading on the speculative markets our work extends the theory of speculative markets in two ways first we derive from economic theory the joint probability distribution of the price change and the trading volume over any interval of time within the trading day and second we determine how this joint distribution changes as more traders enter or exit from the market the model s parameters are estimated by fiml using daily data from the 90 day t bills futures market the results of the estimation can reconcile a conflict between the price variability volume relationship for this market and the relationship obtained by previous investigators for other speculative markets this paper concerns the relationship between the variability of the daily price change and the volume of trading on speculative markets previous empirical studies 2 3 6 12 14 16 of both futures and equity markets always find a positive association between price variability as measured by the squared price change ap2 and the trading volume 2 there are two explanations for the relationship clark s 2 explanation which is secondary to his effort to explain why the probability distribution of the daily price change is leptokurtic emphasizes randomness in the number of within day transactions in clark s model the daily price change is the sum of a random number of within day price changes the variance of the daily price change is thus a random variable with a mean proportional to the mean number of daily transactions clark argues that the trading volume is related positively to the number of within day transactions and so the trading volume is related positively to the variability of the price change the second explanation is due to epps and epps 6 their model examines the mechanics of within day trading the change in the market price on each within day transaction or market clearing is the average of the changes in all of the traders reservation prices epps and epps assume there is a positive relationship between the extent to which traders disagree when they revise their reservation prices and the absolute value of the change in the market price that is an increase in the extent to which traders disagree is associated with a larger absolute price change the price variability volume relationship arises then because the volume of trading is positively related to the extent to which traders disagree when they revise their reservation prices

macroeconomic issues for latin america abstract recent macroeconomic issues in latin america are reviewed with an emphasis on theory topics covered include multiple equilibria from hysteresis or increasing returns exchange rate management and the output and asset market effects of devaluation speculation interest rate management and financial reform government behavior income distribution and growth inertial inflation and heterodox policy shocks and disequilibrium theories