real interest rates and endogenous growth in a monetary economy abstract in endogenous growth models where the engine of growth is human capital acquired via formal education inflation taxes may raise or lower real interest rates depending upon whether or not physical and or human capital are liquidity constrained cases are examined

cash in advance or delayed deposits implications for inflation and growth abstract the paper presents a monetary growth model in which the assets market precedes the goods market in each period instead of following it as in standard cash in advance models as a result of this change in timing money is held by sellers and not only by buyers and it is shown that as a result inflation reduces the rate of capital accumulation

production based asset pricing in monetary economies with transactions costs a general equilibrium asset pricing model for a monetary economy with capital accumulation fin and endogenous financial structure is constructed in which there is a meaningful between monetary policy inflation taxes investment decisions and private financial arrangements a differential stochastic liquidity premium applies in equilibrium to consumption and investment purchases a production version of the capital asset pricing model is constructed the presence of endogenous financial arrangements is shown to play a key role in explaining potential distortions in the equilibrium risk premia associated with technological uncertainty numerical work indicates 1 that return anomalies are potentially large and 2 that the model has implications for empirical implementations for the partial equilibrium production based asset pricing models such as cochrane 1991 1996 and braun 1993 copyright 1996 by the london school of economics and political science

specialization transactions technologies and money growth this paper develops a differentiated product model with endogenous specialization in which either money or a costly alternative transactions technology can be used for market purchases we discuss the real effects of monetary growth in this model which differ from those in standard cash in advance models and the implied interest sensitivity of money demand in general equilibrium

an equilibrium theory of nominal and real exchange rate comovement abstract this study develops a quantitative equilibrium theory to offer an explanation of one of the most puzzling aspects of empirical exchange rate behavior the high degree of nominal and real exchange rate comovement technology shocks coupled with the accomodative response of monetary policy to output fluctuations are primarily responsible for the covariation between nominal and real exchange rates shocks to the marginal efficiency of investment also play an important role

growth and the effects of inflation abstract in this paper we study the relationship between the rate of increase of the money supply and the rate of growth of output in an economy we show that in some models of endogenous growth inflation has direct effects on the growth rate of the economy despite this the estimated welfare cost of inflation from calibrated examples is similar to that found in exogenous growth models

reconsidering the estimation of the economic impact of cultural tourism the assessment of the economic benefits of cultural events is necessary to inform decision making in many cases cultural events are designed to attract tourists and the injection of tourist spending to a local economy is one of the drivers for hosting events from an economic perspective the impact of staging an event can be measured using either an expenditure multiplier or a cost benefit analysis cba approach one of the difficulties with cba is the data required to estimate the relevant benefit function this paper addresses this limitation by illustrating how benefit functions can be parameterised with minimal data thereby enhancing the possibility of using cba our approach is illustrated with a case study of an exhibition held by a regional community in australia the case study compares economic impact assessments and finds using benefit estimates as we propose provides a useful method of estimating benefits with limited data

another look at sticky prices and output persistence abstract price rigidity is the key mechanism for propagating business cycles in traditional keynesian theory yet the new keynesian literature has failed to show that sticky prices by themselves can effectively propagate business cycles we show that price rigidity in fact can by itself give rise to a strong propagation mechanism in standard models provided that investment is also subject to a cash in advance constraint reasonable price stickiness can generate highly persistent hump shaped movements in output under either monetary or non monetary shocks hence whether or not price rigidity is responsible for output persistence is not a theoretical question but an empirical one

is subsidising tourism firms an effective use of public funds abstract this study assesses the impact of state aid on firms in the tourism sector by implementing an accurate micro econometric evaluation of their causal effect analyses consider subsidies allocated by the main regional policy in italy the law 488 1992 during the period 1999 2003 a matching difference in difference mdid estimator is applied considering the presence of selection on observable and non observable factors effects on the tourism sector are compared with those in the manufacturing industry the impacts with respect to different types of tourism destinations where tourism firms operate are also evaluated the results show higher output and employment growth but lower labour productivity dynamics in subsidised firms relative to non subsidised ones the impacts are diverse across types of tourism destinations

investment matching and persistence in a modified cash in advance economy abstract we simulate and estimate a new keynesian search and matching model with sticky wages in which capital has to be financed with cash at least partially our objective is to assess the ability of this framework to account for the persistence of output and inflation observed in the data we find that our setup generates enough output and inflation persistence with standard stickiness parameters the key factor driving these results is the inclusion of investment in the cia constraint rather than any other nominal or real rigidity the model reproduces labor market dynamics after a positive increase in productivity hours fall nominal wages hardly react and real wages go up with some delay regarding money supply shocks we investigate the conditions under which our model specification generates the liquidity effect a fact which is absent in most sticky price models

collateral constraints in a monetary economy this paper reviews the role of collateral constraints in transforming small monetary shocks into large persistent output fluctuations we do this by introducing money in the heterogeneous agent real economy of kiyotaki and moore 1997 money enters in a cash in advance constraint and money supply is managed via open market operations we find that a monetary shock generates persistent movements in aggregate output the amplitude of which depends upon whether or not debt contracts are indexed if only nominal contracts are traded money shocks can trigger large output fluctuations in this case a money expansion triggers a boom whereas money contractions generate recessions in contrast if contracts are indexed then amplification is not only smaller it can also generate the reverse results when the possibility of default and renegotiation is considered the model can generate asymmetric business cycles with recessions milder than booms finally monetary shocks generate a highly persistent dampening cycle rather than a smoothly declining deviation jel e32 e43 e44 e52

international transmission of anticipated inflation under alternative exchange rate regimes this paper studies the international transmission of anticipated inflation a two country two good two currency cash in advance model is used to examine analytically and numerically the consequences of changes in a country s inflation rate domestic monetary policy influences real activity at home through an inflation tax channel these real effects are transmitted to the foreign country via fluctuations in the real exchange rate under a flexible nominal exchange rate inflation is a beggar thy neighbor policy under a fixed nominal exchange rate each country suffers a welfare loss when one country inflates the quantitative results are fairly insensitive to variations in the cash credit mix used to finance investment expenditures 2001 elsevier science ltd all rights reserved

capital tax competition under a common currency abstract we re examine the view that capital taxes are too low when capital is mobile across tax jurisdictions we do so by emphasising a previously neglected implication of decentralised capital tax setting when jurisdictions share a common currency namely capital taxes give rise to a vertical externality by affecting the revenues of the over arching central bank from issuing the common currency this externality may lead ceteris paribus to too high regional capital taxes and may more than offset the usual effects of tax competition in this case and contrary to conventional wisdom decentralised capital taxes will be too high

existence and uniqueness of equilibrium in distorted dynamic economies with capital and labor abstract in this paper we provide a set of sufficient conditions under which recursive competitive equilibrium exists and is unique for a large class of distorted dynamic equilibrium models with capital and elastic labor supply we develop a lattice based approach to the problem the class of economies for which we are able to obtain our existence and uniqueness result is considerably larger than those considered in previous work we conclude by applying the new results to some important examples of monetary economies often used in applied work journal of economic literature classification numbers c62 d51 d90 e10

monetary policy in a cash in advance economy employment capital accumulation and the term structure of interest rates in this paper we study the effects of monetary policies on employment capital accumulation consumption and the term structure of interest rates in a cash in advance economy where money is required for consumption expenditures monetary policy involves targeting the inflation rate the detailed dynamics of the model are fully worked out as no numerical analysis is involved we are able to identify very clearly the different channels through which monetary policy will impinge on the important macroeconomic variables the model is also used to discuss the great canadian

on the optimality of interest rate smoothing abstract this paper studies some continuous time cash in advance models in which interest rate smoothing is optimal we consider both deterministic and stochastic models in the stochastic case we obtain two results of independent interest i we study what is to our knowledge the only version of the neoclassical model under uncertainty that can be solved in closed form in continuous time and ii we show how to characterize the competitive equilibrium of a stochastic continuous time model that cannot be computed by solving a planning problem we also discuss the scope for monetary policy to improve welfare in an economy with a suboptimal real competitive equilibrium focusing on the particular example of an economy with externalities

welfare costs of inflation in a dynamic economy with search unemployment abstract we present a monetary general equilibrium model with labor market frictions in the form of search unemployment which is calibrated for the us economy interestingly both employment and output may even increase with the rate of inflation depending on the elasticity of labor supply considering the transition dynamics following a change in the monetary policy the optimal quarterly inflation rate is found to amount to approximately 0 6 in the benchmark case a reduction of the inflation rate from its current level to its optimal value only results in small welfare gains equal to 0 08 of total consumption

asset pricing and the propagation of macroeconomic shocks this paper considers the implications of habit formation and financial frictions for the propagation of macroeconomic shocks in a model that is capable of matching asset pricing moments a short lived shock that destroys a small fraction of the economy s stock of pledgeable collateral generates a persistent recession a stock market crash and a flight to safety effect this novel mechanism creates a tight link between the asset pricing implications of macroeconomic models and their ability to propagate and amplify the effects of macroeconomic shocks

equilibria under monetary and fiscal policy interactions in a portfolio choice model abstract this paper studies how the presence of income taxes changes the properties of general equilibrium models with monetary and fiscal policy interactions it is found that from a global perspective the only policy regime that leads to a unique equilibrium is one where fiscal policy is active i e the fiscal theory of the price level regime in sims 1994 from a local perspective there are three regimes in particular and relative to the previous literature following leeper 1991 a new third regime exists where a passive fiscal rule combined with a passive monetary rule can still deliver determinacy where the same area of the parameter space would lead to multiple solutions if taxes were lump sum to obtain the size of the new regime the paper characterizes analytically the extent to which tax cuts are self financing and how the distortionary tax laffer curve looks near the steady state in the new regime monetary and fiscal backstops are brought into play so as to rule out off equilibrium dynamics and inflation can temporarily increase in order to increase seigniorage revenues with this flexibility the monetary policy is consistent with the real debt remaining bounded and the arithmetic that follows is monetarist and unpleasant in the sense of sargent and wallace 1981

a note on testing an aggressive investment strategy using value line ranks one of the better known investment advisory services is the value line investment survey an unresolved debate has been in progress in the literature for a decade as to whether the performance of the value line investment service is inconsistent with the efficient market hypothesis for example black 2 states that the vl system can produce extra returns even when transaction costs are considered but he does not report his exact test procedure or any quantitative results of his study on the other hand kaplan and weil 10 11 do not believe that vl can generate abnormal returns we shall show in the following sections that the vl system represents a borderline case when transaction costs are neglected abnormal returns are obtained when realistic transaction costs are used active trading according to vl recommendations does not yield abnormal returns for a buy and hold policy however vl recommendations do yield abnormal returns even when transaction costs are considered

the complete complementarity of consumption and real balances and the strong superneutrality of money abstract in the representative agent model with money in the utility function if consumption and real balances are perfect complements steady state capital intensity and real balance holdings are both invariant to monetary growth regardless of the nature of time preferences

dynamic behavior of capital accumulation in a cash in advance model abstract this paper analyzes the dynamic behavior of capital accumulation in stockman s cash in advance model if the cash in advance constraint applies only to consumption then money is superneutral along the transition path as well as in the long run alternatively if the cash in advance constraint applies to gross investment as well as consumption then a permanent increase in the rate of monetary growth reduces the steady state capital stock the effect on the speed of adjustment depends on the sign of a certain simple function of the parameters of preferences and technology

temporary stabilization policy abstract the effects of a temporary slowdown in the rate of expansion of money supply are studied under ramsey lucas and money superneutrality assumptions it is shown that such a policy expands consumption and leads to capital decumulation and current account deficits in the short run the model is a benchmark case in which temporary policy is always detrimental to welfare connection with the policy credibility issue is briefly discussed

inflation employment and welfare in the presence of transactions costs for some time now two issues of primary importance in macroeconomics and monetary theory have been the relation between inflation and unemployment the phillips curve and the optimum rate of inflation the optimum quantity of money in both of these areas the work of friedman and phelps has been influential friedman 1968 and phelps 1970 emphasized the role of inflationary expectations in generating a short run phillips curve like tradeoff but argued that in the long run the phillips curve is vertical that is friedman and phelps claimed that in the long run defined as the time period within which expectations fully adjust to actual circumstances inflation and employment should be uncorrelated more recently friedman 1977 has argued that since the rate of inflation and its variability tend to be positively related inflation and employment may be negatively related in the long run this is the positively sloped phillips curve phenomenon in recent years the link between inflation and employment has continued to receive considerable attention the vast rational expectations literature on the role of monetary policy and the equilibrium approach to the business cycle are in large part an outgrowth of the earlier phillips curve controversy the notion that there is an inverse long run relation between inflation and employment has recently received theoretical support from barro and santomero 1976 stockman 1981 and aschauer and greenwood 1983 related studies concerning the real effects of inflation have been undertaken by jovanovic 1982 stockman 1984 and abel 1985 the common element running through all of these papers is that the real effects of inflation arise from the transactions technology that underlies money demand l

anticipated monetary policy in a cash in advance economy this paper analyses the effects of perfectly foreseen monetary policy within the framework of a standard cash in advance economy anticipated monetary policy is shown to have real effects by influencing inflationary expectations in a cash in advance economy an increase in the anticipated rate of inflation reduces the return to labour supply and induces a substitution away from time spent in the labour market the paper analyses the implication of this substitution for the time paths of output prices interest rates real and nominal and stock market prices

the speed of convergence and alternative government financing abstract in this paper we are concerned with the speed of convergence in the sidrauski monetary optimizing model sidrauski am econ rev 57 1967 534 in which the steady state capital stock is not influenced by a change in public spending the paper studies how different the speed of convergence to the steady state is affected by a change in government spending under the various ways of financing in exploring the transitional adjustment to the public policy shock it will be convenient to focus upon the degree of relative risk averse

money inflation and investment abstract this paper analyzes an infinite horizon optimizing monetary growth model with endogenously determined income tax rates the technology is linear and random and preferences exhibit unitary relative risk aversion and a constant elasticity of substitution between real money balances and consumption an explicit solution for the rational expectations equilibrium is derived the relationship between the money growth rate and investment depends on the elasticity of substitution moreover maximizing welfare is inconsistent with choosing a money growth rule to maximize investment

inflation liquidity and innovation this paper presents a simple model with financial frictions where inflation increases the cost faced by firms holding liquid assets to hedge risky production against expenditure shocks inflation tilts firms technology choice away from innovative activities and toward safer but return dominated ones and therefore reduces long run growth the theory makes specific predictions about how the severity of this adverse effect depends on industry characteristics these predictions are tested with novel harmonized firm level data from 139 developing countries overcoming small sample problems constraining previous work the analysis finds that inflation affects the composition but not the overall quantity of investment a one percentage point increase in inflation reduces the establishment level probability of innovation by 4 3 percent but does not affect total investment moreover innovating firms display a stronger dependence on liquid assets which in turn are negatively related to inflation generalized difference in differences estimations corroborate the sector specific predictions of the theoretical model

money social status and capital accumulation in a cash in advance model this paper presents an infinite horizon model of optimal capital ac cumulation with the social status concern and the cash in advance constraint when the cash in advance constraint applies to both consumption and investment money is not supemeutral if only consumption is subject to the cash in advance constraint inflation increases capital accumulation

the inflation tax in a convex model of equilibrium growth a general equilibrium monetary economy is described that exhibits equilibrium growth the production technology is consistent with jones and manuelli 1990 and rebelo 1991 the inflation tax and nominal interest rates are shown to be inversely related to the equilibrium growth rates of real variables until a critical point is reached at this point equilibrium growth is eliminated and the predictions of stockman 1981 and abel 1985 concerning the level effects of distortionary monetary policies appear for the nominal side of the model a version of the prediction of friedman 1969 is shown to hold for a particular balanced growth path following king and rebelo 1990 a linear growth version of the model is calibrated to illustrate the potentially large growth and welfare effects of moderate inflations

a longitudinal assessment on the economic effects of hosting major sporting events hosting major sporting events mses has become a globalized strategy for many countries this paper is to incorporate event study and dynamic panel data analysis with annual secondary data to exam

the impacts of temporary but anticipated tourism spending an application to the glasgow 2014 commonwealth games an extensive literature attempts to identify the economic impact of tourism expenditure while input output methods have been widely applied these may not always be appropriate for such applications and there is a growing use of more flexible computable general equilibrium cge approaches this paper uses a multi period scottish cge model to estimate the system wide effects of the temporary tourism expenditure related to the glasgow 2014 commonwealth games we quantify the sensitivity of our results to model specification focusing in particular on how investment and consumption decisions are made and shifted over time to accommodate the temporary tourism shock as part of this analysis we identify the pre announcement period that optimises the present value of the economic impact whilst the empirical results apply to a specific event our results have implications for similar analyses applied to mega events and other temporary phenomena affecting tourism expenditure such as terrorism attacks or epidemics

anticipated inflation and the capital stock in a cash in advance economy abstract an economy is constructed in which the steady state capital stock is inversely related to the rate of inflation as a result that is directly opposite the usual conclusion

the effects of inflation on the number of firms and firm size a typical money and growth model generally incorporates an implicit assumption that the number of firms or the set of goods available is fixed this paper attempts to investigate the implications of relaxing this assumption in a monopolistically competitive model with endogenous markup it is found that among other effects inflation reduces the number of firms and each firm s size moreover due to this new channel inflation induces secondary effects one direct implication is that the welfare costs of inflation in our framework are substantially higher than those documented in existing models with standard features our findings suggest that it is the lessening of competition that appears to be the primary driving force

the forecasting of international expo tourism using quantitative and qualitative techniques this study predicts the number of visitors to an international tourism expo to be held in korea in 2012 an unprecedented event for the host city forecasting demand for such a mega event has received only limited attention in the literature unlike most studies forecasting international tourism demand forecasting expo demand involves using both quantitative forecasting models and qualitative technique because of data limitations combining quantitative techniques with willingness to visit wtv surveys predicts the expo demand at 8 9 million visitors in comparison using the delphi method experts predict expo demand at 6 8 million visitors for this study the delphi method provides more conservative estimates than estimates from combining quantitative techniques with wtv policy implications presented are directed toward expo planners and practitioners in terms of demand and supply side application of these results in the decision making process and future challenges surrounding demand forecasting

the short run tobin effect in a monetary optimizing model in an economy in which households face a cash in advance constraint the nominal interest rate acts like a tax on consumption to the extent that investment is financed from current earnings and so escapes the interest rate tax households will defer their consumption when the nominal interest rate is high a short run tobin effect results capital accumulates most rapidly when the interest rate is thought to be high relative to its past and future values

measuring the economic contribution of the international association conference market an irish case study conferences and meetings are a prerequisite in the modern global economy and can contribute substantially to national income and foreign exchange earnings this study assesses the economic contribution of the international association conference market to ireland and highlights key sectors that demonstrate strong multiplier effects primary conference expenditure estimates are combined with sector multipliers to determine direct indirect and induced effects across a range of monetary aggregates in ireland in 2007 total direct conference spending of 131 1 million generated 235 8 million in output 45 4 million in income 101 6 million in value added 52 0 million in imports and 9 3 million in product taxes key conference sectors are highlighted including hotels and restaurants renting services of machinery and equipment air transport and retail shopping findings also indicate the varying nature of derived economic effects over discrete time periods particularly in the post conference period overall the results demonstrate that the conference market contributed substantially to economic aggregates in ireland in 2007

hosting mega events a guide to the evaluation of development effects in integrated metropolitan regions each time a city or region seeks to host a mega event such as the olympic games boosters proclaim vast benefits related to increased tourism and wealth flowing into the area while benefits can exist in some form or another the net gain for a region seeking to bolster its economic standing is often overstated this is especially true for highly integrated regions when a center city is the sole entity making the event investment much of this results from a collection of erroneous assumptions and a failure to account for the integration of economic activity within a region we address common issues with these reports and provide a guide for evaluating the net benefit of hosting an event more specifically we argue with detailed examples that industry share and commute shed analysis are indispensable tools when evaluating capture rates of new spending within the boundaries of the investment area

using the concept of yield to assess the sustainability of different tourist types abstract sustainability assessments have become important tools for decision makers this research assesses the sustainability of different types of tourists in new zealand by using the concept of yield and by developing yield indicators in the areas of financial public sector and sustainable yield the concept and indicators have been developed in cooperation with the new zealand tourism sector and therefore provide a sector driven approach to implement a sustainability assessment the analysis shows that there are numerous trade offs between indicators when attempting to define the ideal visitor type coach tourists for example are the largest spenders and generate the greatest value added in tourism on a per day basis but they contribute less to the financial sustainability of tourism when the costs of capital are accounted for coach tourists are highly concentrated in a few key destinations and at the same time produce substantial amounts of co2 emissions due to their air travel component in contrast backpacker and camping tourists provide greater financial yield and are more dispersed but they are also the greatest user of publicly provided tourist attractions and therefore come at a higher cost to government than other tourist types camping tourists are also contributing considerably to co2 emissions the yield analysis proposed in this paper could be a valuable tool for complex policy decision making and identifying strategies that lead to high yield tourism

a dynamic specific factors model with money when the capital stock is endogenously chosen by optimizing households the predictions of the static specific factors model are modified an increase in tariffs unambiguously increases real wages whereas an expansion of the labor force does not reduce wages capital and land are not only factors of production but also assets and their shares in the household s portfolio are determined by features of the supply side time preference and inflation an increase in inflation reduces the capital stock but its impact on the price of land is ambiguous because of opposite movements in the inflation tax and in land rents

arbitrage pricing and the stochastic inflation tax in a multisector monetary economy abstract a dynamic general equilibrium multifactor asset pricing model for a monetary economy with capital accumulation and multisector production is constructed equilibrium clower constraints on some investment goods and some consumption goods are imposed an equilibrium apt model is constructed where the covariance between the inflation tax distorted equilibrium investment returns and fundamental forcing processes are important in determining equilibrium risk prices the model is used to address issues concerning the relative importance of real and nominal factors in asset pricing raised in recent papers by chen roll and ross 1986 and cochrane 1991 1992

capital flows investment and exchange rates abstract this paper incorporates international capital flows into a two country monetary general equilibrium model of asset prices with investment and production we calculate theoretical covariances between investment the current account the exchange rate and the terms of trade these covariances depend upon the coefficient of relative risk aversion the magnitude and sign of a country s net international indebtedness other properties of tastes and technologies and the stochastic processes on disturbances to productivity and monetary growth rates international capital flows arise from changes in world wealth and its relative composition in foreign and domestic assets

critical reflections on the economic impact assessment of a mega event the case of 2002 fifa world cup abstract sport tourism has received growing attention as a source of generating significant revenue and contributing major economic benefits to host cities regions and countries however current methods for assessing economic impact have had variable success in estimating tourist numbers and expenditure directly attributable to a sport tourism mega event this paper reports on the assessment of one such event the 2002 fifa world cup in south korea using an estimation method that excluded tourists whose travel was non event related the survey research conducted during the event established that 57 7 of total tourist arrivals during the period of the event could be classified as either directly and indirectly attracted by the world cup using this data it was calculated that the world cup generated an economic impact of us 1 35 billion of output sales us 307 million of income and us 713 million of value added for south korea the results also showed that foreign world cup tourists provided a much higher yield compared with foreign leisure tourists spending an estimated 1 8 times as much inclusion of the expenditure by non world cup tourists 42 3 in the calculations of impact would have resulted in a significant overestimation due to the further multiplication of the expanded figures by an input output model misleading the net economic impact of the event the use of survey data to distinguish event from non event tourists and their respective expenditure clearly illustrates some of the methodological pitfalls associated with forecasting that is simply based on generic tourist data furthermore the data generated by this assessment of net direct expenditure and economic impact using the input output analysis can be used as a comparison point for other mega sport events in terms of further research it is evident that existing models of impact assessment have not adequately conceptualized aversion and diversion effects and this begs the future inclusion of these concepts in economic impact forecasting for mega events