telecommunications in greece a study of production structure and natural monopoly issue until recently telecoms were everywhere large monopolies basically because their production was believed to have many natural monopoly attributes now new forces originated in technological evolution have set in to transform the monopoly regime but did natural monopoly attributes really exist the empirical evidence under consideration concerns hellenic telecom a complete study of the industry s production structure and a natural monopoly test are offered test s results are important for policy formation regarding market s degree of liberalization in greece given also the resemblance of current technology in different countries it is possible to claim a more general validity of the obtained results on production technology beyond the specific case studied

endogenous discounting the world saving glut and the u s current account abstract we study the evolution of the u s current account in a two country dynamic stochastic endowment model in which a single non state contingent bond is the only internationally traded asset the paper focuses on the world saving glut as the primary cause of continual deterioration in the current account and departs from the standard framework by introducing a three parameter model of the subjective discount factor that depends on societal per capita variables that are external to household choices when agents in the model are presented with u s and rest of world endowment data as the realization of the exogenous state vector endogenously driven short run international differences in subjective discounting that display increasing relative u s impatience create saving and current account imbalances that matches patterns observed in the data

current account dynamics and expected future budget deficits some international evidence abstract this paper addresses the question of whether current account deficits are linked to expected future budget deficits we use an optimizing general equilibrium model to show the theoretical relationship between the two deficits we then estimate the econometric equation based on the forward looking expectations model for oecd countries thus extending earlier research based on more conventional analysis from the empirical investigation evidence is obtained that strongly supports the view that current account deficits have been associated with expected future budget deficits during the 1970 1997 period

regional capital mobility in china economic reform with limited financial integration abstract this paper assesses the changes in the regional capital mobility in china during the period of economic reform in 1978 2008 by employing a panel time varying coefficient tvp model this approach is much more suitable to model china s evolution in the regional capital mobility than a standard structural break model as china s reforms took place gradually and were often implemented over several stages using the tvp model we find that 1 china s provincial capital mobility demonstrated a moderate improvement over the sample period but worsened temporarily between 1994 and 1997 this is probably due to the government s effort to combat inflation which reduced the investment and transfers to regions 2 regions with the most developed and least developed provinces experienced higher degree of capital mobility improvement than those in the middle

on china s domestic capital mobility and the role of the government empirical evidence over 1970 2006 this article investigates capital mobility across 29 provinces in china for the period of 1970 2006 using the feldstein horioka fh approach and campbell and mankiw s consumption smoothing cs framework it also examines the role of the governments in driving provincial capital mobility if the provincial government investment is not properly separated out from the private investment the fh framework applied to the overall saving and investment private plus public is found to underestimate the private saving investment correlation and hence overstates the degree of private capital mobility compared with the cs framework that focuses on the private consumption and output both frameworks indicate strong correlation between private saving investment and private consumption output implying strong barriers in the provincial private capital flows however there is ample evidence that capital mobility has been rising over time particularly after the mid 1990s it also appears that the government facilitates capital flows through inter governmental transfers during the sample period the extent of provincial capital mobility sheds light on the ability of different provinces in diversifying idiosyncratic provincial risks the earlier findings are robust to alternative measurements of variables and model specifications

cross country evidence on the relation between stock prices and the current account this article explores the relation between stock prices and the current account for 17 organization for economic co operation and development oecd countries in 1980 2007 a panel vector autoregressive var model is used to compare the effects of stock price shocks to those originating from monetary policy and exchange rates while monetary policy shocks have little effects shocks to stock prices and exchange rates have sizeable effects a 10 contraction in stock prices improves the current account by 0 3 after 2 years hence a channel in addition to the traditional exchange rate channel is found through which external balance for an oecd country with a current account imbalance can be restored

cartel quotas under majority rule the authors examine the choice of quotas by legal volume restricting organizations cartels commodity agreements agricultural marketing boards and prorationing boards unlike their illegal counterparts legal cartels have published regulations and broader enforcement capabilities however differences in costs and size among cartel members still make quota selection contentious conflicts over quotas are typically resolved by voting side payments to influence votes are prohibited the authors examine the predicted effects of this real world voting institution on prices and welfare they also deduce the economic consequences of exogenous political changes such as alterations in the voting weights or in the identity of the voters copyright 1995 by american economic association

international capital mobility net versus gross stocks and flows abstract feldstein and horioka 1980 observed that net capital flows have been small in relation to domestic saving and investment flows for oecd countries in the post war period which they interpreted as evidence of low capital mobility this paper argues that the correlation between gross domestic and international financial flows can be a better indicator of capital mobilitythan net capital flows contrary to the conventional wisdom among international economists gross flows have been small in relation to gross domestic asset creation for oecd countries although by this measure the degree of capital mobility increased in the 1980s

perspectives on the u s current account deficit and sustainability this essay considers the underpinnings of the large u s current account deficit it then tackles the question of whether the u s current account deficit is sustainable a current account deficit is sustainable at a point in time if neither it nor the associated foreign capital inflows nor the negative net international investment position are large enough to induce significant changes in economic variables such as consumption or investment or interest rates or exchange rates even if the current account deficit is sustainable by this definition today its trajectory could still be creating future risks for the u s and global economy

strong time consistency in the cartel versus fringe model due to developments on the oil market in the 1970s the theory of exhaustible resources was extended with the cartel versus fringe model to characterize markets with one big coherent cartel and a large number of small suppliers called the fringe because cartel and fringe are leader and follower the von stackelberg solution concept is appropriate for the supply side of this market the solution for the cartel versus fringe model presented in the previous literature proved to be time inconsistent for a large plausible range of values for extraction costs and initial reserves this paper provides a strongly time consistent solution for the cartel versus fringe model

international capital mobility what do national saving investment dynamics tell us abstract we interpret the relationship between national saving and investment in the long run as reflecting a solvency constraint and interpret the ease with which a country can run current account imbalances in the short run before it has to ultimately reverse the transaction at some future date to satisfy the solvency constraint as being positively related to the degree of international capital mobility we apply panel error correction techniques to data for 20 oecd countries from 1960 to 1999 we find that saving and investment display a long run cointegration relationship that is consistent with the interpretation that a long run solvency constraint is binding for each country over time however deviations from this long run equilibrium relation have become more persistent which suggests that capital mobility has increased

current real business cycle theories and aggregate labor market fluctuations hours worked and the return to working are weakly correlated traditionally the ability to account for this fact has been a litmus test for macroeconomic models existing real business cycle models fail this test dramatically we modify prototypical real business cycle models by allowing government consumption shocks to influence labor market dynamics this modification can in principle bring the models into closer conformity with the data our empirical results indicate that it does

saving investment associations and capital mobility on the evidence from japanese regional data abstract the paper examines the magnitude of the saving retention coefficient b in a setting of known near perfect capital mobility japanese regions first we find that on total regional saving and investment rate data inclusive of regional government saving and investment the estimate of b is negative this negative relationship in the total rates across japanese regions appears to arise from the strong negative association in the government saving and investment rates second on private regional investment and saving rate data b is insignificantly different from zero this is evidence consistent with the hypothesis of feldstein and horioka economic journal 1980 that in a financially integrated economy b would be close to zero

saving investment correlations and capital mobility on the evidence from annual data this paper evaluates the use of saving investment correlations to measure capital mobility it is argued that the intertemporal approach to the balance of payments predicts that the practice of calculating the correlation coefficient using long term averages of saving and investment shares biases the result toward accepting the hypothesis of capital immobility calculations based on annual data show that the correlation coefficient is much lower and that is varies considerably estimates of intranational capital mobility based on saving and investment shares of u s federal states show that the saving and investment link is much looser within a nation than among nations copyright 1992 by royal economic society

comparing capital mobility across provincial and national borders the persistence of high savings investment correlations and home country bias in portfolio construction at the national level is contrasted with new evidence on savings behaviour in canadian provinces we confirm that national borders clearly divert flows of capital to domestic investments but provincial borders have no such effect in particular while there is a significant correlation between national savings and investment among provinces that effect disappears we discuss the implications for interpreting the distinction

temporary and permanent government spending in an open economy some evidence for the united kingdom abstract this paper investigates the effects of government spending changes on a small open economy in an intertemporal substitution framework if agents internalize the government s budget constraint temporary and permanent spending have different implications for wealth and consequently different effects on output and the balance of trade estimation of these effects isolates the different channels through which government spending can influence economic activity main findings for the united kingdom are that government spending i crowds out private spending ii is directly productive and iii when rising permanently leads to a negative wealth effect which induces a large rise in work effort

country specific effect in the feldstein horioka paradox a panel data analysis abstract using panel data methods this study leads to a new interpretation of the feldstein horioka paradox a high estimated saving investment coefficient may be due less to low capital mobility than to the existence of specific individual country effects

asset prices news shocks and the trade balance we analyze the relationship between asset prices and the trade balance estimating a bayesian var for a broad set of 38 industrialized and emerging market countries to derive model based identifying restrictions we model asset price shocks as news shocks about future productivity in a two country dynamic stochastic general equilibrium model such shocks are found to exert sizable effects on the trade balance moreover the effects are highly heterogeneous across countries for instance following a news shock that implies on impact a 10 increase in domestic equity prices relative to the rest of the world the u s trade balance will worsen by up to 1 0 percentage points but much less so for most other economies we find that this heterogeneity appears to be linked to the financial market depth and equity home bias of countries moreover the channels via wealth effects and via the real exchange rate are important for understanding the heterogeneity in the transmission

productivity shocks budget deficits and the current account abstract productivity shocks and budget deficits are considered to be two key determinants of the current account in order to assess formally the role of both factors in driving current account movements the present paper extends the standard intertemporal model of the current account to allow for non ricardian household behavior testable cross equation restrictions for the current account and investment are derived by drawing on the distinction between country specific and global innovations to productivity as well as to the government budget we test the restrictions of the model against time series data for 21 oecd countries and find evidence in support of the model

the global financial crisis and the european single market the end of integration using various versions of the feldstein horioka fh coefficient we measure the time varying degree of capital mobility and economic integration in the european union prior research shows high correlation between domestic investment and savings implying low capital mobility this surprising result has led to subsequent research on the feldstein horioka puzzle our empirical findings show that the puzzle is less puzzling with a coefficient of 0 52 in the period 1990 1995 in eu countries approaching its minimum value of 0 02 in the period 2003 2008 this clearly indicates that the fh coefficient is time varying signalling a deepening of economic integration in the european union yet with the advent of the global financial crisis the fh coefficient has increased to 0 26 underlining worrying signs of disintegration

international business cycles and the dynamics of the current account abstract this paper analyzes the transmission of productivity shocks across countries and how the responses of investment and the current account differ depending on the degree of propagation of shocks we explore both issues by estimating a structural model for japan the us and europe we postulate as an identifying assumption that the propagation of shocks is proportional to trade we find that there is a strong asymmetry in that shocks to the us propagate quickly to the other two economies while european and japanese shocks have little impact in other countries productivity when we explore the responses of investment and the current account we find that productivity increases lead to domestic investment booms and current account deficits investment in other countries tends to react positively to productivity shocks even when the shock is purely national this second result contradicts the predictions of a standard open economy model with perfect capital mobility where in response to country specific shocks domestic and foreign investment should move in opposite directions we also find quantitative differences among the three countries in the response of the current account these differences are not related to the global or idiosyncratic nature of the shocks

the feldstein horioka puzzle revisited a monte carlo study abstract this study revisits the feldstein horioka fh puzzle by employing a variety of asymptotically efficient cointegration estimators and by using the critical values obtained from monte carlo simulations to test the hypothesis of a unit retention coefficient this leads to a lower rejection of the null than standard critical values would have implied despite ample evidence supporting the fh result there appears to be considerable heterogeneity in terms of the savings investment association and only 25 of the 23 oecd countries we examine can be characterised as open economies in the fh sense whether or not one subscribes to the fh interpretation the fh result does not appear to be robust

strategic behaviours in international telecommunications system abstract in this paper the international telecommunication market is analysed in order to evaluate the impact of different strategic behaviours of telecommunications carriers using the nash fixed threat bargaining model we formalize the carriers bargaining behaviour in a growing competitive pressure market the effect of competition is considered both in the final market and in the intermediate one in which carriers compete on tariffs to get an appropriate distribution of profits we show that carriers may have an incentive to a cooperative behaviour in the setting of tariffs and the results of such behaviour in terms of final prices depends upon the competitive pressure degree they are subject

us trade balance dynamics the role of fiscal policy and productivity shocks and of financial market linkages abstract this paper examines whether domestic and foreign productivity and fiscal policy changes can account for the wide swings in us net exports during the period 1975 1991 a two country real business cycle model is used for that purpose the model is simulated using data on productivity government purchases and taxes for the g7 countries a version of the model with incomplete asset markets in which only bonds can be used for international capital flows tracks the us trade balance fairly closely provided permanent country specific productivity shifts are assumed the simulations suggest that us productivity changes were the main source of fluctuations in us net exports

a theory of dynamic oligopoly ii price competition kinked demand curves and edgeworth cycles we provide game theoretic foundations for the classic kinked demand curve equilibrium and edgeworth cycle we analyze a model in which firms take turns choosing prices the model is intended to capture the idea of reactions based on short run commitment in a markov perfect equilibrium mpe a firm s move in any period depends only on the other firm s current price there are multiple mpe s consisting of both kinked demand curve equilibria and edgeworth cycles in any mpe profit is bounded away from the bertrand equilibrium level we show that a kinked demand curve at the monopoly price is the unique symmetric renegotiation proof equilibrium when there is little discounting we then endogenize the timing by allowing firms to move at any time subject to short run commitments we find that firms end up alternating thus vindicating the ad hoc timing assumption of our simpler model we also discuss how the model can be enriched to provide explanations for excess capacity and market sharing keiiwords tacit collusion markov perfect equilibrium kinked demand curve edgeworth cycle excess capacity market sharing endogenous timing

dissecting the dynamics of the us trade balance in an estimated equilibrium model in an estimated two country dsge model we find that efficiency shocks specific to investment account for more than half of the forecast variance of cyclical fluctuations in the us trade balance both domestic and foreign investment specific shocks have a substantial impact on the variability of the imbalance total factor productivity shocks do not matter for the variance and even lead to procyclicality in the trade balance

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

capital mobility in the world economy an alternative test abstract this paper proposes a new measure and test of international capital mobility in order to investigate capital flows we utilize a small open economy version of campbell and mankiw s nber macroeconomic annual 1989 185 216 permanent income model our capital mobility measure focuses on the correlation between the country s consumption and net output instead of the correlation between domestic saving and domestic investment proposed by feldstein and horioka economic journal 90 1980 314 329 the model is estimated for 11 oecd countries the results suggest that the null hypothesis of perfect capital mobility cannot be rejected for more than a half of these countries on the other hand some kind of capital mobility constraints are detected for several countries including the united states and japan

do tax cuts generate twin deficits a multi country analysis we study the eects of tax shocks on the budget and external deficits for 16 industrialized countries over the post 1975 period our structural approach is based on a tractable small open economy model where a tax cut generates a budget deficit in turn the budget deficit aects the external deficit by two distinct channels the demographic channel works through the overlapping generation structure of the model the forecasting channel works through the dynamic structure of the model our empirical analysis documents that tax shocks generate significant positive comovements between the budget and external deficits we also find that both the demographic and forecasting channels are important to explain the comovements

dynamics of the trade balance and the terms of trade the j curve the authors provide a theoretical interpretation of two features of international data the countercyclical movements in net exports and the tendency for the trade balance to be negatively correlated with current and future movements in terms of trade but positively correlated with past movements they document the same properties in a two country stochastic growth model in which trade fluctuations reflect in large part the dynamics of capital formation the authors find that their general equilibrium perspective is essential the relation between the trade balance and the terms of trade depends critically on the source of fluctuations copyright 1994 by american economic association

capital mobility and the relationship between saving and investment rates in oecd countries abstract this paper considers tests that use data on saving and investment rates to determine the degree of international capital mobility two types of evidence are presented to show that a high correlation between saving and investment rates across oecd countries can be consistent with a high degree of capital mobility this evidence qualifies the conclusions of previous studies and casts doubt on the usefulness of testing hypotheses about capital mobility with data on saving and investment rates

estimating saving investment correlations evidence for oecd countries based on an error correction model abstract saving investment correlations are important stylized facts in open economy macroeconomics and indicators of capital mobility they are best estimated by an error correction model ecm because an ecm is consistent with intertemporal general equilibrium models the ecm is a synthesis of previous approaches applying the ecm to the oecd countries we find that in general saving and investment are cointegrated the ecm is more powerful in detecting cointegration than the two step engle granger procedure estimates of the saving investment correlation are robust with respect to overdifferencing we find evidence of a large country effect and an increase in capital mobility within the oecd area

is the french mobile phone cartel really a cartel abstract france telecom ft sfr and bouygues telecom bt have been fined by france s conseil de la concurrence cc for organizing a mobile phone cartel with stable market shares one half one third and one sixth respectively and for directly exchanging commercial information while not contesting the legal decision it is argued here that the economic reasoning is flawed 1 as the cc made much of the firms stable market shares we have first followed this line of reasoning by considering that the market shares are quotas under uniform costs even if there is a general incentive to form a monopolistic cartel bt was too small for it to be worth its while to join it it is not necessary to exchange information directly to coordinate market shares and prices effectively all partial cartels are unlikely 2 we then departed from the cc by considering that the non uniform market shares are explained by the costs in cournot competition this allows costs to be deduced from the observed market shares by assuming that they are kept the same when switching from cournot competition to any form of cartel we deduced that market shares cannot be other than stable and non uniform any monopoly is unlikely to come about because ft has negative incentives to form a monopolistic cartel no partial cartels of two operators are viable because at least one member would lose out the paper also shows that stackelberg competition is unlikely as well as bertrand edgeworth competition in conclusion cournot competition is the only arrangement that guarantees no losses to all operators

the saving investment correlation puzzle is still a puzzle abstract a number of simulation studies claim to have solved the feldstein horioka puzzle by demonstrating that a high time series correlation between saving and investment naturally arises from business cycle shocks this paper uses panel data of saving and investment controlled for business cycle shocks to empirically test the significance of cyclical shocks productivity fiscal and the terms of trade shocks in explaining a high saving investment correlation the estimation results reveal that conventional aggregate shocks only partially explain the high saving investment correlation moreover country differences in the size of the gnp and the non traded sector do not significantly affect the saving investment correlation the saving investment correlation puzzle remains a puzzle after all

current account solvency and the feldstein horioka puzzle in this paper we suggest an alternative explanation of the high cross section association between shares of saving and investment in gdp which feldstein and horioka 1980 interpret as evidence of low capital mobility in oecd countries saving and investment shares appear to be i i we show that a solvency constraint implies that the current balance is stationary and thus that saving and investment cointegrate with a unit coefficient irrespective of the degree of capital mobility it is this long run relation that the fh cross section regression captures econometric results for 23 oecd countries over the 1960 92 period are consistent with this explanation

revision of industrial supply conditions and game theory abstract we analyze the real case of two firms evaluating a shift from a risk and revenue sharing agreement to a supplying agreement from the point of view of economic theory this is a constrained bilateral monopoly problem at the first stage the two firms take sequential decisions of price and demand with price being represented not only as a simple level but also as a more realistic price schedule in this more general case we solve a variational problem by transforming it with no restrictions into a classical mathematical programming one at the second stage the two firms are allowed to bargain over a couple price quantity instead of taking separate decisions about them as expected bargaining is efficient with respect to the constant price case in the price schedule case however efficiency does not hold without further conditions

international capital mobility evidence from panel data abstract krol krol r 1996 journal of international money and finance 15 467 474 reports estimates of the saving investment correlation based on panel regressions that are much lower than those commonly found in the literature this note argues that this low estimate is not related to the panel estimation technique as krol claims but largely to the inclusion of luxembourg in the sample panel estimation reduces the correlation s estimate only by about 0 12

collateral constraints and the current account theory and evidence we investigate the impact of domestic financial frictions on the current account dynamics in asian countries before and after the asian financial crisis in 1997 1998 by introducing collateral constraints into the intertemporal current account approach we examine six asian countries before the crisis collateral constraints significantly impact the current account in korea malaysia the philippines and thailand but after the crisis they do not our study shows that the impact of domestic financial frictions on the current account changes before and after a financial crisis jel f32 f41

strategic planning for long distance telecommunications a symbiotic production system telephone services and other forms of telecommunication services involve a form of production with peculiar characteristics in this paper a symbiotic production model to analyse international telecommunication market is introduced and using conjectural variations the carriers strategic behaviour in a growing competitive pressure market is formalized the effect of competition is analysed both between carriers in the final market and in the intermediate market in which carriers compete over tariffs to get an appropriate distribution of profits the obtained results show the firms have an incentive to cooperate or to collude depending upon the conjectural variations and individuate some policy implications for the international telecommunication market

business cycles and the exchange rate system some international evidence this paper investigates the differences in time series behavior of key economic aggregates under alternative exchange rate systems we use a postwar sample of 49 countries to compare the behavior of output consumption trade flows government consumption spending and real exchange rates under alternative exchange rate systems pegged floating and cooperative systems such as the ems we then examine evidence from two particular episodes involving canada and ireland of changes in the exchange rate system aside from greater variability of real exchange rates under flexible than under pegged nominal exchange rate systems we find little evidence of systematic differences in the behavior of macroeconomic aggregates or international trade flows under alternative exchange rate systems these results are of interest because a large class of theoretical models implies that the nominal exchange rate system has important effects on a number of macroeconomic quantities

international capital mobility evidence from panel data abstract to test whether capital is internationally mobile some researchers have examined the relationship between saving and investment using time averaged data they find saving and investment to be related and conclude that capital is relatively immobile in this paper i argue that a country s intertemporal budget constraint biases results using time averaged data against finding capital mobility using annual data pooled for 21 oecd countries over the 1962 1990 period i find the estimated impact of saving on investment to be considerably smaller than previous estimates

pricing in revenue management for multiple firms competing for customers abstract we consider the pricing strategies of multiple firms providing the same service in competition for a common pool of customers in a revenue management context the firms have finite capacity and the demand at each firm depends on the selling prices charged by all firms each of which satisfies demand up to a given capacity limit we use game theory to analyze the systems when firms face either a deterministic demand or a general stochastic demand the existence and uniqueness conditions of a nash equilibrium are derived and we calculate the explicit nash equilibrium point when the demand at each firm is a linear function of price we also conduct sensitivity analysis of the equilibrium prices with respect to cost and capacity parameters

the savers spenders theory of fiscal policy the macroeconomic analysis of fiscal policy is usually based on one of two canonical models the barro ramsey model of infinitely lived families or the diamond samuelson model of overlapping generations this paper argues that neither model is satisfactory and suggests an alternative in the proposed model some consumers plan ahead for themselves and their descendants while others live paycheck to paycheck this model is easier to reconcile with the essential facts about consumer behavior and wealth accumulation and it yields some new and surprising conclusions about fiscal policy

consumption permanent income and financial wealth in canada empirical evidence on the intertemporal approach to the current account the intertemporal approach to the current account is rejected as a complete explanation of the canadian current account federal government fiscal policy plays an important role in the determination of the current account a private sector agent that treats its holdings of net liabilities of the federal government as net wealth accumulates the sum of these liabilities and the net liabilities of non residents as part of an intertemporally optimal plan this result indicates both fiscal policy and intertemporal considerations are important determinants of current account behaviour consommation revenu permanent et richesse financiere au canada resultats empiriques d une approche au compte courant mettant l accent sur la dimension intertemporelle cet article montre que l approche mettant l accent sur la dimension intertemporelle ne produit pas une explication complte du comportement du compte courant canadien i1 semble que la politique fiscale du gouvernement federal joue un r6le important dans la conformation du compte courant un agent economique prive composite qui traite son portefeuille de dettes nettes du gouvernement federal comme richesse nette va accumuler la somme de ces dettes et des dettes nettes des non residents dans le cadre de son plan intertemporel optimal les resultats montrent que la politique fiscale et des considerations intertemporelles sont des elements determinants du comportement du compte courant

what drives the german current account and how does it affect other eu member states we estimate a three country model using 1995 2013 data for germany the rest of the euro area rea and the rest of the world row to analyse the determinants of germany s current account ca surplus after the launch of the euro our results suggest that the german surplus reflects a succession of distinct shocks mono causal explanations of the surplus are thus insufficient the most important factors driving the german surplus were positive shocks to the german saving rate and to row demand for german exports as well as german labour market reforms and other positive german aggregate supply shocks the key shocks that drove the rise in the german ca tended to worsen the rea trade balance but had a weak effect on rea real activity our analysis suggests these driving factors are likely to be slowly eroded leading to a very gradual reduction of the german ca surplus an expansion in german government consumption and investment would raise german gdp and reduce the ca surplus but the effects on the surplus would be weak

retail gasoline price cycles across spatially dispersed gasoline stations abstract studies of volatility in retail gasoline prices have used either weekly averages of the prices at a small subset of stations in a city or daily observations on prices at a small number of stations this paper uses daily observations on station specific prices within a large canadian metropolitan area to address whether weekly average prices or prices for a small number of stations provide an accurate description of pricing in a market with volatility this paper considers whether researchers using restricted data can draw meaningful conclusions about the appropriate theoretical model and the policy response to allegations of anticompetitive behavior

understanding the dynamic effects of government spending on foreign trade abstract using vector autoregressions on u s time series the present paper documents the effects of fiscal policy on foreign trade an increase in government spending significantly depreciates the nominal exchange rate appreciates the terms of trade and increases net exports exposed to the same spending shock a new keynesian general equilibrium model is shown to match qualitatively the response of relative prices the response of net exports in contrast depends on the intra and intertemporal elasticities of substitution and the degree of home bias in private spending an accommodating monetary policy dampens but does not alter the response of net exports

sovereign default risk and state dependent twin deficits abstract this paper analyzes the impact of the government debt to gdp ratio on the correlation of the fiscal balance and the current account above a government debt to gdp ratio of 90 percent the correlation of the two balances decreases by 0 16 in a sample of 12 euro area countries and by 0 17 for greece ireland portugal and spain this paper develops a small open economy model with defaultable government debt and riskless international capital markets to explain the empirical evidence of a state dependent change in the correlation in the model high public debt to gdp ratios raise sovereign risk premia as the default probability increases leading to higher uncertainty about future taxes in this case precautionary savings of households increase and partially compensate current account deficits that result from fiscal deficits the increase in households saving reduces the correlation of the two balances by the same magnitude as documented in the data the model calibrated to greece matches further business cycle moments and the empirical default frequency

domestic savings and intra national capital flows abstract regional british data on savings and investment are shown to be uncorrelated consistent with the hypothesis of perfectly mobile intra national capital flows

fiscal policy in general equilibrium this paper studies four classic fiscal policy experiments within a quantitatively restricted neoclassical model the authors main findings are as follows 1 permanent changes in government purchases can lead to short run and long run output multipliers that exceed one 2 permanent changes in government purchases induce larger effects than temporary changes 3 the financing decision is quantitatively more important than the resource cost of changes in government purchases and 4 public investment has dramatic effects on private output and investment these findings stem from important dynamic interactions of capital and labor absent in earlier equilibrium analyses of fiscal policy copyright 1993 by american economic association

fiscal policy in good times and bad in the 1980s several countries with large government debt or deficit implemented substantial and in some cases drastic deficit cuts contrary to widespread expectations in many cases private consumption boomed rather than contracted this paper shows that in times of fiscal stress shocks to government revenues and especially expenditure have very different effects on private consumption than in normal times

budget deficit persistence and the twin deficits hypothesis abstract this paper gauges the twin deficits hypothesis i e a positive causal relationship between the external and budget deficits this relationship is measured by the responses of the external deficit to changes in the budget deficit induced by blanchard s model these responses are positively affected by the birth rate and by the degree of persistence of the budget deficit empirical results for the canadian and us economies reveal that although the relevant birth rates are small the great persistence of the budget deficits yields responses that are numerically large and statistically positive this contrasts with previous tests of the twin deficits hypothesis which have never formally taken into account the stochastic properties of the budget deficit

collusion among asymmetric firms the case of different discount factors abstract this study investigates collusive behavior among asymmetric firms for this purpose we develop a selection criterion for deriving a unique collusive outcome and apply it to the case when firms have different discount factors our analysis reveals that for collusion to be self enforcing it is unnecessary that all firms have sufficiently high discount factors but rather only that firms on average have a sufficiently long run view the optimal collusive outcome entails a strict ordering of output quotas in which firms with relatively low discount factors receive a disproportionate share of market demand as found in the case of a common discount factor a fall in a firm s discount factor reduces the likelihood of successful collusion this effect reduces firm profits on the other hand in the event that firms can collude a lowering of a firm s discount factor increases its output quota so that its profits rise

the comparative productivity efficiency for global telecoms abstract this paper reconciles diverse efficiency measures to characterize the productivity efficiency of 39 forbes 2000 ranked leading global telecom operators productivity efficiency ratings should be considered as a key element for achieving greater business performance and better market position this study applies the data envelopment analysis dea approach with the classical radial measure a p efficiency measure and efficiency achievement measure respectively combining multiple outputs and inputs to measure the magnitude of performance differences between leading telecom carriers empirical results indicate that top ranked forbes telecom operators are not the same as those having top ranked ccr efficiency measures the results show that about 20 5 of forbes 2000 telecom operators are operating on the best practice frontier for ccr efficiency measure while only 7 7 match the efficiency achievement measure criteria this study also shows that asia pacific telecom operators have better productivity efficiency than those in europe and america but the differences are not significant another interesting find is that the state owned telcos as a group show a relatively higher scoring than the privatized telcos as a group because they maintain full service fixed line mobile and internet operations as compared to maintaining fixed only or mobile only operations except china but the differences are not significant it has been concluded that competition in the global telecom market will continue to be tied to the enhanced productivity efficiency

twin deficit or twin divergence fiscal policy current account and real exchange rate in the u s abstract in spite of concerns about twin deficits fiscal and the current account deficits for the united states economy empirical evidence suggests that twin divergence is a more usual feature of the historical data i e when fiscal accounts worsen the current account improves and vice versa this paper empirically studies the effects of fiscal policy government budget deficit shocks on the current account and the real exchange rate during the flexible exchange rate regime period based on var vector auto regression models we identified exogenous fiscal policy shocks after controlling for business cycle effects on fiscal balances in contrast to the predictions of most theoretical models the u s results suggest that an expansionary fiscal policy shock or a government budget deficit shock improve the current account and depreciate the real exchange rate increases in private savings and declines in investment contribute to the current account improvement while a nominal exchange rate depreciation as opposed to a relative price level change is mainly responsible for the real exchange rate depreciation the twin divergence of fiscal balances and current account balances is also explained by the prevalence of output shocks i e output shocks more than fiscal shocks appear to drive the co movements of the current account and the fiscal balance

savings investment and international capital flows abstract the high correlation between national savings and domestic investment rateshas been interpreted as evidence that capital is not internationally mobile this paper surveys the theory and evidence on the relationship between savings and investment in a sample of 23 oecd countries a positive correlation between savings and investment rates is found in both the short and long runs however a wide variety of models generate such co movements in savings and investment in response to exogenous disturbances even under conditions of complete financial markets thus the savings investment correlation provides little evidence on the question of international capital mobility

vignettes on the world capital market this paper is motivated by a sense that we as a profession need to understand much better than we now do how the world capital market works we seem to be genuinely schizophrenic in the ways we build models many of them are closedeconomy models in which the rest of the world does not even appear yet others of them are models of the small open economy in which hardly any degree of freedom is left for economic policy to influence events lying behind the schizophrenia is i believe a genuine ignorance on our collective part of how the world capital market

domestic determinants of the current account balance of the united states the u s economy is found to be sufficiently open to make the balance on foreign transactions an essential part of the equilibration process between saving and investment specifically over the past two decades changes in the national saving rate have increasingly been matched by changes in net foreign rather than domestic investment thus it would be counterfactual to assume in policy discussions that measures to raise the national saving rate add fully to the stock of productive capital in the united states barring only keynesian complications conversely a stimulus to domestic investment could be validated in part by drawing on foreign saving

inequality saving and global imbalances a new theory with evidence from oecd and asian countries global imbalances are attributable to savings deficiency in some economies and savings glut in others the recent global crisis has triggered widespread social conflict over income inequality the inequality saving link has again become a pressing issue needing serious attention we present a new theory to explain why the link between inequality and saving is negative in oecd countries but positive in emerging asia we also offer an econometric analysis of differences in inequality saving links between those economies we find that aggressive financial services lead to a negative link by creating income illusion for overconsumption but imperfect financial markets contribute to a positive link by interacting with industrial policies as part of growth strategies while ignoring liquidity constraints on consumption

capital mobility in saving and investment a time varying coefficients approach abstract this paper uses a model with time varying coefficients in order to track changes in feldstein horioka saving retention coefficients over time to the extent that such coefficients measure international capital mobility the main empirical findings are as follows first the stability of the saving retention coefficient is strongly rejected second capital has long been perfectly mobile in canada third capital mobility has never been high in the united states fourth capital was more mobile in japan and the united kingdom at the turn of the 20th century than it has been during the postwar period capital mobility has risen in argentina italy and sweden since around 1970 finally capital mobility for most of the countries considered has not monotonically increased during the postwar period

the terms of trade productivity growth and the current account abstract this paper extends the analytical framework provided by glick and rogoff 1995 journal of monetary economics 35 159 192 to an economy with traded and nontraded goods and it analyzes the impact of country specific and global productivity shocks on the current account and investment each of these disturbances have different implications for the current account and investment that are largely consistent with the empirical results first the current account responds more than investment to country specific traded productivity growth second global traded productivity and country specific nontraded productivity growth have no effect on the current account but they have a significant impact on investment third the global component of nontraded productivity is negligible and has no significant impact on either the current account or investment in addition the response of the current account and investment to relative prices the terms of trade and exchange rate are insignificant this paper also discusses the potential reasons for it

the relationship between domestic savings and investment the feldstein horioka test using japanese regional data abstract the feldstein horioka test on capital mobility applies to japanese intra national capital flows we find that savings and investment are insignificantly correlated this suggests that the high correlation observed by the previous studies is due to the currency premium

twin deficits squaring theory evidence and common sense in this paper we reconsider the twin deficit hypothesis that fiscal shocks generating budget deficits also worsen external trade both from a theoretical point of view and by analyzing data for australia canada the uk and the us first we assess the joint dynamics of budget and trade deficits along the business cycle uncovering a strikingly recurrent s shaped relation between the two the correlation is actually negative suggesting twin divergence this observation however cannot rule out the possibility that government spending expansions and or tax cuts may cause trade deficits as the overall correlation is likely to be dominated by cyclical factors second we reconsider the transmission of government spending in a standard two country two good model we find that openness and the persistence of fiscal shocks are major determinants of the magnitude or even sign of the response of the trade balance to fiscal shocks for a given persistence of the fiscal shock the closer an economy the larger the crowding out effect on investment the lower the deterioration of the trade balance third we take this insight to the data investigating the transmission of fiscal shocks in a var framework in the four countries in our sample our empirical findings tend to support our view in the us and australia which are relatively less open than canada and the uk and where government spending shocks are less persistent we find that the external impact of fiscal policy is rather limited instead private investment responds substantially the reverse is true for canada and the uk these findings confirm and put into perspective earlier results whereas fiscal expansions in the us are found to have on average a negligible effect on the country s trade balance however we emphasize that these results are consistent with a call for a us fiscal retrenchment to address global imbalances the impact of budget cuts on the us external trade is muted by their positive effect on domestic investment strengthening the us ability to generate resources against future interest and debt repayment

fiscal deficits and current account deficits abstract recent fiscal stimulus packages depend for their effectiveness on the assumption of non ricardian savings behavior we show that under the same assumption higher fiscal deficits can have problematic implications if they turn out to be permanent first if they occur in large countries they significantly raise the world real interest rate second they cause a short run current account deterioration equal to around 50 of the fiscal deficit deterioration third the longer run current account deterioration equals almost 75 for a large economy such as the united states and almost 100 for a small open economy