capital market development in china abstract this paper examines why and how capital markets have developed in a low income socialist country it shows that the development is the response of economic agents operating under a more market oriented economic environment with a highly regulated and inefficient banking system this development has presented new policy challenges and opportunities the paper argues that the developmental effects of the emergence of capital markets in china can be as important as its impact on improving allocative efficiency and resource mobilization

reforming the governance of the international monetary fund cacy of these initiatives depends upon the level of compliance by the fund s member countries democratising the fund will make the organisation s initiatives more effective as decisions produced by a democratic process have greater legitimacy and credibility amongst participating members the turn toward issues of global governance moves the imf reform debate beyond arguments about the proper size and scope of the fund realistic changes in the governance of the fund can be achieved by rationalising the fund s quota regime which forms the framework for the organisation s decision making process as well as the basis for allocating member contributions to the organisation s resources reforms based on broadly accepted principles will enhance the fund s legitimacy and accountability as a forum for global economic policy decision making a failure to reform the fund coupled with the recurrence of financial crises in the emerging market economies may hinder the growth of the global economy as processes of production are subordinate to the flows of financial capital financial crises have direct impacts on real economic activity moreover even though most financial crises are short lived they exert long term and asymmetric economic and social impacts on the lives of the most vulnerable members of the global economy recent financial crises and global economic trends have already mobilised non governmental organisations students and workers around the world

whom can we trust to run the fed theoretical support for the founders views abstract the federal reserve has been called a bizarre policymaking structure this paper documents and formalizes a historical argument that the fed s structure was a response to public conflict over inflation s redistributive powers the paper shows that in the face of conflict over redistributive inflation policy by majority can lead to policy that is worse even for the majority than obvious alternatives in balancing the interests for and against surprise inflation the fed s structure can lead to a better outcome

population growth and savings in ldcs a survey article both population growth and savings have traditionally taken a certain place of pride among models of growth and development the purpose of this paper is to examine the literature concerning the hypothesis that the savings rate itself is a function of the population growth rate and this effect exacerbates the negative effect of population on economic growth the evidence is examined from three perspectives i macroeconomic effects of variations in the age structure of the population ii choice theoretic models of family decision making particularly the joint determination of fertility decisions and savings decisions and iii market level interactions of variables which determine individual decisions the paper concludes that both population growth and savings rates are inextricably tied up in the process of economic development there are many ways in which the two variables may interact but no generalizations can be safely made across countries

political instability and savings in less developed countries evidence from sub saharan africa a four equation model is used to investigate the effects of political instability pi on the savings rate in sub saharan africa utilising a comprehensive measure of pi we find that political instability has a deleterious effect on the savings rate both directly and indirectly through a reduction in investment and economic growth the negative effects of pi on savings rate occurs contemporaneously as well as with a lag we also find that economic growth has a stabilising effect on the political system and that not accounting for these effects through a simultaneous equations model results in biased coefficient estimates these relationships are robust with respect to model specification the implication of our results is that economic factors alone cannot explain the development process in less developed countries

imperfect competition expectations and the multiple effects of monetary growth in a monetary overlapping generations model with an imperfectly competitive labor market in which output is below its full employment level it is shown that different backward looking rules for forecasting inflation lead to different steady states despite yielding no forecast errors in the steady state and in many cases none in the short or medium run either higher monetary growth raises output in some steady states in others has no effect and in others lowers it this contrasts with ad hoc or competitive macromodels where the absence of forecast errors in the steady state usually defines it and its properties uniquely copyright 1992 by royal economic society

noisy signals in target zone regimes theory and monte carlo experiments abstract previous empirical evidence indicates that uncovered interest parity uip does not hold for target zone exchange rates like those in the european monetary system and in the nordic countries we explore a target zone model where the market infers the probability of a realignment of the band on the basis of a noisy signal we show theoretically and through monte carlo simulations that if the market overrates the information content in the signal then this may explain the empirical results obtained from testing uip for target zone exchange rates

asymmetric information and rational expectations when is it right to be wrong abstract in this paper we examine the effects of private agents being less than fully rational in their expectations we examine this in the context of monetary policy where the central bank may have uncertain preferences either by choice or by necessity the new feature is that we allow the public to react in two different ways they either form rational expectations and internalize the uncertainty about the central bank s preferences in full or alternatively and if this process of internalization is costly it forms a best guess regarding those preferences this implies a certainty equivalence strategy applied to the preference parameters as those parameters enter the decisions non linearly a systematic error emerges we examine the magnitude of the resulting error in inflation and output following the assumption of certainty equivalence under all reasonable levels of uncertainty this error turns out to be small but involves trading a deflation bias against the cost of gathering the information needed for the full information rational expectations solution

pegged exchange rate regimes a trap this paper studies the empirical and theoretical association between the duration of a pegged exchange rate and the cost experienced upon exiting the regime we confirm empirically that exits from pegged exchange rate regimes during the past two decades have often been accompanied by crises the cost of which increases with the duration of the peg before the crisis we explain these observations in a framework in which the exchange rate peg is used as a commitment mechanism to achieve inflation stability but multiple equilibria are possible we show that there are ex ante large gains from choosing a more conservative not only in order to mitigate the inflation bias from the well known time inconsistency problem but also to steer the economy away from the high inflation equilibria these gains however come at a cost in the form of the monetary authority s lesser responsiveness to output shocks in these circumstances using a pegged exchange rate as an anti inflation commitment device can create a trap whereby the regime initially confers gains in anti inflation credibility but ultimately results in an exit occasioned by a big enough adverse real shock that creates large welfare losses to the economy we also show that the more conservative is the regime in place and the larger is the cost of regime change the longer will be the average spell of the fixed exchange rate regime and the greater the output contraction at the time of a regime change

unions oligopoly and the natural range of employment a simple two sector general equilibrium macromodel is presented wi th oligopolistic price determination in the product market and a unionized labor market in the first stage unions set the nominal wage and in the second stage firms choose outputs given wages by altering the balance of fiscal policy between the two sectors the government can achieve a continuum of aggregate employment levels the natural range of employment a unique natural rate will occur only i f one requires fiscal policy to be the same in both sectors this indicates that the natural rate property of some single or representative sect or macromodels is a special case

inflation its variability and consumption in selected latin american countries abstract the aim of this paper is to estimate the impact of inflation on consumer expenditures in argentina brazil and chile attention is also given to the impact of uncertainty about inflation and to the role of liquid assets

the variable rate of growth effect in the life cycle saving model the rate of growth in real gnp g affects the aggregate saving rate positively in life cycle saving models this rate of growth effect is invariably estimated as the coefficient of g in the saving function we show that other determinants of the saving rate influence the rate of growth effect in other words the rate of growth effect is not constant specifically the real rate of return on financial assets and the population dependency ratio determine the timing of saving over the life cycle and hence alter the rate of growth effect the dependency ratio also has an effect on the saving rate which is independent of g because it together with the foreign saving rate determines the level of saving over the life cycle

testing commitment models of monetary policy evidence from oecd economies in ation rates in a number of oecd follow a common trend over the past four decades in ation starts out low in the 1960s rises for a time before peaking in the 1970s or early 1980s and then falls back to initial levels this similarity in the behavior of trend in ation suggests that any explanation of long run in ation trends ought to apply across oecd countries ireland 1999 shows that a simple time inconsistency model of monetary policy modifled to allow for a time varying nairu can explain long run trends in u s in ation in this paper we show that this result cannot serve as an explanation of the common trend in oecd in ation as it flts the data only in the u s we investigate two important variants of the hypothesis i that time inconsistency was an important component of central bank behavior in earlier decades but has become less signiflcant in recent years and ii that time inconsistency problems drive u s in ation which afiects in ation rates in other countries as a result of central bankers attempts to manage nominal exchange rate movements vis a vis the u s dollar we flnd that the flrst hypothesis flts the data no better than the baseline model we flnd some support for the international spillovers version of the model but the behavior of non u s central bankers with respect to domestic unemployment rates is not well described by the time inconsistency mechanism

the time varying nairu and its implications for economic policy the nairu the unemployment rate consistent with a constant rate of inflation is estimated in this paper as a parameter allowed to vary over time value is determined in an econometric model where the inflation rate depends on its past values demand and supply shocks the nairu estimated for the gdp deflator varies over the past forty years within 5 4 to 6 5 percent its estimated value for the most recent quarter 1996 q2 is 5 6 percent the nairu has declined in recent years in response to global competition immigration other factors weakening labor s bargaining position and the rapidly declining prices of computers and other electronics

robust monetary policy with the cost channel recent research argues that model uncertainty leads the central bank to adjust interest rates stronger to exogenous disturbances than under certainty this paper investigates whether the introduction of a cost channel of monetary transmission whose presence is empirically supported changes the impact of model uncertainty on interest rate setting the model is simple enough to facilitate an analytical solution i find that the presence of the cost channel dampens the effect of model uncertainty on interest rate setting and can offset the activist policy stance a richer model that allows for persistent supply and demand shocks corroborates these findings

public capital and imperfect competition abstract in this paper we consider a macroeconomic model in which public capital is a productive input and there is monopolistic competition in the product market we analyze the effects of a permanent variation in public capital investment both in the short and in the long run finally we show that the optimal provision of public capital under imperfect competition is higher than that associated with the first best policy

the nature of the savings function in developing countries a survey of the theoretical and empirical literature the savings rate marginal or average is regarded as a key performance indicator by development economists and foreign aid practitioners admonish their clients to increase their savings ratio as a primary condition for achieving a satisfactory rate of economic growth however not only have questions been raised regarding the significance of the savings effort as an independent determinant of economic progress but the formulation of policies designed to increase the savings propensity has suffered from a dearth of knowledge regarding the nature of the savings function in developing countries a number of alternative savings hypotheses derived mainly from the literature relating to developed economies have been advanced but the paucity of reliable data has made it difficult to test these hypotheses and obtain results which warrant a reasonable degree of confidence the purpose of this article is a to review the theoretical and empirical literature on the savings function in developing countries b to assess critically the findings with respect to the major hypotheses and c to summarize the state of our knowledge on this important topic we shall begin with a brief review of the nature of the data on savings in developing countries with which economic analysts must work

the central banker as a risk manager estimating the federal reserve s preferences under greenspan we derive a natural generalization of the taylor rule that links changes in the interest rate to the balance of the risks implied by the dual objective of sustainable economic growth and price stability this monetary policy rule reconciles economic models of expected utility maximization with the risk management approach to central banking within this framework we formally test and reject the standard assumption of quadratic and symmetric preferences in inflation and output that underlies the derivation of the taylor rule our results suggest that fed policy decisions under greenspan were better described in terms of the fed weighing upside and downside risks to their objectives rather than simply responding to the conditional mean of inflation and of the output gap

financial liberalization in africa abstract recent evidence has shown that african economies are financially repressed and the underlying motives for perpetuating repressive policies still exist increasing real deposit rates mainly through lower inflation promotes financial savings investment and growth financial liberalization in africa has recorded limited success owing to a high and unstable inflation rate the high cost of financial intermediation low bank demand for deposits and persistent government interference in credit markets chronically high fiscal deficits and their adverse impacts on the balance of payments also constitute hurdles for financial deepening in africa

dependency rates and savings rates reply arthur goldberger s comment is a tempest in a teacup this is readily verified from the data presented in table 1 this table reproduces from my original paper the coefficients for paired equations estimated with three different samples in which in s n and ln si y were the dependent variables as the data of table 1 indicate in 7 of the 12 cases the coefficients are identical through the second decimal place furthermore all the discrepancies are quantitatively very small in 9 cases the paired parameter estimates are within 1 percent of each other in the remaining cases the differences are of the magnitude of 0825 0012 and 0011 these are well within the margins of accuracy within which anyone views data generated from the national income accounts of the less developed countries in light of these considerations it is difficult to understand the tone of goldberger s comment the reason for the slight discrepancies is straightforward my observations for s n and s y were computed separately from data supplied by the statistical office of the agency for international development with the rounding introduced by the series for n and y it is not surprising that the series for s n is not identically equal to the series which would be obtained by forming s n from the product of y n and s y similar slight discrepancies have also been reported in other econometric work in which equations for s n and s y have been estimated with separately computed data series in any case nowhere in my paper did i even refer to the precise numerical parameter estimates obtained in my equations the main conclusions of the paper were that the dependency variables were quantitatively an important determinant of international savings rates and further that introduction of these variables greatly reduced the importance of percapita income on which some previous discussions had focused neither of these conclusions is affected by goldberger s comment

disequilibrium analysis in developing economies an overview a general theory of distortions in product and in factor markets distinguishes between endogenous and policy imposed distortions the literature has tended to focus on policy imposed distortions in product markets and on endogenous distortions in factor markets this paper analyzes policy imposed distortions in product and in factor markets of developing economies section i briefly describes the principal policy imposed distortions observed reviews recent estimates on the extent of discrimination in particular markets and indicates their possible economic effects section ii reports on available estimates of the impact of these distortions on the efficiency of allocating existing resources as well as on savings investment efficiency and economic growth

interest rates savings and growth in ldcs an assessment of recent empirical research abstract the mckinnon shaw proposition of a positive interest responsiveness of savings and the beneficial effects of financial liberalization policies on economic growth has been an issue of considerable debate and a foundation of policy practice in less developed countries ldcs this paper aims at assessing critically a number of recent contributions to the empirical literature dealing with this proposition the need to advance more knowledge in this field on empirical grounds is argued despite the data conceptual and methodological shortcomings faced in making these efforts the main conclusion of this paper is that the debate is far from being settled even for those countries on which empirical research has focused

impacts of official development assistance on agricultural growth savings and agricultural imports abstract this paper explores the links between development assistance agricultural output growth and imports in 56 developing economies over the period 1974 1990 the empirical model treats agricultural growth and imports savings and aid as endogenous the analysis also accounts for differences in macroeconomic policies the results show that aid had a positive impact on agricultural growth a robust relationship exits between aid and agricultural imports consistent with the argument that aid helps industrialized countries through market expansion and strengthened trade ties

assessing the impact of interest rates in less developed countries abstract empirical results obtained do not unambiguously support what one should expect on the basis of conventional economic theory cross country evidence on the average relationship for 64 ldcs during the period 1971 1980 between some of the macroeconomic variables such as rate of growth of real gdp real financial assets saving income and investment income ratios and rate of return on investment on the one hand and the level of the real interest rate on the other is analyzed by applying a non parametric mann whitney test it is found that there is no difference with any statistical significance between the two groups of ldcs above and below the mean real interest rate this implies that the level of the real interest rate by itself has little or no impact on the selected macroeconomic variables

distinguished lecture on economics in government what central bankers could learn from academics and vice versa academic writing about monetary policy has been useful to practical central bankers but more of certain aspects of the economists way of thinking could profitably be imported on the other hand academics could improve their analysis and make it more useful to policymakers if they would pay more attention to certain real world aspects of monetary policy the author draws on his experience at the federal reserve board to point out a number of specific lessons for each side

inflation forecasts and monetary policy proposals for inflation targeting as a strategy for monetary policy leave open the important operational question of how to determine whether current policies are consistent with the long run inflation target an interesting possibility is that the central bank might target current private sector forecasts of inflation either those made explicitly by professional forecasters or those implicit in asset prices we address the issue of existence and uniqueness of rational expectations equilibria when the central bank uses private sector forecasts as a guide to policy actions in a dynamic model which incorporates both sluggish price adjustment and shocks to aggregate demand and aggregate supply we show that strict targeting of inflation forecasts is typically inconsistent with the existence of rational expectations equilibrium and that policies approximating strict inflation forecast targeting are likely to have undesirable properties we also show that economies with more general forecast based policy rules are particularly susceptible to indeterminacy of rational expectations equilibria we conclude that although private sector forecasts may contain information useful to the central bank ultimately the monetary authorities must rely on an explicit structural model of the economy to guide their policy decisions this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

growth theory and industrial revolutions in britain and america abstract long run economic growth has again become a major focus of economic theory a perception of technological change as an economic process with externalities has motivated the development of aggregate models that generate different steady state growth paths economic history has also long been interested in long run economic growth here a dialogue is presented between growth theory and the historical literature on the industrial revolution in britain and america s surge to international economic leadership in the late nineteenth century in conclusion economists recent thinking about the microeconomics of technological change has provided fruitful material for the economic historian of growth unfortunately the models of endogenous growth on the other hand present too aggregated a view of the economy to prove helpful when confronted with the details of economic history jel classification n0 n1 1 theorie de la croissance et revolutions industrielles en grande bretagne et en amerique la croissance economique a long terme est redevenue un point d interet majeur pour la theorie economique une perception du changement technologique comme processus economique porteur d externalites a engendre le developpement de modeles agreges qui generent differents sentiers de croissance en regime permanent l histoire economique s interesse depuis longtemps a la croissance economique a long terme ce texte engage le dialogue entre la theorie de la croissance et la litterature historique a propos de la revolution industrielle en grande bretagne et de l emergence de l amerique au statut de leader international a la fin du dix neuvieme siecle on en arrive a la conclusion que les recents developpements dans la pensee economique a propos de la micro economie du changement technologique ont produit des resultats utiles pour l histoire economique de la croissance malheureusement d autre part les modeles de croissance endogene presente une vue trop agregee de l economie pour s averer utile dans l examen des details de l histoire economique

household saving in developing countries first cross country evidence although most studies have relied on domestic or private sector saving data this article uses household data available from the u n system of national accounts for a sample of 10 countries household saving functions are estimated using combined time series and cross country observations in order to test households responses to income and growth rates of return monetary wealth foreign saving and demographic variables the results show that income and wealth variables affect saving strongly and in ways consistent with standard theories inflation and the interest rate do not show clear effects on saving which is also consistent with their theoretical ambiguity foreign saving and monetary assets have strong negative effects on household saving which suggests the importance of liquidity constraints and monetary wealth in developing countries

undominated prices in the three good model abstract any movement away from walrasian prices will make somebody worse off we ask which other prices share this property the paper characterizes the set of such prices called undominated prices for the three good economy output labor and a nonproduced good that is now well known from the work of barro grossman benassy and malinvaud we consider two groups of consumers workers and shareholders we show that under some conditions there exist prices and wages that generate unemployment and are undominated this requires that a workers be poorly endowed with the nonproduced good b there be little substitution in consumption between the produced and the nonproduced good and c the market for the produced good be balanced i e prices equal marginal costs

how does uncertainty about future fiscal policy affect current macroeconomic variables a dynamic stochastic general equilibrium macromodel is constructed based on infinitely lived dynamically optimising households with labour market monopoly power randomness in future government spending causes randomness in the future output and price levels both when the money wage is flexible and when it is set one period in advance we show that through three different mechanisms rational anticipation of this depresses current aggregate demand if the wage is preset it thereby also depresses current output such fiscal uncertainty is suggested as one possible explanation for the faltering of the economic recovery in europe in 1995 and 1996

the propensities to consume labour and property incomes in the commonwealth caribbean this article outlines theoretically the aggregate savings implications of differences in business and personal savings propensities time series empirical tests for two developing economies generate the conclusion that the marginal business savings rate is much higher than the marginal personal savings rate for double log consumption functions differences in the personal propensity to consume labour and property incomes are substantial and statistically significant

undominated wage rates in a unionized overlapping generations economy abstract an overlapping generations macro model where consumers are divided into workers and capitalists is analysed in each period the wage rate is negotiated between an employers union and a trade union other prices adjust competitively the solution concept used is cooperative the wage rate chosen by unions should be undominated i e there must not exist another wage rate leading to higher utilities for both workers and capitalists the resulting one period equilibria relative pareto optima rpo and also stationary equilibria stationary relative pareto optima srpo are analysed results are that full employment s rpo always exist and in some economies unemployment s rpo also exist sufficient conditions for the latter to be the case are stated and the existence of economies fulfilling these conditions is demonstrated

savings and nutrition at low incomes while many development theorists assume saving propensities vary among different groups there has been limited theoretical justification for this view this paper analyzes two complementary theories stressing the effect on saving of physiological consequences of poor nutrition at low incomes one influence is on the probability of survival another is on workers productivity either effect means that the average propensity to save can rise with income issues considered include annuities exogenous changes in survival and efficiency implications for the efficiency wage theory of unemployment and distinctions between wage and nonwage income implications of nutritional effects for econometric specification of saving functions are stressed

on the effectiveness of economic policy when competition is imperfect and expectations are rational abstract we study the consequences of imperfect competition in a macro model with only one imperfection that of labor market competition otherwise the model is clean agents are optimizers prices are endogenous and expectations are rational we show that although imperfect competition in itself can explain unemployment as is well known it does not in itself give strong support to the use of traditional fiscal policy in fighting unemployment fiscal policy will almost inevitably have real effects but only through a special effect that may be difficult to control in many cases fiscal policy cannot create full employment and it may very well have perverse effects

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

imperfectly competitive cycles with keynesian and walrasian features abstract we consider a multi sector overlapping generations model with oligopolistic firms in the output markets and wage setting trade unions in the labour markets a coordination problem between firms creates multiple temporary equilibria which are either walrasian or of the keynesian unemployment type there exist many deterministic and stochastic equilibrium cycles fluctuating between keynesian recession and walrasian boom periods with arbitrarily long phases in each regime the cycles are in accordance with certain empirical regularities money is neutral and superneutral but appropriate countercyclical fiscal policies stabilize the cycles in a textbook keynesian way

endogenous imperfectly competitive business cycles abstract we investigate how imperfect competition affects the occurrence and the properties of endogenous rational expectations business cycles in an overlapping generations model with constant returns to scale in production the model has explicit product and labor markets all characterized by monopolistic competition an implicit assumption of barriers to entry justifies that the number of firms is fixed even when positive profits occur it turns out that both market power of firms on the product markets and market power of unions on the labor markets make the occurrence of cycles more likely in particular imperfect competition on the product markets and the positive profits associated with it may have the effect that there is a cycle even if the labor supply curve is increasing in the real wage rate for competitive cycles is required not only a decreasing labor supply curve but a wage elasticity below 1 2 at stationary equilibrium market power on the labor markets may have the effect that imperfectly competitive cycles are in accordance with certain empirical regularities some well known some reported in the paper concerning fluctuations in output and involuntary unemployment since involuntary unemployment does not occur under perfect competition such regularities are incompatible with competitive cycles

reputation in a model of monetary policy with incomplete information abstract previous models of rules versus discretion are extended to include uncertainty about the policymaker s type when people observe low inflation they raise the possibility that the policymaker is committed to low inflation type 1 this enhancement of reputation gives the uncommitted policymaker type 2 an incentive to masquerade as the committed type in the equilibrium the policymaker of type 1 delivers surprisingly low inflation with corresponding costs to the economy over an extended interval the type 2 person mimics this outcome for awhile but shifts eventually to high inflation this high inflation is surprising initially but subsequently becomes anticipated

a model of imperfect competition with keynesian features the recent literature on the reappraisal of keynes has viewed keynesian equilibria as arising when prices are fixed and effective demands and supplies are equilibrated through the adjustment of quantities one problem with this approach is that it lacks a theory of price determination in particular of why prices are fixed in the present paper we show that a number of keynesian features arise in a model in which prices are fully flexible but where agents have some monopoly power one advantage of this approach is that it provides a theory of the determination of both prices and quantities

tax policy regulated interest rates and saving abstract the paper evaluates tax policy options designed to reduce distortions to savings behavior that occur when administered interest rates are set beneath market equilibrium levels while the removal of controls on interest rates might be the best option political legal or institutional circumstances might well preclude this solution it suggests that consumption or sales taxes can be designed so that in the short term the rate of return to saving can be changed to approximate the market determined interest rate the main advantage of the measure is that it can provide a time to develop appropriate legal and institutional structures for financial deregulation and b an additional policy instrument that allows the burden of adjustment in a stabilization policy setting to be distributed over more than one instrument

evaluating monetary policy options we present a procedure for evaluating ex ante the effects of alternative paths of a monetary policy tool the federal funds rate in our illustrations on output and the price level within a variant of a widely used vector autoregressive model of the u s economy this exercise is a supplement to or even an alternative to analysis that relies on a particular structural model illustrations of the method are provided by evaluating the effects of changes in the funds rate target additionally the taylor rule is used to generate target funds rates for different target inflation rates and the effects of these are evaluated one of the critical elements in the formulation of monetary policy is the evaluation of the effects of alternative paths of the policy instrument on the macroeconomy for example in federal open market committee fomc meetings estimates of the effects of alternative paths of the federal funds rate are presented to policymakers as an input into the policy process for a discussion see meulendyke 1998 the effects of the alternative paths are evaluated within the context of a structural model of the economy the latest version of the structural model used at the board of governors is described in brayton et al 1997 in this article we present a procedure for evaluating ex ante the effects of alternative paths of a monetary policy tool the federal funds rate in our illustrations on output and the price level we demonstrate this procedure employing a variant of a widely used vector autoregressive var model of the u s economy this exercise can be viewed as a supplement to or even an alternative to analysis that relies on a particular structural model given the lack of general agreement on the appropriate structural model evaluation of the effects of changes in the policy instrument within a variety of different types of models is appropriate the discussion of the proposed procedure is in the spirit of recent work by leeper and sims 1994 who following earlier work by sims 1982 1987 distinguish between normal policymaking and regime changes for purposes of illustration we employ a var model comprised of the same variables used by christiano eichenbaum and evans hereafter cee 1994 1996 and bernanke and mihov hereafter bm 1998 we show how to evaluate and compare the current policy path with normal policy alternatives such as typically sized changes in the federal funds target we stress that this model is used only for illustrative purposes our methodology applies to any generic structural model and thus can easily

sociopolitical instability and the behavior of savings in less developed countries the paper argues for the introduction of sociopolitical instability as a factor in explaining saving behavior it also provides empirical evidence in regard to the quantitative and qualitative relationship between these two variables the empirical results point towards an inverse relationship between sociopolitical instability and savings our estimates are based on a sample of 7 observations from 60 countries a new pooling procedure is used to address the problems of autocorrelation and heteroskedasticity

making monetary policy objectives and rules what is it that monetary policy makers do and how do they do it the simple answer is that a central banker moves interest rates in order to maintain steady real growth and stable prices in this essay i examine the issues that arise in framing the problem faced by monetary policy makers i begin with a discussion of how over the past decade or so central banks have been made more independent and more accountable the result has been the virtual elimination of the inflation bias problem that is caused by political interference in the monetary policy process and better overall macroeconomic performance the essay proceeds with an example of a formal version of the policymakers problem describing their objectives and the information they need to formulate a policy rule i conclude with a discussion of a simple versus complex policy rules the impact of uncertainty on policy making and how central bankers use formal modelling in making their day to day decisions copyright 2000 by oxford university press

government spending and economic growth this study reviewed recent empirical studies providing fresh evidence of the impact of government spending on economic growth it is followed by a new theoretical synthesis and this as well as the other models are in turn subjected to empirical validation the empirical validation is conducted for both developed and less developed economies based on simultaneous equations as well as single equation models with or without adjusting for differences in th total factor productivity growth government size is estimated to have positive impact on economic growth in the short run but not in the intermediate run 25 years in this study

book reviewcentral banking in theory and practice lionel robbins lectures by alan s blinder cambridge mass mit press 1998 pp 92 20 00