comparative statics and asset substitutability complementarity in a portfolio model a dual approach this article uses a dual approach to investigate the properties of an n asset portfolio model the indirect expected utility and expenditure functions are used to provide an extremely simple derivation of slutsky equations by obtaining results similar to roy s identity and shephard s lemma the substitutability complementarity relations among assets are investigated and a number of empirically testable implications are deduced from the properties of the expenditure function

re examining the buffer stock model of money this paper critically examines recent papers in the buffer stock or supply side disequilibrium models of money the paper first investigates the assumptions at the m icroeconomic level and concludes that even with these assumptions aggregate behavior does not necessarily follow buffer stock models in which excess cash balances are held involuntarily in a simple model with uncertain cash flows it is shown that in the aggregate short run involuntary cash holdings are negligible if the buffer stock story is applicable it is to a broader definition of money than used in most empirical work the second part of the paper examines empirical work and argues that the buffer stock idea cannot be implemented using single equation techniques and that when viewed appropriately current empirical result s refute the buffer stock idea as it is currently modeled copyright 1987 by royal economic society

capital taxation and accumulation in a life cycle growth model almost all of the serious economic work on savings decisions within the past decade has relied on some variant of the life cycle hypothesis in which savings arise out of individual choices of an optimum lifetime consumption path this paper reexamines the incidence and welfare consequences of capital income taxes within a realistic life cycle model the results suggest that the elimination of capital income taxation would have very substantial economic effects for example a complete shift to consumption taxation might raise steady state output by as much as 18 percent and consumption by 16 percent the long run welfare gain from such a shift would for plausible parameter values exceed 150 billion annually stated somewhat differently shifting to consumption taxation would raise the lifetime utility of the representative consumer by the equivalent of about six years income in the new steady state these estimates dwarf estimates of the static welfare cost of taxation and significantly exceed even extreme previous estimates of the dynamic loss this study departs from earlier analyses of the effects of taxes on capital income in several respects probably the most important difference between this treatment and most preceding ones lies in the assumptions about the interest elasticity of saving it is shown below that the common two period formulation of saving decisions yields quite misleading results a more realistic model of life cycle savings demonstrates that for a wide variety of plausible parameter values savings are very interest elastic this implies that shifting away from capital income taxation would significantly increase capital formation making possible long run increases in consumption many studies of the welfare effects of capital income taxation have ignored the general equilibrium effects of increased capital formation in an economy with life cycle savings there is no presumption that the undistorted growth path corresponds to any sort of social optimum as peter diamond has shown life cycle savings can lead to a steady state capital intensity either greater or less than the golden rule level more generally it is clear that there is no reason to believe that a life cycle economy will maximize any particular intertemporal social welfare function a fundamental tenet of welfare evaluation is that preexisting distortions must be considered in evaluating the consequences of tax changes the results presented in this paper take explicit account of the nonoptimal character of the no tax steady state this explains in large part why such a sizeable welfare effect of capital taxes is found in an economy far from the golden rule level of capital intensity there are substantial gains in steady state consumption achievable through increased capital formation section i of the paper examines the aggregate savings function in a continuous time life cycle framework the second section clarifies the differences between wage and consumption taxes an aggregate production function is added to complete the model in the third section the effects of changes in capital taxes on both steady state incidence and welfare are considered within a general equilibrium framework the final section of the paper discusses some implications of the results and suggests areas which appear to warrant further study assistant professor of economics massachusetts institute of technology and research analyst national bureau of economic research i am grateful to alan auerbach martin feldstein laurence kotlikoff to the participants in the nber workshop on business taxation and to the harvard public finance seminar for useful discussions james poterba and james buchal performed the numerical calculations

integrated regressors and tests of the permanent income hypothesis abstract we use recent research on estimation and testing in the presence of unit roots to argue that hall s 1978 t and f tests of whether consumption is predicted by lagged income or by lags of consumption beyond the first are asymptotically valid a monte carlo experiment suggests that the asymptotic t and f distributions provide a good approximation to the actual finite sample distribution

modeling determinants of poverty in mauritania abstract this paper presents a brief descriptive summary of poverty in mauritania as revealed by household survey data for 1990 and then uses regression analysis to study the determinants of living standards and hence poverty the latter is conducted at the level of broadly defined socioeconomic groups using an econometric technique which also models the selection of households into socioeconomic groups household characteristics are used as explanatory variables including demographic education and sector specific variables by controlling for many factors multivariate analysis enables a clearer understanding of the nature and determinants of poverty than can be obtained from examination of summary poverty indices

an intertemporally quasi separable demand system on the assumption that the natural root of dynamics lies in the intertemporal dimension of the optimization process and that an operational and meaningful solution has to be found by appropriately placing restrictions on preferences this paper develops and tests on u k 1952 81 data a dynamic demand system exploiting w m gorman s concept of quasi separability comparison with a static intertempora lly weakly separable alternative provides further evidence for the i dea that dynamic modeling can overcome the usual rejection of theoret ical constraints in demand analysis copyright 1987 by mit press

entrepreneurship selection and performance a meta analysis of the impact of education in developing economies this meta analytical review of empirical studies of the impact of schooling on entrepreneurship in selection and performance in developing economies looks at variations impact across specific characteristics of the studies a marginal year of schooling in developing economies raises enterprise income by an average of 5 5 percent which is close to the average return in industrial countries the return varies however by gender rural or urban residence and the share of agriculture in the economy furthermore more educated workers typically end up in wage employment and prefer nonfarm entrepreneurship to farming the education effect that separates workers into self employment and wage employment is stronger for women possibly stronger in urban areas and also stronger in the least developed economies where agriculture is more dominant and literacy rates are lower

seasonality and habit persistence in a life cycle model of consumption summary the allocation of non durable consumers expenditure over the four quarters of the year reflects choices made by consumers implying a utility function exhibiting seasonality incorporating such a function the life cycle model fails to explain fully the observed dynamics in uk seasonally unadjusted data seasonal habit persistence effects are introduced and found to be significant although this generalized model stands up well to testing in a univariate context it fails to exclude a predictive role for lagged income changes seasonality is inherent in many economic time series but it is rarely considered to be an issue of interest in econometric model building rather than explicitly investigating the economics underlying seasonal variation modellers typically try to remove its effects either by using seasonally adjusted data or by including seasonal intercept dummies in their equations the former practice is criticized by wallis 1974 who shows that it may distort the relationship between variab le the latter assumes that the function simply shifts up or down with the season however except for degrees of freedom considerations there seems to be no a priori reason why the same parameters or functional form should apply at different times of the year indeed gersovitz and mackinnon 1978 argue that realistic utility cost or production functions result in models in which seasonal influences cannot be separated out in a simple fashion in the present study seasonality is treated as one of the features to be explained within the economic model thus in the particular application to non durable consumers expenditure it is argued that the allocation of expenditure over the year reflects seasonal tastes and hence seasonality in the underlying utility function the implications of this are explicitly investigated the framework for our analysis is the influential paper by hall 1978 who derives a randomwalk model for real non durable consumers expenditure when rational expectations are combined with a life cycle theory of consumption hall does not investigate seasonality at all and employs seasonally adjusted values in his empirical analysis although subsequent us authors have examined many aspects of this theory the type of data used has rarely been

welfare analysis and intertemporal substitution abstract this paper explores the structure of welfare comparisons when direct utility is weakly separable over time the lifetime welfare effect of a reform is then the sum of atemporal hicksian variations and intertemporal variations reflecting intertemporal substitution these latter are shown to be of only second order importance in lifetime welfare comparisons approximations to the intertemporal variations when preferences are intertemporally additive are derived pointing to the welfare significance in this context of not only the intertemporal elasticity of substitution but also within period income effects numerical examples illustrate the analysis and suggest possible orders of magnitude

reinterpreting a temporally aggregated consumption cap model recent literature has found that the coefficient of relative risk aversion estimated through consumption based asset pricing models is implausibly high even when the phenomenon of temporal aggregation is taken into account this article suggests that an ima 1 1 process be assumed as the generating mechanism of consumption instead of the standard random walk process in this case if the coefficient of the moving average component is negative the implied value of the coefficient of relative risk aversion can be reduced to plausible levels some empirical and theoretical support for the ima 1 1 hypothesis is also presented and discussed

interpreting econometric evidence the behaviour of consumers expenditure in the uk abstract the dynamic models of consumers expenditure proposed by davidson et al 1978 and hendry and von ungern sternberg 1979 are re appraised in the light of hall s 1978 analysis of the empirical implications of the life cycle permanent income hypothesis in particular that the series for consumption should obey a random walk apart from trend in an attempt to reconcile the conflicting findings monte carlo experiments are used to demonstrate that if the davidson et al model were actually correct the hall model would appear to give a good description of the data and would probably not be rejected all the models are re estimated with new data for the uk and these data do reject a modified random walk specification in conclusion we discuss the issue of income exogeneity and comment on questions of model selection and interpretation

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

potential pitfalls for the purchasing power parity puzzle sampling and specification biases in mean reversion tests of the law of one price the ppp puzzle is based on empirical evidence that international price differences for individual goods loop or baskets of goods ppp appear highly persistent or even nonstationary the present consensus is these price differences have a half life that is of the order of five years at best and infinity at worst this seems unreasonable in a world where transportation and transaction costs appear so low as to encourage arbitrage and the convergence of price gaps over much shorter horizons typically days or weeks however current empirics rely on a particular choice of methodology involving i relatively low frequency monthly quarterly or annual data and ii a linear model specification in fact these methodological choices are not innocent and they can be shown to bias analysis towards findings of slow convergence and a random walk intuitively if we suspect that the actual adjustment horizon is of the order of days then monthly and annual data cannot be expected to reveal it if we suspect arbitrage costs are high enough to produce a substantial band of inaction then a linear model will fail to support convergence if the process spends considerable time random walking in that band thus when testing for ppp or loop model specification and data sampling should not proceed without consideration of the actual institutional context and logistical framework of markets

adjustment costs durables and aggregate consumption abstract previous tests of the permanent income hypothesis pih have focused on either non durables or durables expenditures in isolation this paper studies consumer purchases of non durables and durables as the outcome of a single optimization problem it is shown that with non separability in utility the presence of adjustment costs of changing durables stocks may affect the time series properties of both components of expenditure an econometric test of the pih based on the model developed in the paper is both more efficient and less prone to bias than those in some previous studies however this test confirms earlier rejections of the pih in aggregate quarterly data

disequilibrium buffer stocks and consumers expenditure on non durables the authors examine the importance of a disequilibrium real balance effect on non durable consumers expenditure in the u k using cointegration techniques and the johansen procedure they first establish a desired long run demand function for liquid assets depending on income wealth and a set of interest rates deviations of liquidity from this desired level cause changes in consumption via intertemporal substitution but via its effect on disequilibrium liquidity consumption is modeled in an error correction framework and is also found to depend on income and financial wealth both the disequilibrium liquidity and wealth terms may be picking up the effects of financial liberalization e g mortgage leak on consumption as funds released will be temporarily held in financial assets they also find some evidence that changes in the distribution of income have an independent effect on aggregate consumption copyright 1991 by mit press

confronting the environmental kuznets curve t he environmental kuznets curve posits an inverted u relationship between pollution and economic development kuznets s name was apparently attached to the curve by grossman and krueger 1993 who noted its resemblance to kuznets s inverted u relationship between income inequality and development in the first stage of industrialization pollution in the environmental kuznets curve world grows rapidly because people are more interested in jobs and income than clean air and water communities are too poor to pay for abatement and environmental regulation is correspondingly weak the balance shifts as income rises leading industrial sectors become cleaner people value the environment more highly and regulatory institutions become more effective along the curve pollution levels off in the middle income range and then falls toward pre industrial levels in wealthy societies the environmental kuznets curve model has elicited conflicting reactions from researchers and policymakers applied econometricians have generally accepted the basic tenets of the model and focused on measuring its parameters their regressions typically fitted to cross sectional observations across countries or regions suggest that air and water pollution increase with development until per capita income reaches a range of 5000 to 8000 when income rises beyond that level pollution starts to decline as shown in the conventional ekc line in figure 1 in developing countries some policymakers have interpreted such results as conveying a message about priorities grow first then clean up numerous critics have challenged the conventional environmental kuznets curve both as a representation of what actually happens in the development process and as a policy prescription some pessimistic critics argue that crosssectional evidence for the environmental kuznets curve is nothing more than a

self employment and self selection in developing country labor markets labor markets in less developed countries ldcs have traditionally been characterized as non competitive this view is expressed in well known models in the development economics literature for example the labor surplus model of lewis 16 asserts that labor in rural areas of ldcs in early stages of development is so abundant that if the wage rate were determined competitively it would be below the subsistence level hence institutions are assumed to arise to determine the wage rate non competitively and to provide the resulting excess supply of labor to agriculture with a subsistence level of living the harristodaro 11 model of rural urban migration asserts that labor unions minimum wage laws public sector hiring practices and other institutional factors tend to keep formal sector wages in urban areas above labor market clearing levels the resulting excess supply of labor in urban areas is assumed to survive at a subsistence level by becoming selfemployed in the low productivity informal sector recent empirical studies provide little support for the non competitive view of ldc labor markets evidence from india thailand malaysia kenya and guatemala suggests that labor markets are much less imperfect than often assumed an important empirical finding in several of these studies is that self employed workers appear to have higher earnings than their wage employee counterparts in urban areas 2 this fact is inconsistent with the notion that self employment is typically a low productivity occupation engaged in by individuals who are searching for scarce well paying formal sector jobs the purpose of this study is to analyze and estimate a model of individual choice between wage and self employment in the ldc context the model incorporates a production function in the self employment sector that includes managerial ability as an input analysis of the influence of managerial ability on the choice of self employment leads to a theory that can explain the observed pattern of earnings of the urban self employed compared to wage employees implications of the model for estimation of production function

intertemporal consumer behaviour in developing countries this paper explores aggregate consumption behaviour in four developing countries under the assumption that consumers planning horizons do not extend over their expected lifetime under certain conditions the resulting moving planning horizon model suggests that changes in current income would exert considerably more influence over current consumer spending than is predicted by forward looking theories of consumption which typically assume that consumers planning horizons coincide with expected lifetime estimation of the model for the group of developing countries provides empirical support for the role of changes in current income in influencing the consumption process the results also reveal that consumers are relatively short sighted sinced the length of the planning period of consumers ranges from just over ten months an important implication of these findings is that policy measures can be effective not only if they influence consumers permanent incomes but also if they affect changes in curr

seasonal fluctuations and the life cycle permanent income model of consumption this paper examines a new possible explanation for the recent rejections of the life cycle permanent income model of consumption the treatment of seasonal fluctuations the paper shows that when the seasonal fluctuations in consumption purchases are included in an analysis of the life cycle permanent income model there is no evidence in the aggregate data against the model the estimates of the parameters of agents utility functions obtained with seasonally unadjusted data are plausible and the unadjusted data do not reject the overidentifying restrictions on the model

some consequences of temporal aggregation in empirical analysis i derive the generating mechanism of a temporally aggregated process when the disaggregated one belongs to the vector autoregressive integrated moving average class i then study the effects of temporal aggregation on a set of characteristics of usual interest such as exogeneity causality cointegration and common features an empirical example with canadian interest rates illustrates the main issues

consumption saving and rational expectations some further evidence for the u k this paper examines implications of the rational expectations permanent income framework for quasi savings using u k data the residual from a cointegrating regression between income and consumption provides the quasi savings series that is used in conjunction with differenced income in a bivariate vector autoregression with associated restrictions and exclusion tests a further implication is that savings should granger cause labor income changes incomes and consumption are found to be cointegrated in levels as a robust result and the bivariate system performs well however savings granger cause labor income changes with a perverse positive sign and exclusion restrictions fail copyright 1989 by royal economic society

consumption and demand during the recent economic downturn anec dotal reports in the press indicate that some demands are recession resistant beer while others are very procyclical e g wine this naturally causes economists to attempt to infer something about engel curves just as macroe conomists think differently about growth and business cycles so it seems should microe conomists think differently about how con sumption responds to growth and business cycles using quarterly national income and product account nipa data figure 1 depicts consumption and food expenditure growth mean percentage growth rates for food con sumption was 2 3 in the period 1948 1977 and 1 85 in the period 1978 2009 while the standard deviation of growth rates fell from 0 37 in the earlier period to 0 27 in the later pe riod consistent with engel s law the growth rate of food consumption has fallen over time in either total or per capita forms unsur prisingly the quarterly growth rate of medical consumption not shown is higher than food with a mean growth of 5 97 in the earlier period and reduced growth of 3 4 and de clining in the later period interestingly stan dard deviation d of medical growth rate has fallen substantially from 0 51 to 0 18 the mean growth of overall consumption expendi tures was 3 9 d 4 15 in the earlier period and 3 1 d 2 62 in the later period finally housing expenditure growth rates not shown halved from 5 04 in the early period to 2 51 in the latter period with very stable rates of growth d 0 15 however negative growth rates occur during recessions 2001 is an ex ception indeed food expenditures fell almost 15 in the recent quarter from the previous quarter which was also negative growth sim ilar patterns of negative growth rates during re cessions occur for the other two categories of consumption in the period 1978 2009 and for total consumption as expected consumption and consumption growth behave very differ ently in recessions the question is are the negative growth rates just due to a fall in cur rent income or do they reflect uncertainty if uncertainty is key then one must funda mentally think about model future expecta tions in order to understand measure current demand as simple as these basic engel curve consid erations are one of the liveliest debates in eco nomics centers on consumption in response to income for decades there has been the steady accumulation of evidence for and against a keynesian type view that people consume out of current income the contrary view is most commonly called the permanent income hypothesis or pih due to modigliani and brumberg 1954 friedman 1957 and oth ers generally forward looking intertemporal models of consumption and savings might be called the life cycle hypothesis with pih as a special case yet economists have not been particularly successful at amassing convincing evidence that is consistent with the life cycle model of behavior in all of its ramifications and many find models of conventionally ra tional economic agents wanting e g laibson 1998 the pih is that individuals consume out of an annuity derived from expected lifetime wealth this is particularly relevant when dis cussing the effects of countercyclical fiscal pol icy john taylor 2008 recently sided with the pih against the keynesian or neo keynesian view a second major issue is whether liquid ity constraints mitigate the forward looking life cycle predictions a third issue is how un certainty affects consumption and saving pre cautionary behavior much research has focused on the demand response to changes in total expenditure or even food expenditure allocations to particu lar foods engel curve notions of this research could be stated as dqt dc 1 n where c is real total consumption expenditures c j2 i piqi where qt and pt are the th quantity and real price respectively macroeconomics fellows address rulon d pope is professor of economics at brigham young university the author would like to thank daniel sullivan for assistance fellows address was presented at the 2008 aaea annual meet ing in milwaukee wi august 2009 invited addresses are not sub jected to the journal s standard refereeing process

consumption leisure and earnings related liquidity constraints a note abstract the life cycle model with liquidity constraints produces a euler equation with unobservable kuhn tucker multipliers if borrowing restrictions depend on earnings preferences are non separable between goods and leisure and individuals are employed we derive a euler equation involving only observable variables

the permanent income hypothesis estimation and testing by instrumental variables the permanent income hypothesis with rational expectation is restated estimated and tested by an instrumental variables technique on the postwar u s aggregate time series data the hypothesis is accepted on a consumption series which includes service flows from consumer durables if the consumption series is the one in the national income and product accounts the hypothesis is decisively rejected an explanation is suggested to reconcile the conflicting test results

embodied pollution in trade estimating the environmental load displacement of industrialised countries abstract the present paper sets out to aid in the development of environmental load displacement indicators developing the notion of the environmental memory of physical flows we estimated embodied pollution in trade of 18 industrialized countries with a the rest of the world and b developing countries from 1976 to 1994 we found that in the last years of analysis total imports of japan usa and western europe have entailed in general larger air pollutant emissions than local exports the balance of embodied emissions in trade beet seems to follow an inverted u shape across time in japan and western europe and an n shape in the us in the period of analysis japanese and european environmental terms of trade with developing countries improved from the japanese and european point of view whereas american environmental terms of trade with developing countries deteriorated over time although there is no statistical trend between income and embodied emissions in imports in a cross section analysis there does seem to be a positive relationship between both variables at a national level the results suggest that despite many shortcomings this type of assessment may shed useful insights on the international aspects of sustainable development

consistent estimates of the wage equation when individuals choose among income earning activities one of the most stable relationships in economics is the human capital wage determination equation numerous studies using data from the u s as well as low income countries have found that education raises the individual s wage rate and that experience affects wage rates in a non linear way peaking in the age cross section generally at around thirty years of experience the wage rate is an aggregate concept in that it represents the returns per hour of work regardless of the type of work performed this paper is a first step toward a disaggregation of wages according to income earning activities the activities distinguished here are work in the wage labor market and vork in self employment these activities earn respectively market wages and self employment wages but this nomenclature does not imply that work in self employment is an activity outside the labor market self employment is an individual s choice among labor market alternatives the motivation for this paper is three fold first of all current literature has not explored in any depth the issue whether the determinants of the wage rates earned in the two activities are similar differences may well exist entrepreneurial human capital varies from that of employees the mix of pecuniary wage and non pecuniary compensation may differ entrepreneurs frequently use their own assets like land or capital in their business activity section ii will expound on these theoretical differences in more detail second little is known about self employment wages most wage studies admit to the different nature of the two activities by omitting all individuals reporting self employment earnings from the sample and estimate wage equations for employees only this is not the optimal solution to the problem in developing countries up to one half of the labor force is self employed and even in industrialized countries 10 to 15 percent adds up to a sizeable group in absolute numbers restricting the sample to employees is likely to intro

how does foreign direct investment influence energy intensity convergence in china evidence from prefecture level data abstract the huge energy intensity gaps among chinese prefectures make the overall reduction of energy intensity extremely difficult energy intensity convergence eic i e catching up of the high energy intensity prefectures with the low ones is imperative for narrowing these gaps as one of the most important channels for international technology diffusion foreign direct investment fdi has great impact on energy intensity and may be beneficial for the convergence based on pollution haven hypothesis however fdi may result in energy intensity divergence to provide an in depth understanding of the mechanisms of fdi induced convergence divergence this paper employs markov chain approach to examine the impact of fdi on eic for 256 chinese prefectures in the period from 2005 to 2014 moreover we particularly emphasis on the influences of local specific characteristics such as human capital resource endowment and environmental regulation on fdi induced convergence divergence our study on 256 chinese prefectures finds that fdi helps prefectures with higher energy intensity to catch up with lower ones which strengthens eic the impact of fdi on eic varies depending on different local characteristics among all characteristics mentioned above human capital and environmental regulation benefit the convergence driving effect of fdi while this effect is hindered by resource endowment more comprehensive and detailed policies are recommended to address energy intensity gaps in china

consumer behaviour theory and empirical evidence a survey this survey is designed to emphasize the relationship between empirical a nd theoretical considerations in the analysis of consumer behavior a lthough it focuses primarily on analysis at the individual or micro l evel it tries where possible to draw implications for the estimati on of aggregate relationships the importance of micro level analysis stems from the rapid expansion in available panel and survey data se ts this development has generated its own theoretical and empirical issues many of which are raised in this survey copyright 1988 by royal economic society

consumption and income some simple excercises with panel data this paper reports on the performance of simple versions of the rational expectations permanent income hypothesis of hall 1978 and the error correction approach of davidson et al 1978 in explaining nondurable consumption expenditure from austrian panel data paying particular attention to the characterization of nondurability we examine the parameter restrictions implied by the respective models and then select favoured dynamic consumption income relationship our findings suggest that the models receive limited support only for the narrowest category of nondurables food consumed at home particularly for broader categories the strength of model rejections and the complex dynamic paths observed imply that the models provide an inadequate description of consumption at the micro level

effects of transitory consumption and temporal aggregation on the permanent income hypothesis this paper shows that u s monthly consumption data are consistent with the permanent income hypothesis when transitory consumption and temporal aggregation effects are jointly incorporated into the model in this case a more appropriate representation for the permanent income hypothesis is the integrated moving average ima 1 1 process with a negative ma coefficient rather than the repeatedly rejected random walk process restrictions on the relative importance of transitory and permanent consumption are also discussed with and without measurement errors copyright 1993 by mit press

vertical and horizontal intra industry trade a cross industry analysis for the united kingdom a large theoretical literature has emerged directed at explaining the presence of intra industry trade iit one of the distinctions which comes out of these models is that between horizontal iit where goods are differentiated by attributes and vertical iit where goods are differentiated by quality in this paper horizontal and vertical iit in u k trade are disentangled using a unit value dispersion criterion and a range of industry characteristics the paper not only points up the relative importance of vertical and horizontal iit in the united kingdom it also demonstrates how a failure to separate them out can impact on the interpretation of empirical results copyright 1995 by royal economic society

temporal aggregation and hall s model of consumption behaviour a simple exercise of time series analysis shows that the presence of the phonomenon of temporal aggregation in quarterly consumption data can substantially alter the empirical inference about hall mocel of consumption behaviour this fact has received almost no attention in the econometric research in this field

a simple nonadditive preference structure for models of household behavior over time intertemporal separability is an almost universal assumption in empirical work on household behavior but a good deal of recent work on consumption and labor supply suggests that it may not be tenable the traditional weakening of this assumption is to allow for habit formation i propose an alternative structure for intertemporal preferences that nests intertemporal additivity in a simple way and yields closed form solutions for demand functions this structure includes the neoclassical durables model as a special case i derive a demand system that nests the almost ideal system as its time separable counterpart this model is estimated on u k aggregate time series data for seven goods time separability is decisively rejected moreover i find that ignoring temporal dependencies leads to considerable bias in the estimates of elasticities of the seven goods durables display the strongest nonseparable effect the estimated reactions are consistent with the neoclassical durables model

expenditure allocation across nondurables services durables and savings an empirical study of separability in the long run the separability of categories of consumption expenditures and savings are empirically examined in the context of an error correction model of aggregate quarterly expenditure allocations in canada some evidence is found for separability of consumption allocations from savings in both the long run structure and short run dynamics of the model lending some support to the use of the assumption in modelling consumption behaviour

peasant household behaviour with missing markets some paradoxes explained a model of peasant household behavior under varying degrees of household specific food and labor market failures is constructed to show that these structural features can explain several well known patterns of peasant response which have often been attributed to peculiar motives presumed specific to peasants the model explains sluggish response to cash crops prices and high instability in perceived food and labor scarcities the key role of manufactured consumer goods prices in stimulating peasants effort in cash crops production the effectiveness of taxation as opposed to incentives in stimulating cash crops production and the key role of technological change in food production to enhance cash crop production results are obtained analytically in the case of one market failure and by numerical simulation with more than one

trends random walks and tests of the permanent income hypothesis abstract recent studies find that consumption is excessively sensitive to income these studies assume that income is stationary around a deterministic trend the data however do not reject the hypothesis that disposable personal income is a random walk with drift if income is indeed a random walk then the standard testing procedure is greatly biased toward finding excess sensitivity moreover if income follows either a more general non stationary process or a borderline stationary process this procedure is also seriously biased

life cycle expenditure allocations and the consumption costs of children abstract in this paper we assess whether it is changing needs or intertemporal substitution that dominate household expenditure responses to the presence of children over the life cycle we construct lifetime expenditure paths for households with different demographic profiles and consider the shape of these paths and some possible implications for welfare measures simulated expenditure paths based on consistent single period and multi period models indicate that it is indeed changing needs that dominate such paths in periods when children are present in the household however allowing for intertemporal substitution is still shown to be important since it can introduce new information relevant to the calculation of household welfare

an investigation of the long run properties of aggregate non durable consumers expenditure in the united this paper estimates the effects of the modeling of nondurable consumption in the light of the five years of new data since the publication of the paper by j e h davidson et al 1978 and the development of the new cointegration technique of r f engle and c w j granger 1987 existing models are found to be inadequate on two grounds they fail parameter stability tests and they do not contain a suitable equilibrium specification the paper uses the cointegration approach to search for an encompassing model that is both stable and cointegrates the main finding is that the analysis must be extended to allow for differential income effects caused by changing higher rate income tax bands copyright 1989 by royal economic society

econometric issues in macroeconomic models with generated regressors the paper critically reviews the literature on the econometric issues raised by the use of generated regressors gr in empirical models the economic rationale for the use of gr is considered with examples being drawn from several macroeconomic examples including new classical macroeconomic ncm models which postulate monetary neutrality various estimation methods are discussed for models which include surprise or unexpected terms and the strengths and weaknesses of each approach are investigated drawing upon the work of mcaleer and mckenzie 1991 situations where the typically inefficient two step estimation 2se method will be efficient are highlighted problems of model misspecification and measurement errors are also investigated an empirical section highlights some of the dangers of using uncorrected 2se estimation results through a careful consideration of many recent attempts to test the ncm monetary neutrality hypothesis copyright 1993 by blackwell publishers ltd

aggregate consumption and the distribution of income in the united kingdom an econometric analysis blinder i975 explained this omission by arguing that with the ascendancy of the friedman 1957 and modigliani and brumberg i954 models of consumer behaviour the view that income distribution affected aggregate consumption fell into disrepute in academic circles it was supplanted by the view that marginal and perhaps even average propensities to consume are constant over the income distribution pp 447 8 the life cycle model as is well known derives the aggregate consumption function from the hypothesis that the consumer chooses the time path of consumption which maximises lifetime utility subject to the constraint that the present discounted value of all consumption plus the present discounted value of the bequest if any is equal to lifetime disposable resources a consequence of such a hypothesis is that consumption at each instant is proportional to lifetime disposable resources with the constant of proportionality dependent only on age length of life the rate of interest and tastes in their empirical work friedman and modigliani may also have had to ignore income distribution due to lack of data however blinder 1975 went on to show that even under the life cycle hypothesis provided that the marginal utility of bequests say f was different

factors affecting food poverty in ghana household production theory is applied to the ghana household budget survey data to 1 identify the main determinants of food poverty and 2 determine the net contribution of children to household food availability results suggest income fertility and maturity indices age sex and education significantly explain household calorie gaps hypothesis test results at one per cent and five per cent suggest the contribution of children to household food availability is less than their caloric intake estimated non linear equations permit the prediction and monitoring of the calorie gap for a given household or set of households with given household income and demographic features in a given location

a nonparametric test of the life cycle rational expectations hypothesis in a world of perfect certainty and perfect capital markets agents allocate expenditure in such a way that the marginal utility of discounted expenditure is the same in each period in this paper we present a test of whether any particular series of discounted prices and quantities can be exactly reconciled with a utility function and marginal utility of discounted expenditure that do not change from period to period we find that uk us and canadian postwar aggregate data all reject our condition although it is not rejected for long sub periods we show that our results for the uk suggest particular modifications to the strong form of the rational expectations hypothesis that our condition tests in fact these data are exactly consistent with a number of alternative hypotheses from this we argue that time series data are ill suited to parametric testing of any of the competing hypotheses on the inter temporal allocation of expenditure the pure theory of the inter temporal allocation of goods and time with perfect capital markets and perfect foresight is identical to the static demand case there is a single lifetime budget constraint and the allocation of expenditure to each period is made so that the marginal utility of discounted expenditure is the same in each period bewley 1977 and hall 1978 have identified the life cycle rational expectations hypothesis under uncertainty reh with the proposition that expected utility maximising consumers will allocate expenditures and time in such a way as to try and keep the marginal utility of discounted money constant given a set of time series on prices purchases wages and labor supply we can ask whether these realised plans are consistent with the life cycle hypothesis in this paper we propose a test that requires no ad hoc specification of functional forms or error processes but rather gives an answer yes or no based on finite mathematical techniques the specific hypothesis we test is a strong form of the reh viz that the marginal utility of discounted expenditure is constant over the period of observation for long time series this seems to be an absurdly strong hypothesis since it is effectively equivalent to assuming perfect capital markets and perfect foresight with regard to all important variables if however we can accept this strong hypothesis for a particular data set then any test of the weaker forms of the life cycle rational expectations hypothesis on this data set must be interpreted

survey expectations in the time series consumption function this paper introduces survey based measures of expectations and uncertainties about income and real interest rates into an otherwise conventional consumption function the survey dat a contribute more than conventional variables to the explanation of changes in consumption the hypothesis that consumption follows a random walk is rejected in favor of a model in which consumption responds with a lag to changes in expected income growth the significance of inflation in earlier estimates of the u s consumpti on function is shown to be spurious and due to a strong negative correlation between expected inflation and expected income growth copyright 1992 by mit press

a survey of some recent econometric methods this survey is written mainly for the applied economist though we hope that the specialist econometrician will find something of interest too our aim has been to try to bring the applied worker as up to date as possible and in the process to improve the quality of applied work by providing access to the latest ideas in econometrics we have tried to describe and explain in a relatively non technical way the main developments that have taken place in the last ten years partly for reasons of space the survey is by no means exhaustive but it does cover a wide range of topics in both time series and cross section analysis among the subjects covered are the followoing the nature of data including integrated and fractionally integrated data four estimation methods maximum likelihood method of moments m estimators and non parametric estimation inference with stationary and integrated regressors a comparison of various model evaluation principles the formulation of models including dynamic specification cointegration and conditional expectations in mean and variance copyright 1989 by royal economic society

stochastic life cycle theory with varying interest rates and prices incorporating the assumption of rational expectations has produced some striking new predictions from many familiar economic theories one of the benefits of this development is that these new predictions provide additional means of testing well documented theories without necessarily requiring new data though it must be admitted that this is at the cost of an additional and for many a controversial assumption in his paper on life cycle and permanent income theory hall 1978 has given a very good example of such new predictions he demonstrated that if consumers are assumed to measure wealth using rational expectations of future income rather than a distributed lag of past income then a logical consequence of standard life cycle theory is that consumption will closely follow a first order autoregression subsequently bilson 1980 and flavin 1981 showed that the disturbance term in this autoregression will depend on the errors in predicting current and future income at first sight this remarkable result may seem to be inconsistent with the standard consumption function which relates consumption to income but an example will help explain why there is no necessary conflict consider the simple consumption function or absolute income hypothesis

growth is good for whom when how economic growth and poverty reduction in exceptional cases summary economic growth and liberal economic policies often help the poor but what about the numerous cases in which they do not this article analyzes two types of cases those in which income growth of the poor was significantly lower than expectations negative exceptions and those in which income growth of the poor significantly exceeded expectations positive exceptions insights from these cases inform our theoretical understanding of poverty reduction in addition this article contributes a typology of strategies used in these cases including alternative pathways to economic growth and neoliberal prescriptions for poverty reduction

towards a more general approach to testing the time additivity hypothesis a new procedure is proposed for re examining the assumption of additivity of preferences over time which although untenable is usually maintained in intertemporal analyses of consumption and labour supply the method is an extension of a famous work by browning however it is more general in permitting the estimation of intertemporal demand systems which are explicit in an unobservable variable price of utility but may lack a closed form representation in terms of observable variables such as prices and total outlay it also makes extensive use of duality theory to solve the endogeneity problem encountered in browning s study applying this method with an appropriate estimator to the australian aggregate data it is found that the time additivity hypothesis is decisively rejected which is consistent with browning s conclusion

a trade related pollution trap for economies in transition evidence from china abstract this study argues that economic growth does not necessarily reverse the pollution haven behavior even if one economy shifts from the low income group to the high income one i e the economy in transition the economy in transition can become a convergence of trade related pollution then getting stuck in a pollution trap through investigating the case of china during 2003 2009 this study examines the features and causes of trade related pollution trap supported by the world input output database and the product specific statistics from china customs this study applies the input output analysis to trace the distribution of pollution embodied in china s foreign trade then it constructs a sector country year panel and applies the fixed effect model to examine causes of the pollution trap the results show that china s pollution terms of trade ptt with developing economies increases and exceeds one while the ptt with developed economies keeps larger than one it supports the feature of pollution trap the results also demonstrate that pollution trap is determined by the synergy of environmental regulation inter industry trade and intra industry trade 1 environmental regulations keep china from becoming pollution haven of developed economies rather than relocating pollution intensive production to other developing economies 2 the current intra industry trade of low value added products worsens china s environmental performance 3 the diluting advantage on labor and the accumulating advantage on capital keep china specializing in pollution intensive production overall the pollution trap may alert economies that applies the outward oriented growth model to prepare for sustainability transition our findings imply that going green rather than moving away is essential in response to trade environment effects more stringent regulation should improve the environmental performance of production and encourage the utilization of clean technology the increasing role of intra industry trade requires to upgrade the commodity structure towards one with higher added value

does the public sector obey the rational expectations permanent income hypothesis a multi country study of the time series properties of government expenditures 1989 does the public sector obey the rational expectations permanent income hypothesis a multi country study of the time series properties of government expenditures applied economics vol 21 no 9 pp 1257 1266

net liquid assets and net illiquid assets in the consumption function some evidence for the united kingdom abstract this note reports details of estimating consumption equations for the united kingdom which separate net wealth into net liquid assets and net illiquid assets the estimation framework is related to that in the influential article by hendry and von ungern sternberg 1981 but recognises the importance of defining income to allow not only for inflation induced losses but also for depreciation provisions the empirical results provide some support for a role for both liquid and illiquid assets in determining consumption decisions

the sensitivity of consumption to transitory income estimates from panel data on households we investigate the stochastic relation between income and consumption specifically consumption of food within a panel of about 2 000 households our major findings are 1 consumption responds much more strongly to permanent than to transitory movements of income 2 the response to transitory income is nonetheless clearly positive 3 a simple test independent of our model of consumption rejects a central implication of the pure life cycle permanent income hypothesis the observed covariation of income and consumption is compatible with pure life cycle permanent income behavior on the part of80 percent of families and simple proportionality of consumption and income among the remaining 20 percent as a general matter our findings support the view that families respond differently to different sources of income variations in particular temporary income tax policies have smaller effects on consumption than do other more permanent changes in income of the same magnitude this abstract was borrowed from another version of this item

the performance of periodic autoregressive models in forecasting seasonal u k consumption the parameters of a periodic model are allowed to vary according to the time at which observations are made periodic autoregressive models are fitted to the quarterly values of seasonally unadjusted real nondurable consumers expenditure for the united kingdom and its components the periodic model offers no improvement over conventional specifications if the aggregate is modeled directly on the other hand periodic models generally perform well for the components which contain additional seasonal information the choice between a periodic or nonperiodic specification is also shown to have an important influence on the resulting dynamic properties

temporal change of china s pollution terms of trade and its determinants abstract based on the world input output database wiod this study employed a revised pollution terms of trade ptt indicator to investigate the temporal change of china s environmental cost relative to its economic gains from international trade from 1995 to 2009 the results show that china has ptt larger than 1 indicating that china emits more emissions to obtain each unit of value added from exports than its trade partners over the period china s ptt first decreased from 1995 to 2001 and then increased from 2001 to 2009 the further decompositions show that improving technology is the leading driving force to decrease ptt while the change in global trade pattern is the leading force increasing ptt especially after 2001 we further decomposed the temporal change of china s ptt by income group of the trading partners the results show that the change in the global trade pattern is the crucial driving force behind the different changes of ptt by income group

consumption innovation persistence and the excess smoothness debate based on studies using us data consumption is too smooth relative to the implications of the rational expectations permanent income hypothesis repih of consumption we examine this and a number of related methodologicalissues for the uk using maximum likelihood estimation mle of an autoregressive fractionally integrated moving average arfima model of the income process we conclude that an innovation to income has a persistent effect on consumption and that in contrast to the findings from us studies consumption is too volatile compared to the repih model further mle is substantially more efficient than the semi parametric method of estimating arfima models which has previously been used in this area

determinants of consumption and savings behavior in developing countries the determinants of savings generally and the specific effects of government policies on savings and consumption are pivotal forces in investment and economic growth the hall hypothesis states that consumption is a function of lifetime permanent income rather than income in each period independently changes in interest and tax rates money supply or government expenditure will affect permanent income and hence consumption and savings only if they are unexpected and thus not already incorporated in the estimation of permanent income we are unable to reject the hall hypothesis in tests for developing countries when we allow for varying interest rates we do find evidence of a negative effect of inflation on consumption and a positive relationship between the real interest rate and consumption the evidence for the hall hypothesis also suggests that ricardian equivalence may be valid this is barro s hypothesis that the effect on savings is the same whether government deficits are financed through taxation or debt our preliminary testing however does not support ricardian equivalence savings is the part of one s current income that is not spent on current consumption and it constitutes a large part of a nation s aggregate savings and investment and thus is a major determinant of the growth of future income and consumption households balance the tradeoffs between current and future consumption possibilities when making their individual consumption decisions understanding the determinants of households consumption behavior has been central to macroeconomics the three main theoretical approaches to this issue are keynesian consumption theory the life cycle permanent income hypothesis under rational expectations and the theory of the infinitely lived agent or altruistically linked consumers the theories differ in the extent to which they explain the observed consumer behavior and in their predictions regarding the effects of government policies on individual savings behavior for instance increased taxes higher nominal interest rates or an increase in the money

the pollution terms of trade and its five components abstract based on two extensions this paper proposes a re appraisal of the concept of the pollution terms of trade ptt introduced by antweiler 1996 first detailed data allows capturing the effect of differences in emission intensities across countries and over time second relying on johnson and noguera 2012 the revised ptt index controls for trade in intermediate goods and is based on value added rather than gross output figures applied to a database for so 2 emission intensities for 62 developed and developing countries over the 1990 2000 period it turns out that the first extension has a larger empirical importance than the second one the global pattern is one in which the major rich economies exhibit a ptt index below one higher pollution intensity in imports than in exports trade imbalances tend to exacerbate this asymmetry allowing rich economies to further offshore their pollution through trade

surprises in the consumption function the life cycle hypothesis has been the dominant theoretical basis for empirical work on the aggregate consumption function for about a quarter of a century under it real consumption is proportional to real life cycle wealth where the factor of proportionality depends on real interest rate expectations and the demographic structure of the population life cycle wealth is the sum of financial and human wealth however because the latter is the present real value of the stream of labour and transfer income expected over the life cycle it is not directly observable this fact has led to a great variety of proxying devices in empirical applications and in consequence much looseness in the interpretation of very different models as being all consistent with life cycle theory indeed one can argue that this has protected the hypothesis from being seriously tested and perhaps rejected an insight associated with friedman 1957 is that the view taken by consumers of life cycle income does not alter by much from period to period since there is greater persistence in life cycle income than in current income this also explains the greater persistence of consumption than of current income intuitively this would suggest that lagged consumption being related to last period s perception of life cycle income which in turn is not much different from this period s perception should have a major role in predicting current consumption this intuition was formalised by hall 1978 using ideas familiar from the study of stock market prices and the term structure of interest rates hall showed that if the real rate of interest is constant and given a number of other assumptions including no transitory element in consumption then the life cycle hypothesis implies that

the consumption function in macroeconomic models a comparative study 1984 the consumption function in macroeconomic models a comparative study applied economics vol 16 no 6 pp 799 838

inflation and the euler equation approach to consumption behaviour some empirical evidence abstract by using u s quarterly data on non durable consumption over the period 1951 i 1986 ii this note presents various pieces of evidence for the view that inflation variables in the anticipated surprise and uncertainty forms matter in the euler type consumption autoregression inflation variables are not only significantly negative and make the overall performance of the euler type specifications better but they also induce the wrong sign for the real rate of interest these results are puzzling and suggest that the question of why in contrast with a fisherian intertemporal optimization inflation matters in the consumption autoregression should be an important area for research

macroeconomic planning and disequilibrium estimates for poland 1955 1980 the authors specify and estimate a four equation disequilibrium model of the consumption goods market in a centrally planned econo my this work is based on previous papers of r portes and d winter 1977 and w charemza and r quandt 1982 the model contains a household demand equation a planners supply equation a min condition and plan adjustment equation through which plan formation becomes endogenous the paper uses a unique new data set of time series for plans for the major macroeconomic variables in poland the overall framework is applicable to any large organization which plans economic variables coauthors are richard e quandt david winter and stephen yeo copyright 1987 by the econometric society

imperfect capital markets and the monetarist black box liquidity constraints inflation and the asymmetric effects of interest rate policy in this paper we examine the effects of unanticipated changes in interest rates on consumers expenditure in a model in which capital markets are imperfect we show that where constraints exist on the amounts individuals can borrow individuals may rationally choose to borrow up to the limits of such constraints over part of their lifetimes such liquidity constrained individuals in general have a higher marginal propensity to consume out of changes in current income than is the case with liquidity unconstrained individuals changes in interest rates which have the effect of redistributing income between liquidity constrained monetary debtors and liquidity unconstrained creditors will thus have a net effect on aggregate consumption we further show that this effect operates asymmetrically in the sense that an increase in interest rates will have a larger net impact than a fall formally we examine the impact of a change in the interest rate which we assume exogenous on the behaviour of an individual consumer the analysis is thus independent of the source of the interest rate shock 2 but we believe an important application of the model concerns the transmission mechanism through which monetary policy operates in this paper we do not consider the relationship between the supply of money and interest rates but simnply follow standard economic theory in assuming that monetary policy operates through the impact of interest rates on expenditure it is the mechanism linking interest rate changes to expenditure that has proved hard to identify and it is in this respect that our analysis may be relevant in suggesting a process through which interest rates can affect expenditure which appears to have been neglected hitherto the model provides a possible channel of transmission of monetary policy different from those usually considered 3 in so doing the model may offer some insight into the transmission processes within the monetarist black box and indeed suggests that the efficacy of monetary policy may in part depend on the existence of capital market imperfections

the nature and determinants of socioeconomic inequality among peasant households in southern sudan abstract real income inequality among rural households in tropical africa sometimes may be imperceptible to the casual observer nevertheless the detailed information painstakingly collected from a small sample of peasant households in an area of southern sudan reported here shows that such income inequality is quite significant the great majority of the population are no doubt absolutely poor in the sense that many basic needs goods and services are scarce and income and food security are precarious yet in a situation where arable land is relatively abundant some households are much better off than others indeed our data suggest that inequality is extreme between rural households in terms of a wide variety of welfare indicators including the level of current household income set in the context of the chayanov model of peasant household decision making the paper explores the nature extent and principal determinants of income inequality in the sampled area this study establishes that those households which are able to relax the family labor constraint on the size of agricultural harvests and to diversify their principal sources of income away from purely subsistence levels of crop output into production of a marketable surplus into off farm income generating activities and into formal sector wage employment are able to attain a relatively higher standard of living according to a range of locally based welfare indicators

consumption of non durables and durables an empirical note abstract the empirical analysis of consumption in four european countries and the u s a shows different autocorrelation patterns for non durables and durables which do not however correspond to the differences implied by the life cycle permanent income model as formulated by hall and mankiw

testing the permanent income hypothesis the evidence from canadian data this paper investigates whether there are variants of the permanent income model that are consistent with seasonally unadjusted quarterly postwar canadian data the analysis is based on a misspecification test equation which nests the standard permanent income model the results obtained are somewhat unfavourable to the permanent income hypothesis the same results also apply to more general models in which the real interest rate is time varying and the utility function is non separable in consumption and the stock of durable goods un test de l hypothese du revenu permanent resultats derives a partir des donnees cana diennes ce memoire presente les resultats d une enquete pour etablir s il existe un ou des variantes du modele du revenu permanent qui soient compatibles avec les donnees trimestrielles canadiennes non desaisonnalisees pour la periode de l apres seconde guerre mondiale l analyse est fondee sur une equation qui encastre le modele de revenu perma nent standard mais qui est enrichie pour tester la specification de l 6equation les resultats obtenus sont quelque peu defavorables a l hypothese du revenu permanent les memes resultats s appliquent aussi a des modeles plus generaux dans lesquels le taux d interet reel

investigating the determinants of household welfare in cote d ivoire to predict the effect of economic policies on household welfare one should first understand which characteristics of households and of the localities in which they live enable them to raise their welfare levels this paper outlines a simple procedure for investigating the determinants of household welfare and demonstrates its use with recent data from cote d ivoire despite the relative simplicity much information is obtained from its use on cross sectional survey data results specific to cote d ivoire include high low returns to education in urban rural areas high benefits from cocoa land relative to coffee land a significant impact on economic welfare from the availability of medical services and no apparent benefits from agricultural extension services

intra industry trade in intermediate products pollution and internationally increasing returns this paper examines the relationship between intra industry trade in intermediate products pollution and increasing returns we develop a two country model in which production occurs in two stages final and intermediate good production intermediate goods are produced under monopolistic competition and final good production exhibits increasing returns with respect to the number of varieties of intermediates pollution occurs in the production of the final good when polluting intermediates are used we analyze the effects of international trade in intermediate products on pollution output and welfare under an endogenous tax scenario and with two types of pollution functions the results show that because of increasing returns international trade either leads to lower total pollution in each country or lower pollution per unit of output in at least one country in addition intra industry trade causes countries to import the environmental quality of their trading partners

testing the stability of the hall consumption function specification abstract this paper contains stability tests of hall s consumption specification by using cross country data from 11 oecd countries taken as a whole results are in favour of hall s hypothesis even though there is some conflicting evidence

the intertemporal allocation of expenditure on non durables services and durables this paper presents estimates of the parameters of a consumption function for u s quarterly seasonally unadjusted data on non durables services and durables the theoretical novelty in the approach we present is in the derivation of the consumption function from an underlying many goods allocation problem applying this model with an appropriate estimator to the data we find i the homogeneity restrictions suggested by theory are not rejected ii there is no evidence of excess sensitivity to income iii there is no evidence to suggest that agents cannot adjust their durable stocks as they would wish and iv the intertemporal substitution elasticity is not well determined

driving factors of carbon emissions embodied in china us trade a structural decomposition analysis abstract based on the environmental multi regional input output model this study employed structural decomposition analysis to investigate the driving factors of carbon emissions embodied in china us trade over the period of 1995 2009 effective driving factors were classified into six groups and each group included both factors at home and abroad the results show that factors trade structure of intermediate products at home and export market shares of final products at home presented the largest positive impacts to increments in carbon emissions embodied in chinese exports to the us while the majority of negative impacts was generated by changes in energy intensities at home the increment in carbon emissions embodied in us exports to china was mostly contributed by total demands abroad impacts of other driving factors were much smaller at the sectoral level both positive and negative impacts of driving factors were largely limited to a few sectors e g textiles products machinery transport equipment and electrical equipment here positive impacts were mostly contributed by export market shares of final products at home and total demands abroad and negative impacts were mainly contributed by energy intensities at home policy implications deduced from the results were discussed

the buffer stock notion in monetary economics not the least of harry johnson s contributions to our discipline was the series of survey papers on aspects of monetary economics which he produced during the 1960s and 1970s it is no exaggeration to say that the way in which the literature of monetary economics is organised even now follows the design which johnson first set out in 1962 and built on in the subsequent decade nevertheless the subject has not stood still and one of the more interesting developments of the last few years has involved the introduction of what has been variously described as the disequilibrium money shock absorber or as i prefer to call it the buffer stock notion into monetary economics the development of this line of thought was getting underway before johnson s untimely death much of it indeed under the auspices of his own research programme at the lse even so this did not happen early enough for the relevant ideas to be put in their proper niche by johnson himself and the buffer stock approach is not yet fully integrated into the mainstream of monetary economics much of the relevant literature is empirical concerned with modelling particular aspects of the monetary experience of specific countries hence it is fragmented and contains few papers which attempt a coherent account of just what this approach is and how it relates to other approaches to monetary analysis although essays by goodhart 1982a b and judd and scadding 1982a contain important discussions of these issues to the best of my knowledge only jonson 1976a and knoester 1979a have devoted entire papers solely to this central issue and these are relatively inaccessible and hence less widely known than they deserve to be in this lecture i shall attempt to give a brief account of the essentials of this approach first i shall sketch out its microeconomic background and then i shall discuss those theoretical characteristics which differentiate it from the neo austrian analysis of robert e lucas jr and his associates as well as from the conventional keynesian approach to monetary economics last but by no means least i shall argue that it yields simple theoretical insights into important empirical and policy related issues which are troublesome for alternative approaches in short my tribute to harry

surprises in the consumption function incomplete current inflation and moving average errors a note in an important paper hall i978 demonstrated that the joint assumptions of the life cycle hypothesis rational expectations and the constancy of the real rate of interest give rise to the startling implication that the flow of real consumption should only be related to its value in the previous period and a random error this error reflects new information which accrues between the previous and current period formally

is consumption too smooth the case of the united kingdom this study consider whether for the uk the restrictions of the rational expectations permanent income repi model of consumption are consistent with the data and whether consumption is too smooth given innovations in labour income some of the findings confirm those for the usa the repi restrictions are rejected however in marked contrast to the result of campbell and deaton 1989 little is found to support the view that consumption is too smooth indeed there is some support for the view that consumption is too volatile some insight is given as to how such results can arise

aggregate consumption behaviour and liquidity constraints the canadian evidence this paper considers a general permanent income model in which a fraction of consumers in the economy is liquidity constrained consumption growth rate for these individuals is related to the growth rate of their income and the level of real interest rates the interest rate coefficient is predicted to be smaller in the presence of liquidity constraints empirically liquidity constraints are found to be important and the estimated intertemporal elasticity of substitution parameter is much larger than the one obtained by estimating the standard representative agent model lastly there is some evidence of structural changes over the sample period which are associated with the 1982 recession

on the durability of non durable goods abstract using both monthly and quarterly data this paper shows that the durability rates of non durable goods and services are significantly greater than zero and in line with the prediction of the theory the common practice of testing consumption and consumption related models with the national income and product account category of non durables and services under the assumption of zero durability may thus be inappropriate