rice production response in cambodia this study estimates rice production response using the cambodia socioeconomic surveys conducted in 2004 and 2007 the results indicate that agricultural productivity is far below its potential and can be increased substantially by using modern technology and inputs such as fertilizer and irrigation our findings also suggest that the cambodian government needs to design its investment strategy to improve rural infrastructure including irrigation transportation and electricity in order to increase its agricultural production and productivity and boost farmers income

investment in u s agriculture resource adjustment problems in u s agriculture are motivated against the background of the farm problem the adjustment cost hypothesis is invoked to specify and estimate consistently a system of dynamic investment demand and output supply equations by utilizing recent advances in dynamic duality theory the investment demand equations assume the form of a multivariate flexible accelerator results indicate that labor capital services and land exhibited quasi fixity while intermediate materials were a variable factor this can be construed as a form of asset fixity within aggregate u s agriculture the univariate flexible accelerator hypothesis is rejected

interrelationships among the elements of national innovation systems a statistical evaluation abstract an obstacle often faced by countries in attempting to improve the standard of living of their people and the productivity of their economic base is a low level of technological development at the national level such a problem may be conceptualized in the form of a national innovative system nis which represents a country s involvement in innovative activity it is the purpose of this paper to develop a comprehensive nis model through the identification of elements which characterize a country s nis and of the interrelationships embedded in each individual system the point of departure is to treat the nis as any other sector of the economy as a result its various elements are delineated according to their role within the nis as inputs outputs moderators or as a measure of productivity the nature of the interrelationships is assessed through a structural equations model linking the various elements it is shown that substantial commonalities exist among the basic elements of the various niss notwithstanding large differences in technology development strategies that exist across countries and the wide disparity between levels of development of each country in the sample

energy investment risk assessment for nations along china s belt road initiative abstract overseas energy investment as an effective way of securing energy supply is being favored by the world s leading energy consuming countries however energy investment has the potential high risk on multiple forms including political and regulatory risk currency liquidity and refinancing risk as well as resource risk and so on to effectively evaluate overseas energy investment risk this study proposed a new indicator system from six dimensions furthermore a fuzzy integrated evaluation model based on the entropy weight was constructed to rate the energy investment risk for 50 nations along china s belt road initiative the findings indicate that resource potential and chinese factors have become the main determinant of energy investment risk while environmental constraints and political risk should also be considered for investing decisions in conclusion saudi arabia united arab emirates pakistan kazakhstan and russia are the most ideal choices for china s energy investment balancing resource potential and investment environment

democracy economic development and income inequality most cross national tests of inverse association between democracy and inequality have operationalized the concept of democracy by measuring its level at a single point in time more compelling theoretical arguments can be made for causal relationships that operate over time between 1 a country s years of democratic experience and income inequality and 2 income inequality and the stability of democracy continuous and qualitative measures of years of democratic experience are estimated to have a significant negative impact on income inequality independent of economic development and other control variables for a sample of 55 countries a very strong inverse correlation is also observed between income inequality and regime stability for a sample of 33 democracies this association holds independent of economic development which is found to have no direct effect on democratic stability after controlling for income inequality

infrastructure and public utilities privatization in developing countries should governments in developing countries promote private ownership and deregulated prices in noncompetitive sectors or should they run publicly owned firms and regulate prices at the expense of rents to insiders a theoretical model is used to answer these normative questions the analysis focuses on the tradeoff between fiscal benefits and consumer surplus during privatization of noncompetitive sectors privatization transfers control rights to private interests and eliminates public subsidies yielding benefits to taxpayers at the cost of increased prices for consumers in developing countries where budget constraints are tight privatization and price liberalization may be optimal for low profitability industries but suboptimal for more profitable industries and once a market has room for more than one firm governments may prefer to regulate the industry without a credible regulatory agency regulation is achieved through public ownership

supply and demand functions for multiproduct u s cash grain farms biases caused by research and other policies this study presents new estimates of supply and demand elasticities for u s multiproduct cash grain farms and estimates of input and output bias effects caused by public and private crop research extension and farmers schooling the study also shows that the social rate of return to public crop research is large about 62 percent

purchasing power parity and the euro area abstract this paper analyzes purchasing power parity ppp for the euro area we study the impact of the introduction of the euro in 1999 on the behavior of real exchange rates we test the ppp hypothesis for a panel of real exchange rates within the euro area over the period 1973 2003 our methodology exploits the cross sectional dependence across real exchange rates and allows for heterogeneity in the rates of mean reversion we present evidence in favor of ppp for the full panel of real exchange rates but we show that accounting for cross country differences within the euro area is essential the unit root hypothesis can be rejected for some real exchange rates but evidence for ppp is weak for others we also investigate ppp between the synthetic euro against several other major currencies over the period 1979 2003 we find support for the ppp hypothesis for the full panel of real exchange rates when the restriction of a common mean reversion coefficient is relaxed we reject the unit root hypothesis for the euro swiss franc rate only we conclude that the process of economic integration in europe has accelerated convergence toward ppp within the euro area

productivity growth in u s agriculture under dynamic adjustment a dynamic measure of productivity growth adjusted for deviations from the long run equilibrium is established within an adjustment cost framework an empirical application to u s agriculture is presented which permits identifying the dynamic linkages between technical change and productivity growth in u s agriculture total factor productivity as dynamically measured grew at 1 50 per annum the combined effect of scale quality adjusted input growth and long run disequilibrium input use contributes only 3 44 of the growth while technical change dominates the growth of total factor productivity

the purchasing power parity persistence paradigm abstract rogoff journal of economic literature 1996 34 647 668 describes the remarkable consensus of 3 5 year half lives of purchasing power parity deviations among studies using long horizon data these studies however focus on rejections of unit roots in real exchange rates and do not use appropriate techniques to measure persistence our half life estimates explicitly account for serial correlation sampling uncertainty and most importantly small sample bias calculating confidence intervals as well as point estimates for long horizon and post 1973 data we find that even though most of the point estimates lie within the 3 5 year range univariate methods provide virtually no information regarding the size of the half lives

ppp strikes back aggregation and the real exchange rate we show the importance of a dynamic aggregation bias in accounting for the ppp puzzle we prove that the aggregate real exchange rate is persistent because its components have heterogeneous dynamics established time series and panel methods fail to control for this using eurostat data we find that when heterogeneity is taken into account the estimated persistence of real exchange rates falls dramatically its half life for instance may fall to as low as eleven months significantly below the consensus view of three to five years

politics and perceived country creditworthiness in international banking this paper marks a departure from most previous studies of country creditworthiness in international banking because it incorporates systematically generated quantitative indicators of political instability in the analysis the authors empirically test for the effects of political instability on perceived country creditworthiness using data on thirty heavily indebted developing countries for the period 1967 86 in addition to economic factors they examine the effects of three types of political instability regime change political legitimacy and armed conflict the authors also distinguish between proximate instability and chronic instability they find significant effects of proximate instability particularly in governmental regime on indicators of countries perceived creditworthiness copyright 1990 by ohio state university press

the propensity to patent abstract this paper analyzes the relationship between 1974 rd among the exceptions the tendency was toward diminishing returns variables measuring overseas sales federal r d support diversification scope of invention use and invention type had only modest explanatory power there was no significant evidence of disproportionate patent accumulation in the more highly concentrated industries

joint venture formation of very large multinational firms large firms differ from smaller firms in many aspects in this research note we investigate the relationship between the size of firm and the characteristics of equity joint ventures ejvs empirically we found that very large firms are more likely to have a higher equity stake in their ejvs seek alignment with other foreign firms engage in global industries and invest in large scale ejvs than smaller firms they are also less affected by the risk conditions of the host country empirical testing is based on a sample of 1 298 foreign ejvs in the people s republic of china between 1981 and 1998 interesting differences also exist among firms that are based in the u s japan and europe

the micro macro disconnect of purchasing power parity abstract this paper reconciles the persistence of aggregate real exchange rates with the faster adjustment of international relative prices in microeconomic data error correction model estimates indicate that a different mix of shocks drives international price deviations at the microeconomic level and that dynamic adjustment works through arbitrage in the goods market rather than the foreign exchange market when half lives are estimated conditional on a common set of estimated macro shocks we find that micro relative prices exhibit every bit as much persistence as aggregate real exchange rates these results challenge theories of real exchange rate persistence based on sticky prices and heterogeneity across goods

applying theil s multinomial extension of the linear logit model to meat expenditure data one of the chief drawbacks of the multinomial extension of the linear logit model is that after the standard linearization the parameters which are directly estimated have no obvious economic meaning this paper presents alternative transformations which facilitate interpretation in one linearization the estimated coefficients will be elasticities at a selected data point such as the mean in another form the coefficients will be slutsky parameters the latter version is chosen for an empirical analysis of the demand for meat in great britain a number of issues concerning the model s error structure and dynamic specification are discussed

real exchange rate adjustment in and out of the eurozone it is often suggested that currency unions unduly inhibit the efficient adjustment of real exchange rates recently this has been seen as a key failure of the eurozone this paper presents evidence that throws doubt on this conclusion our evidence suggests that real exchange rate movement within the eurozone was at least as compatible with efficient adjustment as the behavior of real exchange rates for the floating rate countries outside the eurozone this interpretation is consistent with a model in which nominal exchange rate movements give rise to persistent deviations from the law of one price in traded goods

dissecting the ppp puzzle the unconventional roles of nominal exchange rate and price adjustments the conventional view as expounded by sticky price models is that price adjustment determines the ppp reversion rate this study examines the mechanism by which ppp deviations are corrected nominal exchange rate adjustment not price adjustment is shown to be the key engine governing the speed of ppp convergence moreover nominal exchange rates are found to converge much more slowly than prices with the reversion being driven primarily by nominal exchange rates real exchange rates also revert at a slower rate than prices as identified by the ppp puzzle j econ lit 34 1996 647 c 2003 elsevier b v all rights reserved

cash crop choice and income dynamics in rural areas evidence for post crisis indonesia in this article we investigate the factors affecting levels and growth of incomes in rural indonesia following the crisis of 1997 1998 in particular we investigate the relative roles of nonfarm incomes and productivity improvements achieved via changes in crops versus improvements on the same crops on income dynamics framing the article in the context of an optimal labor allocation model relying on unique household panel data from central sulawesi and using advanced panel econometric methods we find that local innovations related to the adoption and intensification of new cash crop varieties more specifically the shift from coffee to cocoa production can explain a substantial part of the observed post crisis developments causal estimates of the effect of growing cocoa suggest that households were on average able to achieve about 14 higher income levels during the post crisis period compared to the planting of other crops most notably coffee also our results demonstrate the importance of engagement in nonfarm activities for household income growth comparative analyses using a nationally representative survey suggest that similar processes are at play in other parts of indonesia

the exchange rate a shock absorber or source of shocks a study of four open economies abstract the paper provides svar estimates for the uk canada sweden and denmark making explicit a monetary policy reaction function and taking account of exchange rate targeting practices it examines the role of the exchange rate as shock absorber as opposed to a source of its own and destabilizing shocks we find that in all countries but the uk real shocks are predominantly symmetric relative to the neighbor implying little need for the exchange rate to act as shock absorber the shocks arising in the exchange market appear to have played a more important role in denmark than in the other countries

a new look at debt rescheduling indicators and models this paper presents logit and discriminant models of debt rescheduling the models incorporated new short term debt data and variables representing economic shocks the 30 country database covered the period from 1975 to 1982 and contained the largest number of debt rescheduling observations of any previous database because of the new indicators and more recent data the models captured the effects of the changes that have occurred in the world economy since the oil price shocks and the period of rapid debt accumulation by the developing countries compared to the earlier research models the models have proven to be efficient in forecasting debt reschedulings

conditional ppp and real exchange rate convergence in the euro area abstract while economic theory highlights the usefulness of flexible exchange rates in promoting adjustment in international relative prices flexible exchange rates also can be a source of destabilizing shocks we find that when countries joining the euro currency union abandoned their national exchange rates the adjustment of real exchange rates toward their long run equilibrium surprisingly became faster to investigate we distinguish between differing rates of purchasing power parity ppp convergence conditional on alternative shocks which we refer to as conditional ppp we find that the loss of the exchange rate as an adjustment mechanism after the introduction of the euro was more than compensated by the elimination of the exchange rate as a source of shocks in combination with faster adjustment in national prices these findings support claims that flexible exchange rates are not necessary to promote long run international relative price adjustment

a dynamic adjustment model for u s agriculture 1948 79 abstract a multioutput model is developed within the adjustment cost framework to analyze the structure of dynamic adjustments in u s agriculture during the post war period an important feature of this model is that the econometric model is consistent with dynamic economic theory fluctuations in capital stocks variable inputs and outputs are explained by changing opportunity costs empirical results indicated that durable equipment farm produced durables and family labor exhibited significant rigidity in adjustment as a response to exogenous shocks surprisingly the hypothesis that real estate was a variable input could not be rejected the univariate flexible accelerator hypothesis which is widely maintained in most agricultural adjustment studies is inconsistent with the data

the effect of political events on united states direct foreign investment a pooled time series cross sectional analysis this paper examines the effect of political events on the manufacturing direct foreign investment mdfi decisions of u s multinational corporations the relationship between political events and nonpolitical factors and mdfi is investigated through regression analysis of pooled time series 21 years and cross sectional 24 countries data and through various tests of the homogeneity of the relationship across groups of countries the study finds that the relationship between political events in mdfi is different for less developed countries as opposed to developed countries for the less developed countries both inter nation and intra nation conflict and cooperation affect mdfi in contrast u s mdfi in developed countries appears to be affected only by inter nation conflict and cooperation

competitiveness of nations a knowledge discovery examination this paper presents the insights gained from the use of data mining and multivariate statistical techniques to identify important factors associated with a country s competitiveness and the development of knowledge discovery in databases kdd models to predict it in addition to stepwise regression and weighted non linear programming techniques intelligent learning techniques artificial neural networks and inferential techniques classification and regression trees were applied to a dataset of 43 countries from the world competitiveness yearbook wcy the dataset included 55 variables on economic internationalization governmental financial infrastructure management science and technology as well as demographic and cultural characteristics exploratory data analysis and parameter calibration of the intelligent method architectures preceded the development and evaluation of reasonably accurate models mean absolute error 5 5 and subsequent out of sample validations the strengths and weaknesses of each of the kdd techniques were assessed along with their relative performance and the primary input variables influencing a country s competitiveness our analysis reveals that the primary drivers of competitiveness are lower country risk rating and higher computer usage in entrepreneurial urbanized societies with less male dominance and basic infrastructure with higher gross domestic investment savings and private consumption more imports of goods and services than exports increased purchase power parity gdp larger and more productive but not less expensive labor force and higher r d expenditures without diminishing the role and importance of wcy reports our approach can be useful to estimate the competitiveness of many countries not included in wcy while our findings may benefit policy makers and international agencies to expand their own abilities insights and establish priorities for improving country competitiveness

the multivariate flexible accelerator model its empirical restrictions and an application to u s manufacturing this paper derives an exhaustive set of restrictions implied by the multistock flexible accelerator specification of the adjustment cost model for the firm the flexible accelerator specification of the demand for capital and labor is estimated using u s manufacturing annual data for the 1947 1976 period the consistency of the data with the model is examined by testing the validity of the derived restrictions finally the conditions which permit aggregation over firms are determined and tested empirically the flexible accelerator specification has been popular in the empirical literature on interrelated investment and employment decisions see nadiri and rosen 38 coen and hickman 10 and schramm 40 more recent examples include sargent 39 berndt fuss and wavermann 4 berndt and morrison 6 and meese 34 under suitable assumptions the specification may be rationalized by the adjustment cost model of the firm eisner and strotz 13 lucas 30 mortensen 35 extends the work of lucas and derives some empirically testable restrictions of the accelerator specification that are implied by the adjustment cost framework the broad objective of this paper is to provide a more rigorous and comprehensive test of the adjustment cost model than is presently found in the literature this objective is achieved in three stages first we offer an alternative derivation of the mortensen restrictions and more importantly we prove theorem 1 that his restrictions are exhaustive i e we establish an integrability result for the flexible accelerator adjustment cost model second the flexible accelerator specification of the demand for capital and labor is estimated using total u s manufacturing annual data for the 1947 76 period it is assumed that firms minimize expected production costs subject to a technology which implies that capital and labor stocks are costly to adjust while a third factor materials is freely adjustable the consistency of the data with the adjustmentcost framework is examined by testing for the validity of the derived restrictions further we test the validity of some separability restrictions on the adjustmentcost technology that to varying degrees are imposed a priori in all of the cited empirical studies finally we provide a complete characterization of the individual firm technologies which justify the common assumption of the existence of a representative firm this problem of aggregation over firms which has been

output response to prices and public investment in agriculture indonesian food crops abstract this paper analyzes dynamic food crop supply response in indonesia the effects of technology prices and investments on output growth for rice corn soybean and cassava are examined the analysis generates crop wise area yield and input demand parameters suitable for the evaluation of price and investment policies and shows the large impact of public investment in agricultural research extension and irrigation on long run output growth in indonesia elimination of the fertilizer subsidy and reinvestment of the resulting fiscal savings in research extension and irrigation would produce large benefits

revisiting the persistence of real exchange rates abstract in this paper we provide new and robust evidence that panel regressions significantly reduce the estimated half lives of real exchange rates in a sample of 21 countries these results are obtained under dynamic panel models that control for non purchasing power parity ppp equilibria small sample bias does not have a significant impact on half lives since the increase in the half life arising from the bias is more than compensated by the decrease of the half life due to the control of non ppp equilibria among the two sources of non ppp equilibria i e first the balassa samuelson effect and second smooth shifts in mean we find that under a heterogeneous panel model the first source results in a larger reduction of half lives

on the determinants of net foreign investment these models do not explain why investments in productive processes in any country exceed or fall short of the wealth of the residents of that country most existing models of portfolio choice and asset pricing make the key assumption of a given world market portfolio which implies that at any point in time net foreign investment itself is given 2 the present paper does not make this assumption this paper provides a simple model of net foreign investment in a world of perfect markets 3 the model has the useful property that production decisions are made simultaneously with portfolio choice decisions as in cox ingersoll and ross 1978 the central feature of the model is that technologies in use differ across countries it is assumed that pre existing capital can be shifted costlessly between countries production decisions in other words decisions about how the existing stock of capital is invested among available technologies determine net foreign investment in the home country however production decisions depend on the distribution of the returns to investments in various technologies whereas this paper analyzes an issue which has always been of considerable interest in the field of international finance it uses a different framework from that used in most of the literature on net capital flows it recognizes explicitly the role of risk as a determinant of net foreign investment 4 because political risk is not modeled explicitly this paper constitutes only a first attempt at understanding the determinants of net foreign investment political risk must play a significant role as a determinant of net foreign investment because net university of rochester i am grateful to the members of the international finance seminar at the university of rochester to jorge de macedo ron jones don lessard and especially pat reagan for useful conversations and comments and to the center for research in government policy and business for financial support net foreign investment in the domestic country is understood to mean the difference between total wealth invested in the domestic country and domestic wealth it follows that net foreign investment is a stock and not a flow international economists would call net foreign investment the

sovereign default interest rates and political uncertainty in emerging markets abstract a large body of the empirical literature shows that high turnover rates length of tenure of policymakers and the degree of conflict within a country affects sovereign spreads debt and default rates we help to rationalize such claims by including these political features in a dynamic stochastic small open economy model of sovereign debt and default in this way we offer a complementary approach to the econometric analyses in the literature consistent with the data the quantitative analysis shows that politically unstable and more polarized economies experience higher default rates and larger level and volatility of sovereign interest rate spreads

modelling international tourism and country risk spillovers for cyprus and malta abstract small island tourism economies sites are developing sovereign countries that rely on tourism as a source of exports and need a consistent inflow of foreign investment in order to facilitate economic growth access to international capital markets helps sites smooth out their consumption over time while absorbing adverse domestic production shocks this paper provides a comparison of tourism growth country risk returns and their associated volatilities or uncertainty for 2 sites namely cyprus and malta monthly data are available for both international tourist arrivals and composite country risk ratings compiled by the international country risk guide icrg for the period may 1986 to may 2002 the time varying conditional variances of tourism growth and country risk returns for the 2 sites are analysed using multivariate models of conditional volatility empirical results show that cyprus and malta are complementary destinations for international tourists changes to tourism patterns in cyprus lead to changes to tourism patterns in malta hence tour operators and national tourism promotion authorities in cyprus and malta should collaborate closely in marketing and promoting joint tourism products moreover foreign entities interested in investing in the tourism sectors of cyprus and malta should consider investment projects that span a long period of time the performance of the tourism sector and the associated composite risk are independent of each other for the two countries however there is a direct relationship between the tourism sectors of cyprus and malta and their respective country risk settings

a nonlinear expenditure system using a linear logit specification recent literature on the estimation of models of consumer expenditure patterns indicates that engel curves are nonlinear and demographic variables are important determinants of demand a linear logit household expenditures model is presented which automatically displays adding up properties derived from the budget constraint while permitting great flexibility in the engel curves in addition homogeneity and symmetry can be imposed and tested and by a simple transformation the coefficients can be estimated by linear regression another advantage of the model is that demographic variables such as household size and composition can be introduced without sacrificing the adding up properties

evolution roots and influence of the literature on national systems of innovation a bibliometric account the literature on the national systems of innovation nsi is a relatively new field of research that has spread remarkably in the past 20 years this article offers a complementary quantitative description of the state of the art of the literature based on bibliometric methods by explicitly addressing the roots evolution and influence of nsi literature the exercise shows that over time the rate of published articles was quite irregular and that contributions on nsi have not yet converged to an integrated analytical framework although historically detailed descriptions on nsi showed a noticeable increase in the more recent period 2006 2010 analyses using more formal and diversified quantitative methodologies for assessing the performance of nsi remained lacking reflecting its persisting methodological weaknesses the roots of the nsi literature can be found at the core of innovation studies by certain well known scholars in the area of economics of innovation and science policy research even though publications on nsi are falling in relative importance and are highly concentrated on a small set of countries united kingdom denmark and the united states their influence is global they are cited by authors affiliated in organisations around the world notably in latin america and asia such an influence goes far beyond the area of innovation studies and has resonated in fields such as economic geography environmental studies international business and managerial sciences this demonstrates that the nsi literature is not self referential

official exchange rate arrangements and real exchange rate behavior we study the behavior of real exchange rates under various official designations of exchange rate arrangements examining many currencies we find important differences across the designations most notably real exchange rate mean reversion is fastest when nominal exchange rates are officially pegged we also find a large nonlinear effect adjustment is fastest when the real exchange rate deviates greatly from its mean this nonlinear effect is also most striking among officially pegged currencies finally we find that nominal exchange rates rather than prices do most of the adjusting

real exchange rate persistence and country characteristics a global analysis abstract this paper examines the persistence of real exchange rates across 151 countries we employ univariate time series techniques on a country by country basis allowing for deterministic structural breaks and nonlinearities in the adjustment process our findings suggest that bilateral exchange rates display higher rates of persistence than multilateral exchange rates with the latter former exhibiting half lives of less than 1 2 year s assessing country results by stage of economic development we find that industrial countries display higher levels of exchange rate inertia than developing countries we retrieve evidence indicating that higher inflation nominal exchange rate volatility trade openness and proximity to reference country are associated with faster rates of real exchange rate convergence conversely international financial integration is found to only play a role at the country group level with differential effects across cohorts

currency risk and country risk in international banking this paper focuses on the conditions under which banks are subject to currency and country risks on their dollar denominated loans to foreign firms and governments we conclude that currency risk is a function of the rates of domestic and foreign inflation deviations from purchasing power parity and the effect of these deviations on the firm s and the nation s dollar equivalent cash flows country risk is largely determined by the variability of the nation s terms of trade and the government s willingness to allow the national economy to adjust rapidly to changing economic fortunes banks typically try to cope with currency risk when lending to foreign firms and governments either by both denominating and funding their loans in the foreign currency or failing that by denominating their foreign loans in dollars the latter practice appears to protect the banks by shifting any risk associated with exchange rate fluctuations to the borrowers yet to the extent that changes in currency values affected the ability and or willingness of foreign borrowers to repay their dollar loans the exchange risk on these loans is converted into credit risk this is the element of currency risk referred to in the paper s title when the government is the borrower credit risk becomes country risk the objective of this paper is to explore the conditions under which banks are subject to currency and country risks on their dollar denominated foreign loans section i analyzes the sources of currency risk for firms while section ii extends the analysis to study the riskiness of dollar loans to foreign firms under several currency scenarios the political economic circumstances under which dollar loans to foreign governments could be subject to currency and country risk are the subject of section iii section iv discusses in more detail the various political and economic indicators of country risk section v summarizes the paper s key points

debt arrears in latin america do political variables matter political instability and debt problems characterise latin america in the last two decades this article estimated a logit model of debt arrears including economic as well as political variables our results suggested that both economic and political indicators affected debt repayment in latin america during 1971 86 we also cast a shadow on the viewpoint that authoritarian and military regimes have an advantage over democratically elected governments with regard to debt related issues

mussa redux and conditional ppp abstract the extreme persistence of real exchange rates found commonly in post bretton woods data does not hold in the preceding fixed exchange rate period when the half life was roughly half as large in our sample this finding supports sticky price models as an explanation for real exchange rate behavior extending the classic argument of mussa 1986 from a focus on short run volatility to long run dynamics two thirds of the rise in real exchange rate variance observed across exchange rate regimes is attributable to greater persistence of responses to shocks including greater price stickiness rather than to greater variance of shocks themselves

the evolution of purchasing power parity abstract a large body of literature in international finance has attempted to estimate the speed of convergence between countries aggregate price indices to those levels predicted by purchasing power parity ppp this paper takes a novel approach by considering how this speed of convergence itself has evolved over time using a dynamic common correlated effects dcce framework from chudik and pesaran 2015 applied to a panel of countries real exchange rates over the years 1960 2015 we find an average half life of around 3 years moreover we show that the estimated half life fell by about 2 years over the course of the past five decades suggesting that the so called ppp puzzle rogoff 1996 may abating over time our results also serve to contextualize past estimates by demonstrating a high degree of sample selection sensitivity in this literature furthermore we propose explanations for the observed increase in the speed of international price adjustments focusing primarily on the increasingly tradable nature of the composition of the u s consumer price index cpi we build a measure of tradability of the cpi and show that despite an increase in the proportion of services in the average consumer s basket the cpi has become more tradable over time thus offering a potential explanation for the observed increase in adjustment speed

understanding post euro law of one price deviations we put together a unique panel of thousands of good level prices before and after the euro to compare the determinants and understand the evolution of goods price dispersion across europe over time we find that tradeability and nontraded inputs play a significantly smaller role for cross country price dispersion after the adoption of the euro and for eurozone economies as compared to european union ones we then compare the distributions of law of one price lop deviations over time to understand how the degree of integration across european economies changed after the euro our tests reveal that the distributions after the euro are typically significantly different from those before consistent with a greater degree of integration utilizing our unique panel data set to trace the location of individual goods in the distribution of lop deviations we ask how the price advantage or disadvantage evident in these price distributions evolves over time and whether goods characteristics play a role for the persistence of these lop deviations lop deviations for these goods are highly correlated over 5 or 10 year horizons and correlations remain significantly high over longer horizons these correlations are greater for homogeneous as compared to differentiated goods and vary across countries finally for most of these european economies and goods price advantage is typically revealed to be more persistent than price disadvantage

dynamic factor demands under rational expectations we model the industrial demands for structures equipment and blue and white collar labor in a manner consistent with rational expectations and stochastic dynamic optimization in the presence of adjustment costs but allowing generality of functional form we represent the technology by a translog input requirement function that specifies the amount of blue collar labor needed to produce an output level given quantities of three quasi fixed factors nonproduction workers equipment and structures a complete description of the production structure is obtained by simultaneously estimating the input requirement function and three stochastic euler equations we find adjustment costs are small in total but large on the margin and differ considerably across factors

relative importance of political instability and economic variables on perceived country creditworthiness this paper examines the relative importance of political instability and economic variables on perceived country creditworthiness our results indicate that both political instability and economic variables are taken into account in evaluating country creditworthiness however it appears that bankers assign larger weight to economic variables hence it seems that the country creditworthiness perceptions are largely based on a country s economic performances which we except to reflect longer term political stability in addition the frequency of changes in the regime and armed conflict both proxying for political instability also affect the credit ratings

adjustment cost and supply response in a fishery a dynamic revenue function in industries where firms can adjust product mix in response to price changes the process can be delayed by adjustment costs an example is fishermen who change fishing grounds to target different species if adjustment costs are sufficiently large this may hamper the fishermen s response so that regulatory tools that are not efficient in the long run are useful in the short run moreover adjustment costs can influence the choice of species targeted in this paper dynamic supply equations are specified using a revenue function approach different hypotheses about the dynamics of the supply equations are tested for norwegian trawlers

transactions costs and nonlinear adjustment in real exchange rates an empirical investigation eolquilibrium models of real exchange rate determination in the presence of transactions costs imply a nonlinear adjustment process toward purchasing power parity ppp conventional cointegration tests which ignore the effect of transactions costs may be biased against the long run ppp hypothesis our results using both monthly data for the interwar period and annual data spanning two centuries clearly reject the linear framework in favor of an exponential smooth transition autoregressive process the systematic pattern in the estimates of the nonlinear models provides strong evidence of mean reverting behavior for ppp deviations and helps explain the mixed results of previous studies

risk in international banking this paper differentiates between country risk the probability that a country will default on its obiigations and two forms of international banking risk 1 the extent to which a bank s foreign activities affect the cost of equity capital and 2 the extent to which a bank s foreign activities affect the probability of bankruptcy the paper focuses on the latter form of international banking risk using chebyshev s inequality it is pointed out that the risk of bankruptcy is influenced by the mean as well as the variance of the return distribution consequently restrictions on the international composition of a bank s portfolio may increase rather than reduce the probability of bankruptcy

intertemporal price indices for the firm abstract a notion of intertemporal price aggregation is analysed within the adjustment cost model of the firm and is shown to be feasible precisely for those technologies which imply an accelerator adjustment rule a unique feature of the common quadratic production function specification is established the analysis is shown to be relevant to the possibility of decentralization within the firm to functional form specification for dynamic demand functions and to comparative dynamics analysis

interrelated factor demands for manufacturing a dynamic translog cost function approach abstract in this paper we report the results of estimating a joint model for labour capital and energy using the transcendental logarithmic cost function of christensen jorgenson and lau 1973 this allows us to determine both the own price and cross elasticities of substitution between labour capital and energy we combine a model of factor shares with a dynamic adjustment process for each factor we also impose on the cross equation restrictions necessary to provide additivity homogeneity and symmetry since the covariance matrix in systems of share relationships is singular we follow the suggestions of anderson and blundell 1982 and employ a mullivariate error corrrection model the results suggest that additivity symmetry and homogeneity restrictions do hold and that there are short run increasing returns to scale

additional evidence of long run purchasing power parity with restricted structural change we investigate two alternative versions of purchasing power parity ppp reversion to a constant mean in the spirit of cassel and reversion to a constant trend in the spirit of balassa and samuelson using long span real exchange rate data for industrialized countries we develop unit root tests that both account for structural change and maintain a long run mean or trend with conventional tests previous research finds evidence of some variant of ppp for 9 of the 16 countries with the unit root tests in the presence of restricted structural change we find evidence of ppp for five additional countries

constitutional rules reputation and sovereign debt abstract the inability of governments to pre commit to certian policies often results in pareto inefficient equilibria a policy is not time consistent if it requires a course of action that will subsequently become undesirable this paper examines the possibility of creating constitutional rules which can support sovereign debt contracts which would otherwise violate the requirement of time consistency the possibility of establishing international reputation with internal enforcement mechanisms is sensitive to the constitutional environment which will also determine the appropriate form of the constitutional rules