interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

optimal pest control in agriculture abstract based on economic methodology we model an ecosystem with two species in predator prey relationship mice feed on grain and grain feeds on a resource with optimizing behavior of individual organisms a short run ecosystem equilibrium is defined and characterized that depends on the farmer s use of fertilizer and pesticide and on the mice population which in turn is affected by pesticides in that way a microfounded agricultural production function is derived linking a sequence of short run ecosystem equilibria yields the growth function of the mice population which is thus derived rather than assumed in each period the farmer harvests all grain in excess of some given amount of seed if she maximizes her present value profits optimal farming is characterized by either using no pesticide or a moderate amount of pesticide or by applying a chattering control pest eradication is never optimal on the other hand if the farmer takes into account steady state mice populations only it may be optimal to eradicate mice or to use no or a moderate amount of pesticide depending on prices as well as on the shape of the grain production function which is determined by microparameters of grain reproduction

the effectiveness of alternative preference elicitation procedures in predicting choice in a large scale national study the authors evaluated the effectiveness of several preference elicitation techniques for predicting choices the criteria for accuracy included both individual hit

endogenous risk in a portfolio balance rational expectations model of the deutschemark dollar rate abstract a portfolio balance model of the dm s rate under rational expectations is specified in which systematic risk induced deviations from uncovered interest parity are allowed this leads to a reduced from containing a potentially time varying risk premium which we approximate and estimate using an arch in mean approach the maximum likelihood estimator and a lagrande multiplier test for arch in mean are developed the estimation results indicate a small but non negligible time varying risk premium

in search of the exchange risk premium a six currency test assuming mean variance optimization abstract a number of authors examining deviations of actual rates of currency depreciation from forward discounts have claimed to find evidence of risk premiums if these deviations are indeed partly due to risk premiums rather than being entirely due to expectational errors then they should be systematically related to those variables on which risk premiums are thought to depend finance theory tells us that if investors optimize with respect to mean and variance the risk premium depends in a specific way on 1 the supplies of assets denominated in the various currencies 2 the variance covariance matrix of the rates of return and 3 the coefficient of risk aversion the null hypothesis of this paper is that the coefficient of risk aversion is zero countries assets are perfect substitutes and risk premiums are nonexistent the alternative hypothesis is that rates of return are systematically related to asset supplies by a macroeconomic portfolio balance function the maximum likelihood technique used dominates previous attempts to find such a relationship in that the parameters of the portfolio balance function are constrained to depend on the variance covariance matrix as the finance theory says they should on the other hand the technique also dominates previous applications of the finance theory in that the expected returns are allowed to vary over time as the macroeconomic portfolio balance theory says they should the paper s finding is a statistical inability to reject the null hypothesis for a portfolio of six currencies although this could be due to low power in the test

uncertainty in sales and inventory behaviour in the u s trade sectors this paper investigates uncertainty in sales and inventory behavior for the u s wholesale and retail trade sectors first using a vector error correction model with garch m the authors find that the uncertainty measured by forecast error variance in sales does not affect inventory behavior in both trade sectors second using forecast error variance decomposition and estimated permanent components they observe that the uncertainty may be attributed more to demand shocks than to cost shocks

the implications of mean variance optimization for four questions in international macroeconomics abstract the hypothesis of mean variance optimization has powerful implications transcending particular methods used for variance covariance estimation 1 for conventional estimates of risk aversion substitutability between domestic and foreign securities is close to perfect in the sense that risk premiums are small in magnitude a few basic points and thus cannot explain much bias in forward rates 2 nevertheless as long as risk aversion is not zero foreign exchange intervention still affects the level of the exchange rate proportionately at least to asset supply changes 3 current account deficits also have effects 4 finally dollar depreciation should not be accompanied by appreciation of the mark against the franc

crop yield skewness under law of the minimum technology no satisfactory motivation has been forwarded in favor of any crop yield distribution including the normal this article explores the foundations of yield distributions for the law of the minimum resource constraint technology at the plot level of analysis with independent identical uniform resource availability distributions the yield skew is positive whereas it is negative whenever the distributions are normal simulations show how asymmetries in resource availabilities determine skewness it is suggested that a negative yield skew occurs whenever production is tightly controlled so that the left tails of some resources availabilities distributions are thin irrigation may increase yield skewness copyright 2009 oxford university press

asset pricing and foreign exchange risk econometric evidence for the g 7 abstract this paper uses an error correction model ecm to examine the dynamic behavioural relationship between the excess returns of foreign exchange and the variables that measure the stock market risk factor the test results for the major currencies of the g 7 over the period january 1982 to january 1994 support the hypothesis that the excess foreign exchange returns are related to relative risks of the two national equity markets and hence supports the notion of a risk premium in foreign exchange markets in addition we find evidence of non monotonic adjustment in some of the equations with respect to the us dollar which suggests some short run exchange rate overshooting

multiattribute risky choice behavior the editing of complex prospects this investigation draws upon concepts from prospect theory kahneman and tversky kahneman d a tversky 1979 prospect theory an analysis of decisions under risk econometrica 47 263 291 and multiattribute utility theory keeney and raiffa keeney r l h raiffa 1976 decisions with multiple objectives preferences and value tradeoffs wiley new york in an examination of the multiattribute risky choice behavior of 128 managers the questions of how managers edit multiattribute prospects and how editing relates to various independence assumptions were explored the major result is that managers appear to violate attribute independence in its general form and especially in the form of the marginality assumption the most common form of behavior observed was multiattribute risk aversion for prospects involving only gains and multiattribute risk seeking for prospects involving only losses this result reinforces the importance of a target reference point or aspiration level that has been f

state conditional fertilizer yield response on western kenyan farms 15 16 17 we acknowledge with gratitude support from the rockefeller foundation the united states agency for 18 international development usaid leadership enhancement in agriculture program leap and the 19 coupled natural and human systems program of the biocomplexity initiative of the national science 20 foundation through grant bcs 0215890 the world agroforestry center icraf graciously hosted 21 the lead author for part of the research and provided soil test results we are also grateful to james

tests of international capm with time varying covariances we perform maximum likelihood estimation of a model of international asset pricing based on capm we test the restrictions imposed by capm against a more general asset pricing model the betas in our capm vary over time as the supplies of assets change and as the conditional covariances or returns on those assets change we let the covariances change over time as a function of macroeconomic data and an alternative model allows the covariances to follow a multivariate arch process we also can identify a modified capm model with measurement error we find that the estimated capm performs much better when variances are not constant over time nonetheless capm is rejected in favour of the lessrestricted model of asset pricing

testing day s conjecture that more nitrogen decreases crop yield skewness whilecontroversysurroundsskewnessattributesoftypicalyielddistributions abetterunderstandingis importantforagriculturalpolicyassessmentandforcrop insuranceratesetting day 1965 conjectured that crop yield skewness declines with an increase in nitrogen use at low levels but not at higher levels employing four corn yield experimental plot datasets we investigate the conjecture by introducing a a flexible bayesian extension of the just pope technology to incorporate skewness and b a quantilebased measure of skewness shift bayesian estimation provides strong evidence in favor of negative skewnessatcommercialnitrogenratesandforday sconjecture therewasweakerevidenceinfavorof positively skewed cotton yield and little evidence in favor of the conjecture the results are confirmed by the quantile based measure we also find evidence that skewness becomes more negative upon moving from corn after corn to corn after soybean

factors influencing the profitability of fertilizer use on maize in zambia major findings the additional maize produced from a given amount of fertilizer applied varied widely across households even after largely controlling for soil and rainfall conditions the median estimated response rate was 15 9kgs of maize per kg nitrogen applied under the range of conditions and smallholder management practices average maizefertilizer response rates declined as the application rate increased beyond 2 bags of urea and 2 bags of d compound factors raising the response rate and profitability of fertilizer use included timely availability application rates less than the moa 4x4 recommendation use of animal draft power in land preparation and use of hybrid seed in remote areas and given current management practices fertilizer use appears to be profitable only for a minority of smallholder farmers in the relatively remote areas for farmers in the more accessible areas profitability of fertilizer use depends on timely availability if fertilizer is not available on time even farmers in the more accessible parts of this area of relatively high agronomic suitability for maize production are largely unable to use fertilizer profitably because over 30 percent of the households reported that fertilizer was delivered late these findings indicate that efforts to ensure timely distribution can contribute substantially to the productivity gains achievable from fertilizer use

strategies for sustainable intensification in east african highlands labor use and input efficiency strategies for poverty alleviation and sustainable natural resource management usually focus on land use options for improving yields increasing the returns to critical factors requires possibilities for input substitution inadequate timing of input applications or nonavailability of complementary factors can seriously hinder this substitution such constraints particularly apply in less favored areas where soil organic matter content is too low for enabling efficient nutrient uptake and soil structure limits water infiltration and moisture retention this article focuses attention on the importance of labor for crop management activities and input applications that enhance input efficiency in highland area cropping systems of northern ethiopia given the inherent complementarities between labor and nutrient supply during critical phases of the plant growth process input efficiency strongly depends on labor use we present a semiparametric bioeconomic modeling approach to analyze the available options for improving input efficiency in agricultural production input response equations are used that consider the returns per unit of land and labor as a function of specific combinations of material inputs and management practices critical trade offs may arise when opportunity costs for labor are considered or when complementary factors appear as binding constraints the model enables assessment of feasible pathways for enhancing sustainable intensification and poverty alleviation in typical settings of the east african highland region

integrating agronomic principles into production function specification a dichotomy of growth inputs and facilitating inputs this article presents a general conceptual framework for integrating agronomic principles into economic production analysis we categorize inputs in crop production into growth inputs and facilitating inputs based on this dichotomy we specify an asymmetric production function the robustness of the asymmetric framework is tested using crop level panel data on potato production in the netherlands the test results do not reject the proposed framework and the asymmetric specification better represents the underlying production technology

a nonparametric approach to the von liebig paris technology we develop the dual implications of the von liebig paris nutrient response technology and parametric and nonparametric tests for this technology we discuss the nonparametric approach using two different representations corresponding to optimistic and pessimistic nonparametric approximations of the technology application of the nonparametric approach to two experimental data sets and to two data sets generated by monte carlo methods confirms the presence of yield plateaus but provides mixed evidence regarding input nonsubstitution the optimistic representation exhibits virtually no input substitution while the pessimistic representation shows considerable substitutability

arch models properties estimation and testing abstract the aim of this survey paper is to provide an account of some of the important developments in the autoregressive conditional heteroskedasticity arch model since its inception in a seminal paper by engle 1982 this model takes account of many observed properties of asset prices and therefore various interpretations can be attributed to it we start with the basic arch models and discuss their different interpretations arch models have been generalized in different directions to accommodate more and more features of the real world we provide a comprehensive treatment of many of the extensions of the original arch model next we discuss estimation and testing for arch models and note that these models lead to some interesting and unique problems there have been numerous applications and we mention some of these as we present different models the paper includes a glossary of the acronyms for the models we describe

short run fluctuations in foreign exchange rates evidence from the data 1973 1979 abstract the paper examines the statistical properties of daily changes in foreign exchange fx rates for nine currencies it finds that these changes are leptokurtotic i e have long tailed and sharp peaked histograms the evidence suggests that this leptokurtosis does not arise from an underlying paretian stable distribution nor from a stationary mixture of normal distributions but rather from normal processes with time varying parameters this finding casts doubt on the validity of many standard techniques t stats arima methods some moving statistics for estimating the time varying parameters are also presented

recent estimates of time variation in the conditional variance and in the exchange risk premium abstract the optimal diversification model of investors portfolio behavior can give a linear relationship between the exchange risk premium and the conditional exchange rate variance this note surveys recent empirical work that allows the conditional variance itself and therefore the risk premium to vary over time in particular it examines the implications of recent empirical estimates for earlier arguments based on the assumption that the conditional variance was constant over time that the exchange risk premium had to be small in magnitude and variability

utilizing conjoint analysis to design modern crop varieties empirical example for groundnut in niger abstract preferences for monetary and non monetary plant traits influence modern crop variety adoption decisions of farmers to enhance adoption probability of modern crop varieties it is necessary to identify and focus research on traits that significantly contribute to utility while de emphasizing insignificant plant attributes this paper illustrates the potential for applying conjoint analysis to aid the design and targeting of client responsive modern crop varieties farmers ranked eight orthogonally derived plant trait combinations used in an illustrative example utilities were estimated using the choice probability based method of ordered probit results showed that conjoint analysis can differentiate significant and non significant traits of modern crop varieties the usefulness of applying conjoint analysis over identifiable disaggregated groups of a sample was also evident future application of conjoint analysis to the design and targeting of modern crop varieties should carefully consider sample composition and size to permit the estimation of relevant sub models for desired farmer segments

risk premia carry trade dynamics and economic value of currency speculation in this paper we derive the dynamics and assess the economic value of currency speculation by formalizing the concept of a trader inaction range we show that exchange rate returns comprise a time varying risk premium and that uncovered interest parity uip holds in a speculative sense the often cited forward bias puzzle originates from the omission of the risk premium in standard uip tests consistent with its popularity among market professionals the carry trade strategy can be rationalized as it systematically collects risk premia and generates economic value when applied in multi currency portfolios

factors explaining the low and variable profitability of fertilizer application to maize in zambia it is widely recognized that an african green revolution will require greater use of inorganic fertilizers often made comparisons note that fertilizer use rates in africa are just 10 20 of those in asia europe and the americas most attempts to explain relatively low adoption of fertilizer assume yield responses to inorganic fertilization warrant higher application rates and hypothesize that observed use rates are limited by market based factors another explanation may be that application rates are low because african yields are less responsive to inorganic fertilizer than yields in other regions and less responsive than analysts perceive examining the case of zambia we evaluate whether yield response to fertilizers could explain adoption and application rates a model of yield response is constructed and a combination of estimators is employed to mitigate potential biases related to correlation between fertilizer use and unobserved heterogeneity as well as stochastic shocks results indicate higher fertilization rates would be marginally profitable or unprofitable in many cases given commercial fertilizer and maize prices phosphoric fertilizer is particularly unprofitable on acidic soils which are common in zambia and other areas of sub saharan africa we propose feasible recommendations for diversifying the current government strategy to enhance crop productivity

the forward premium puzzle in a model of imperfect information abstract this paper studies the forward premium puzzle in a model with imperfect information the model predicts fixed effects and conditional heteroskedasticity in the forward premium regression and provides a rationale for the evidence in mayfield and murphy mayfield e s murphy r g 1992 interest rate parity and the exchange risk premium economics letters 40 319 324

the cost of simplifying preference models formulas are derived which estimate the accuracy of conjoint analysis in predicting preferences in a validation sample this accuracy turns out to depend on among other things which model of preference is used e g whether interactions are added whether partworth or linear functions are used i first show a paradoxical result that simpler models often yield higher predictive accuracy even when a more complex model is the true one the reason for this is that the additional parameters of the complex model are estimated with larger variance which tends to overwhelm the benefits of using the true model i then shift my criterion from predicting an individual s preferences to predicting market share which is of most interest to managers under this criterion my conclusions reverse and i show that a true model even when complex is much more likely to yield higher predictive accuracy than a simpler incorrect model this reverses some previous conclusions in marketing and confirms that finding the

conditional variance and the risk premium in the foreign exchange market abstract we investigate the existence of a risk premium in the foreign exchange market based on the conditional variance of market forecast errors the forecast errors are assumed to follow the arch process introduced by engle 1982 estimation and diagnostic testing of the model are discussed and results are presented for the currencies of the united kingdom france germany japan and switzerland