a model of currency depreciation and the debt inflation spiral abstract this paper shows how a government that cannot make credible policy commitments might manage its exchange rate and fiscal stance in a world of rational expectations the dynamic game model developed here potentially can generate diverse patterns of macroeconomic behavior patterns that differ as a result of assumed differences in government objectives under some types of government the ongoing strategic interaction between the public and private sectors leads to a disinflationary outcome other governments may push the economy into a spiral of rising debt and inflation

collapsing exchange rate regimes and exchange rate dynamics some further examples abstract this paper extends some recent perfect foresight models of balance of payments crises and exchange rate realignments to a world of smart speculators sticky prices and restricted international capital movements the likelihood and timing of a regime collapse are shown to depend upon initial foreign reserve endowments monitary policy speeds of market adjustment and future exchange rate policy these factors are also shown to influence the dynamic behavior of the exchange rate and prices during a transitional period of floating

hips and hearts the variation in incentive effects of insurance across hospital procedures the separate identification of effects due to incentives selection and preference heterogeneity in insurance markets is the topic of much debate in this paper we investigate the presence and variation in moral hazard across health care procedures the key motivating hypothesis is the expectation of larger causal effects in the case of more discretionary procedures the empirical approach relies on an extremely rich and extensive dataset constructed by linking survey data to administrative data for hospital medical records using this approach we are able to provide credible evidence of large moral hazard effects but for elective surgeries only

capital controls and balance of payments crises abstract the theory of balance of payments crises shows that under perfect foresight a system of fixed exchange rate is not sustainable in the presence of diverging economic policies in this paper it is shown how and why capital controls succeed in maintaining the principle of a fixed but adjustable parity both cases of a devaluation and a revaluation are considered and a condition for a parity change to be credible is presented

the persistence of the peso problem when policy is noisy abstract the peso problem the market s belief that a discrete event may occur has frequently been blamed for the persistence of on average mistaken forecasts of macroeconomic variables this paper demonstrates how beliefs that a policy process may have switched can induce apparent ex post biased forecasts of exchange rates even after the switch has occurred furthermore during this peso problem period exchange rates may appear to contain a speculative bubble component since they will systematically deviate from the levels implied by observing fundamentals ex post and the conditional variance of exchange rates will exceed the variance implied by observing fundamentals

balance of payments crises under inflation targeting abstract this paper analyzes a small open economy model under inflation targeting it shows why such a monetary regime is vulnerable to speculative attacks that take place over a short period rather than instantaneously the speed at which the regime collapses and the extent of reserve losses are increasing in the central bank s explicit or implicit commitment to intervene in the foreign exchange market attacks are therefore ranked from most to least severe as follows exchange rate targeting cpi inflation targeting domestic nontradables inflation targeting and money targeting under inflation targeting the size of the attack is increasing in the tradables consumption share

staggered price setting translog preferences and endogenous persistence abstract this paper generates persistent real effects of a monetary disturbance in the context of staggered price setters the model combines two related and reinforcing features a translog demand structure and a particular input output production structure these features offer a rationale why a firm when computing its own optimal contract price is influenced by the prices set in other overlapping contracts practically the two features interact in a positive manner and provide a way to generate significant endogenous persistence

buying and selling attacks on fixed exchange rate systems abstract in this paper we show how rational expectations models of speculative attacks on fixed exchange rate systems can be extended to take into account the possibility that the central bank could be forced to either devalue or revalue essential to the analysis are the concepts of buying attack and selling attack by means of which we were able to describe how expectations about the future exchange rate are formed we also provide a discussion on the problem of uniqueness of the equilibrium that may arise in this kind of speculative attack models

low inflation pass through and the pricing power of firms abstract recently there has been a significant decline in the degree to which firms pass through changes in costs to prices a decline that is frequently characterized as a reduction in the pricing power of firms the decline appears to be associated with the decline in inflation in many countries the decline has important implications for monetary policy because it affects both forecasts of inflation and the effects of changes in monetary policy on inflation some have argued that the decline in pricing power helped to keep inflation low in the face of apparently strong demand pressures in the united states in the late 1990s this paper puts forth the view that the decline in pass through or pricing power is due to the low inflation environment that has recently been achieved in many countries first a microeconomic model of price setting is used to show that lower pass through is caused by lower perceived persistence of cost changes evidence is then presented showing that inflation is positively correlated with persistence of inflation suggesting that the low inflation itself has caused the low pass through an economy wide model consistent with the micromodel is then presented to illustrate how such changes in pricing power affect output and inflation dynamics in favorable ways but can disappear quickly if monetary policy and expectations change

a dynamic analysis of the demand for health insurance and health care we find that asymmetric information is important for the uptake of supplementary private health insurance and health care utilization we use dynamic panel data models to investigate the sources of asymmetric information and distinguish short run selection effects into insurance from long run selection effects short run selection effects i e responses to shocks are adverse but small in size also long run effects driven by differences in for example preferences and risk aversion are small but we find some evidence for multidimensional asymmetric information for example mental health causes advantageous selection estimates of health care utilization models suggest that moral hazard is not important

new directions for stochastic open economy models the paper develops a simple stochastic new open economy macroeconomic model based on sticky nominal wages explicit solution of the wage setting problem under uncertainty allows one to analyze the effects of the monetary regime on welfare expected output and the expected terms of trade despite the potential interplay between imperfections due to sticky wages and monopoly the optimal monetary policy rule has a closed form solution to motivate our model we show that observed correlations between terms of trade and exchange rates are more consistent with our traditional assumptions about nominal rigidities than with a popular alternative based on local currency pricing 2000 elsevier science b v all rights reserved

distributional effects of general population prescription drug programs in canada canadian household prescription drug expenditures are studied using the statistics canada family expenditure survey masterfiles for periods that include the introduction of provincial general population prescription drug programs budget shares for non senior households are examined over time using non parametric regres sion parametric difference in difference techniques and quantile regression methods the evidence suggests that while program effects are muted when there are high deductibles a non senior prescription drug subsidy is more redistributive than an equal cost proportional income transfer in part because of differential private health insurance coverage by income this is in contrast to previous evidence on canadian senior prescription drug subsidies jel classification 118 j42

real exchange rate monetary policy and the u s economy evidence from a favar model this paper examines the effects of exchange rate depreciation to the u s economy in a factor augmented vector autoregression model using monthly data of 148 variables for the post bretton woods period of 1973 2017 exchange rate shock is identified to reflect exogenous disturbances to the foreign exchange market and movements in exchange rate that are not accounted for by changes in the u s monetary policy we find that depreciation is expansionary and inflationary to the broad u s economy the current account improves over time conforming to the j curve theory and monetary policy is leaning against the wind jel e3 e5 f31 f32 f41

exchange rate pass through openness and the sacrifice ratio abstract considerable recent work has reached mixed conclusions about whether and how globalization affects the inflation output trade off and suggests that the ultimate effect of openness on the output inflation relationship is influenced by a variety of factors in this paper we consider the impact of exchange rate pass through and examine how pass through conditions the effect of openness on the sacrifice ratio we develop a simple theoretical model showing how the extent of both pass through and openness can interact to influence the output inflation relationship next we empirically explore the nature of these two variables and their interaction results indicate that greater pass through increases the sacrifice ratio that there is statistically significant interaction between pass through and openness and once the extent of pass through is taken into account alongside other factors that affect the sacrifice ratio such as central bank independence openness fails to exert an empirically robust effect on the sacrifice ratio

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

are bond financed deficits inflationary a ricardian analysis this paper considers the possible theoretical validity of the following monetarist hypothesis that a constant positive government budget deficit can be maintained permanently and without inflation if it is financed by the issue of bonds rather than money the question is studied in a discrete time perfect foresight version of the competitive equilibrium model of sidrauski modified by the inclusion of government bonds as a third asset it is shown that the monetarist hypothesis is invalid if the deficit is defined exclusive of interest payments but that it is valid under the conventional definition it is also shown that the stock of bonds can grow indefinitely at a rate in excess of the rate of output growth provided that the difference is less than the rate of time preference these formal conclusions do not take account of possible limitations on taxing capacity arising from default incentives that tend to grow with the stock of bonds

speculative currency attacks and balance of payments crises abstract this paper reviews the recent theoretical literature on collapsing exchange rate regimes using a combination of technique intuition and realworld observation we discuss the literature s main insights point out some unresolved questions and offer suggestions for future research the survey should be of interest to both specialists and non specialists in the field of international macroeconomics

international trade without ces estimating translog gravity this paper derives a micro founded gravity equation in general equilibrium based on a translog demand system that allows for endogenous markups and substitution patterns across goods in contrast to standard ces based gravity equations trade is more sensitive to trade costs if the exporting country only provides a small share of the destination country s imports as a result trade costs have a heterogeneous impact across country pairs with some trade flows predicted to be zero i test the translog gravity equation and find strong empirical support in its favor

tax incentives and the decision to purchase health insurance evidence from the self employed the tax reform act of 1986 introduced a new tax subsidy for health insurance purchases by the self employed we analyze the changing patterns of insurance demand before and after tax reform to generate new estimates of how the after tax price of insurance affects the discrete choice of whether to buy insurance we employ both traditional regression models and difference in difference methods that compare changes in insurance coverage across groups around tra86 the results from our most carefully controlled comparison suggest that a 1 percent increase in the cost of insurance coverage reduces the probability that a self employed single person will be insured by 1 8 percentage points

the changing role of government in financing health care an international perspective this paper explores the changing role of government involvement in health care financing policy outside the united states it provides a review of the economics literature in this area to elucidate the implications of recent policy changes on efficiency costs and quality our review reveals that there has been some convergence in policies adopted across countries to improve financing incentives and encourage efficient use of health services in the case of risk pooling all countries with competing pools experience similar difficulties with selection and are adopting more sophisticated forms of risk adjustment in the case of hospital competition the key drivers of success appear to be what is competed on and measurable rather than whether the system is public or private in the case of both the success of performance related pay for providers and issues resulting from wait times evidence differs within and across jurisdictions however the evidence does suggest that some governments have effectively reduced wait times when they have chosen explicitly to focus on achieving this goal many countries are exploring new ways of generating revenues for health care to enable them to cope with significant cost growth but there is little evidence to suggest that collection mechanisms alone are effective in managing the cost or quality of care jel h51 i11 i18

on the outcome of inconsistent programs under exchange rate and monetary rules abstract this paper studies the case of inconsistent programs of monetary policy that is programs incompatible in the long run with a given budget deficit so that at some point in the future there is an eventual crisis and demise of the program all of which is from the outset anticipated by the public the context is one of a small open economy with perfect foresight in which two sets of possibilities are analyzed i a monetary or an exchange rule for the conduct of monetary policy and ii presence or absence of capital mobility it is found that while the choice of the rule is unimportant restrictions on capital mobility determine a very different response for the case of either rule concerning side effects of the program on non monetary variables and on the post crisis level of country indebtedness

tight money and inflation abstract in a recent paper sargent and wallace present an example where tightening of monetary policy over a specified time interval in conjunction with a constant deficit leads to an increase in the rate of inflation not only beyond this interval but even from the outset in the present paper i show how the latter result can be derived from a standard monetary growth model of the sidrauski brock type this enables a relatively simple interpretation of the apparent paradox

the capital inflows problem revisited a stylized model of southern cone disinflation in the late 1970s countries in latin america s southern cone initiated attempts to lower domestic inflation rates through the progressive reduction of a preannounced rate of exchange rate devaluation the stabilization programs gave rise to massive capital inflows real exchange rate appreciation and current account deficits this paper develops a stylized intertemporal framework in which the effects of a credible preannounced disinflation scheme can be studied it is shown that even when agents have perfect foresight and markets clear continuously the capital inflows phenomenon and the associated real appreciation may result while unanticipated permanent inflation changes are neutral in the paper anticipated inflation is neutral only in exceptional circumstances a preannounced disinflation operates by altering the path of an expenditure based real domestic interest rate that depends on expected changes in the prices of liquidity services and nontradable consumption goods

adverse selection moral hazard and wealth effects in the medigap insurance market using data from a longitudinal study of the recently retired we attempt to separate the moral hazard effect of medicare supplementary medigap insurance on health care expenditures from the adverse selection effect of poor health on medigap coverage we find evidence of adverse selection but its magnitude is unlikely to create serious efficiency problems taking adverse selection into account reduces the estimate of the moral hazard effect in addition we find a strong positive wealth effect on the demand for supplementary insurance

exchange rate pass through to bilateral import prices abstract this paper estimates exchange rate pass through for a unique set of bilateral us import prices over the period 1992 2006 it finds evidence of a significant decline in pass through to us import prices from some but not all of the trading partners in the sample these differences rule out a universal decline in pass through rates to bilateral us import prices they further indicate a growing divergence in the import price response to a uniform dollar decline

dynamics of the exchange rate in anticipation of pegging abstract this paper studies an economy in which agents expect the current floating rate regime to be interrupted on a specific future date by a transitional fixed rate policy when the new peg is not revealed in advance the path of the floating rate in anticipation of pegging is determined by the interaction between what agents perceive to be the objectives and the constraints of the central bank the paper highlights the role of the pegging date the duration of the fixed rate interval the quantity of reserves available to the authorities and the nature of policies expected after pegging is terminated

when is it optimal to abandon a fixed exchange rate the influential krugman flood garber kfg model of balance of payment crises assumes that a fixed exchange rate is abandoned if and only if international reserves reach a critical threshold value from a positive standpoint the kfg rule is at odds with many episodes in which the central bank has plenty of international reserves at the time of abandonment we study the optimal exit policy and show that from a normative standpoint the kfg rule is generally suboptimal we consider a model in which the fixed exchange rate regime has become unsustainable due to an unexpected increase in government spending we show that when there are no exit costs it is optimal to abandon immediately when there are exit costs the optimal abandonment time is a decreasing function of the size of the fiscal shock for large fiscal shocks immediate abandonment is optimal our model is consistent with evidence suggesting that many countries exit fixed exchange rate regimes with still plenty of international reserves in the central bank s vault copyright 2008 wiley blackwell

a fiscal theory of currency crises an exchange rate crisis is caused when the fiscal authority lets the present value of primary surpluses inclusive of seigniorage deviate from the value of government debt at the pegged exchange rate in the absence of long term government bonds the exchange rate collapse must be instantaneous with long term government bonds the collapse can be delayed at the discretion of the monetary authority fiscal policy is responsible for the inevitability of a crisis while monetary policy determines its characteristics that is the timing of the crisis and the magnitude of exchange rate depreciation

currency crises and contingent liabilities a contingent liability is a future spending commitment that is realized with some probability international organizations emphasize the dangers of contingent liabilities when providing advice why one answer is obvious if significant contingent liabilities are realized they commit governments to substantial fiscal costs there is a further reason by taking on a contingent liability the government can increase the probability of the underlying shock taking place this paper describes how the issuance of government guarantees and the methods by which they are financed affect the probability of crises taking place it also discusses the determinants of post crisis inflation and depreciation

pass through of exchange rates and competition between floaters and fixers this paper studies how a rise in the share of u s imports from china or any country with a fixed exchange rate could disproportionately lower pass through of exchange rates to u s import prices we develop a theoretical model showing how changes in the competitive environment induce exporters from other countries to lower markups in response to a dollar depreciation thereby moderating pass through the model indicates that a particular local bias condition is necessary for this effect and that free entry amplifies it the model also produces an approximately log linear structural equation for pass through regressions including the china share panel regressions over 1993 2006 indicate that the rising share of trade from china or from all countries with fixed exchange rates can explain a decline in pass through by about onefifth of its size

pass through of competitors exchange rates to us import and producer prices this paper shows that in theory and bls microdata the prices of imported goods respond to the exchange rates er of the producer s foreign competitors in contrast standard models have no role for competitors ers excluding the effects of competitors exchange rates typically biases upwards estimates of bilateral exchange rate pass through because competitors ers and bilateral ers are positively correlated a multi country version of atkeson and burstein s 2008 industry aggregation model is able to explain a sizable proportion of pass through of competitors exchange rates to import prices and also predicts pass through of foreign competitors prices and pass through of competitors ers to us producer prices both of which are supported in the data the results suggest that pass through will be larger for er movements shared by a greater fraction of foreign competitor countries

balance of payments crises in a perfect foresight optimizing model abstract the paper extends the literature on balance of payments crises by treating the issue in a generalized equilibrium framework investors maximize a non separble utility function defined over consumption and real money balances under the threat of a future collapse of the fixed exchange rate regime the paper obtains real effects in the form of current account adjustments when agents realize that the fixed regime is not indefinitely viable new information regarding official foreign lending can cause attacks at the central bank in the form of sudden shifts by investors out of domestic money into foreign bonds

collapsing exchange rate regimes abstract the paper develops models of speculative runs and collapse of fixed exchange rate regimes which result from credit policies that are ultimately inconsistent with a fixed exchange rate while no substantially new results are offered the formulation itself is of interest in highlighting the important ideas that have emerged in this area we modify the flood garber model to make the analysis more comparable with the deterministic case specifically we assume that the money growth process is specified in terms of growth rates rather than absolute increments and as a uniform rather than exponential distribution the modified analysis lends itself to a simple geometric interpretation of the krugman and flood garber models highlighting the important difference between the deterministic and stochastic models in the former the speculative attack run is concentrated in the latter the transition to floating is diffuse reserve losses exceed increases in domestic credit because of a rising probability of transition and reserve depletion accelerates on the way to the regime change

the balance of payments and borrowing constraints an alternative view of the mexican crisis in this paper we develop a model in which a country faces a balance of payments crisis if constraints on its international borrowing bind we use the model to describe the dynamics of the trade balance capital account and balance of payments of a country that borrows to finance consumption following sweeping macroeconomic and structural reforms and then hits constraints on its international borrowing we compare the predictions of this theoretical example with events in mexico from 1987 through 1995

the vulnerability of price stabilization schemes to speculative attack this paper examines the effects of government attempts to stabilize the prices of commodities by use of buffer stocks agricultural goods subject to supply uncertainty as well as depletable resources are considered in each case it is shown that the resulting rational expectations competitive equilibrium contains a speculative attack a situation where the entire government stock is suddenly purchased by previously inactive speculators the analysis is applied to the historical attempt to peg the gold price which caused the attack of 1968 the insights gained and the methodology developed also apply to the various international agreements to impose bans on commodity prices which have been proposed by the united nations conference on trade and development

new products with a symmetric aids expenditure function abstract we study a symmetric aids expenditure function that allows for variation in the range of goods solving for the reservation prices for goods not available a convenient form for the expenditure function is obtained this functional form should prove useful in monopolistic competition models were the range of products changes due to entry and exit

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

speculative attack and the external constraint in a maximizing model of the balance of payments balance of payments models of speculative attack differ from non renewable resource models in that foreign exchange reserves may be borrowed from abroad this paper shows that in an idealized world where all private income is subject to lump sum taxation central bank reserves can become infinitely negative without violating the government s intertemporal budget constraint none the less a growth rate of domestic credit exceeding the world interest rate if maintained indefinitely leads to violation of the constraint in the paper s model given an assumed limit to official external borrowing the paper next analyses inevitable transitions between fixed and floating exchange rate regimes when individual preferences are explicitly specified in a discrete time deterministic model the collapse of a fixed rate may be characterized by two successive speculative attacks

potential of regional and seasonal requirements in us regulation of fresh lemon imports peterson regional destination and seasonal access restrictions are regulatory options available to mitigate pest risk on imported fresh fruits and vegetables rather than impose an import ban this paper analyses the economic effects of potential entry of argentine lemons into the united states under alternative geographic and seasonal restrictions one challenge to assessing the economic effect of entry is determining the post entry quantity of argentine exports using a homothetic trans log expenditure function we calibrate a set of reservation prices for us demand for argentine lemons based on observed prices and quantities of other lemon varieties these are compared with a set of projected entry prices to determine whether entry will occur and post entry export levels across the policy scenarios argentine lemon exports to the united states range from 8 0 to 14 9 million kg higher prices for argentine lemons reduce its exports to the european union and other markets while lemon exports from chile and mexico are adversely affected broader applications of regional and or seasonal restrictions may be effective policies for achieving pest risk mitigation goals in a manner consistent with wto obligations to minimise distortions to trade

monetary independence under bretton woods perspectives from a stochastic maximizing model research based on the kouri porter 1974 model of international capital flows suggests that the central banks of nonreserve countries enjoyed considerable monetary independence during the bretton woods era this paper is a theoretical and empirical reassessment of this conclusion using a stochastic maximizing model it is shown that the existence of imperfect asset substitutability does not guarantee monetary control at the empirical level the estimated offset coefficients for four industrialized countries are consistent with zero monetary independence

does exchange rate stability increase trade and welfare we develop a simple general equilibrium framework to study the effect of the exchange rate system on trade and welfare an important feature of the model is deviations from purchasing power parity caused by rigid price setting in buyers currency we find the following first exchange rate stability is not necessarily associated with more trade in a simple benchmark model with separable preferences and only monetary shocks trade is unaffected by the exchange rate system consistent with most evidence second both trade and welfare can be higher under either exchange rate system depending on preferences and on the monetary policy rules followed under each system finally in general there is no one to one relationship between the levels of trade and welfare across exchange rate systems

private insurance subsidies and public health care markets evidence from canada in this study i examine the effects of government subsidies to employer provided health insurance on the decision to purchase insurance and on utilization of publicly funded health services using unique variation in tax subsidies across canadian provinces as an instrument i estimate the effects of these subsidies on the demand for supplemental health insurance and their extended effects on the decision to use publicly funded health services my results show that government subsidies through tax exemptions have significant effects on the decision to purchase insurance furthermore additional insurance policies lead to moral hazard in the use of publicly funded health services jel classification h2 h4 11

a viable gold standard requires flexible monetary and fiscal policy national domestic credit expansion dce policies which offset the effect of money demand shocks on international gold reserves the gold standard collapses with certainty in finite time through a speculative selling attack against one of the currencies various policies for postponing a collapse are considered when a responsive dce policy eliminates the danger of a run on a country s reserves the exogenous shocks disturbing the system which previously were reflected in reserve flows now show up in the behaviour of the public debt unless the primary non interest government deficit is permitted to respond to these shocks the public debt is likely to rise or fall to unsustainable levels for the idealized gold standard analysed in the paper viability can be achieved only through the active and flexible use of monetary and fiscal policy

collapsing exchange rate regimes some linear examples abstract we construct a pair of linear examples to study the collapse time of a fixed exchange rate regime the first example is a perfect foresight continuous time model which allows calculation of the exact collapse time and the tracking of reserves the second example is a discrete time stochastic model which yields an endogenous probability distribution over the collapse time and produces a forward discount of the exchange rate

fiscal imbalances and the dynamics of currency crises abstract this paper analyzes links between the fiscal theory of the price level ftpl and the first generation models after krugman journal of money credit and banking 11 1979 311 325 exploring the idea that a synthesis between the two can become a new framework to analyze the fiscal dimension of currency crises working in a simple synthetic framework we show how external nominal shocks can cause a fiscal imbalance and undermine currency stability resolve two well known paradoxes of the first generation model discuss the role of seigniorage revenues and illustrate how fiscal and interest rate policies interact to determine the magnitude and the timing of speculative attacks and devaluations

the exact timing of the collapse of an exchange rate regime and its impact on the relative price of traded goods as of february 28 1983 ninety four countries are classified as having a fixed exchange rate regime 38 are pegged to the u s dollar 13 to the french franc 14 to the special drawing right and 24 to different baskets of currencies the choice of a fixed exchange rate peg implies a specific monetary discipline namely monetary growth equal to the growth rate of the currency or currencies to which a country is pegged monetary policy is thus subject to an exchange rate rule rather than to either a monetary growth rule or alternatively to discretionary policy a fixed exchange rate is a specific case of an active crawling peg where the preannounced rate of change in the exchange rate is zero active crawling peg rules whereby the exchange rate is adjusted downward by a preannounced amount over a specified period of time have been practiced in various places particularly in latin america recent experiments include argentina beginning december 1978 brazil during the 1980 calendar year chile from february 1978 to june 1979 jamaica from may 1978 to may 1979 portugal from august 1977 to june 1979 and uruguay beginning october 1978 1 at times the prean

the timing of exchange rate collapse abstract recent episodes of exchange rate collapse have renewed interest in models of speculative attacks these episodes have been considered by some observers to be inconsistent with fundamentals models of attack since there was no prolonged period of policy misalignment and declining reserves as required by such models this paper develops a fundamentals model in which collapse is instantaneous at the time of unexpected policy change and or a change in the expectations of future policy even for a reserve abundant country

a comparison of alternative models for the demand for medical care we have tested alternative models of the demand for medical care using experimental data the estimated response of demand to insurance plan is sensitive to the model used we therefore use a split sample analysis and find that a model that more closely approximates distributional assumptions and uses a nonparametric retransformation factor performs better in terms of mean squared forecast error simpler models are inferior either because they are not robust to outliers e g anova anocova or because they are inconsistent when strong distributional assumptions are violated e g a two parameter box cox transformation

fixed exchange rates and trade abstract a classic argument for a fixed exchange rate is its promotion of trade empirical support for this however is mixed while one branch of research consistently shows a small negative effect of exchange rate volatility on trade another more recent branch presents evidence of a large positive impact of currency unions on trade this paper helps resolve this disconnect our results which use a new data based classification of fixed exchange rate regimes show a large significant effect of a fixed exchange rate on bilateral trade between a base country and a country that pegs to it these results suggest an economically relevant role for exchange rate regimes in trade determination since a significant amount of world trade is conducted between countries with fixed exchange rates

tax credits insurance and the use of medical care the personal income tax systems in canada the united states and elsewhere permit deductions or tax credits for out of pocket health care expenditures and private medical insurance premiums little is known about the effects of such tax measures on individual behaviour in contrast to the extensive research on the tax exemption for employer provided health insurance in this paper we exploit variation in the after tax cost of health expenditures under the tax law to estimate the tax price elasticity of demand for prescription drugs health insurance and other eligible expenditures we find evidence of moderate to large tax price elasticities compared with traditional point of service price elasticity estimates despite the apparent differences in the way tax subsidies are experienced by consumers in contrast we find no evidence the tax subsidy affects demand for health insurance on the intensive margin which we show is consistent with the theory of optimal self insurance we discuss the implications of our results for recent proposals to reform public and private health insurance systems jel classification i1 h2 credits d impot assurance et l utilisation des soins medicaux les systemes d impot sur le revenu des particuliers au canada aux etats unis et ailleurs permettent des deductions ou credits d impot pour les depenses directes en soins de sante assumees par les particuliers ou pour les primes d assurance privee on connait mal les effets de ces mesures fiscales sur le comportement des personnes par comparaison avec les resultats extensifs de la recherche sur les effets des exemptions fiscales pour l assurance sante fournie par les employeurs dans ce texte on utilise la variation dans le fardeau des depenses pour la sante apres impot selon les diverses juridictions pour evaluer l elasticite de la demande de medicaments d ordonnance de l assurance sante et d autres depenses eligibles en reponse a des differences de prix fiscaux on decouvre que l ordre de grandeur des elasticite se situe entre moderee et grande quand on les compare aux evaluations des elasticites traditionnelles de la demande aux points de service par rapport aux prix et ce malgre les differences apparentes dans les experiences de ces subventions fiscales pour les consommateurs d autre part on ne trouve pas de support pour l hypothese que les subventions fiscales affectent la demande d assurance santea la marge intensive ce qui concorde bien avec ce que nous enseigne la theorie de l auto assurance optimale on discute les implications de ces resultats pour certaines reformes recentes proposees aux systemes d assurance sante prives et publics

macroeconomic policy exchange rate dynamics and optimal asset accumulation the paper develops a model of exchange rate and current account determination for a small economy peopled by infinitely lived utility maximizing households in this setting a central bank purchase of foreign exchange has no real effects when central bank foreign reserves earn interest at the world rate and proceeds are returned to the public in contrast an increase in the monetary growth rate does have real effects even in the long run the model developed here implies that an increase in government spending may lead to a surplus on current account the external adjustment process predicted by the model is one in which consumption real balances and external assets all rise or fall simultaneously

markups and the number of firms in a simple model of imperfect competition abstract two counter intuitive results regarding the number of firms emerge from the existing monopolistic competition literature first the number of firms is positively related to the extent of the monopoly power second when the goods market is perfectly competitive the number of firms is reduced to zero this paper proposes a plausible way to escape from these two counter intuitive deficiencies

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association