the differential regional effects of monetary policy this paper examines whether monetary policy has similar effects across regions in the united states impulse response functions from an estimated structural vector autoregression reveal a core of regions new england mideast plains southeast and the far west that respond to monetary policy changes in ways that closely approximate the u s average response of the three noncore regions one great lakes is noticeably more sensitive to monetary policy changes and two southwest and rocky mountains are found to be much less sensitive a state level version of the model is estimated and used to provide evidence on the channels for monetary policy

buyer optimal learning and monopoly pricing this paper analyzes a bilateral trade model where the buyer s valuation for the object is uncertain and she observes only a signal about her valuation the seller gives a take it or leave it offer to the buyer our goal is to characterize those signal structures which maximize the buyer s expected payoff we identify a buyer optimal signal structure which generates i efficient trade and ii a unit elastic demand furthermore we show that every other buyer optimal signal structure yields the same outcome as the one we identify in particular the same price

a rothschild stiglitz approach to bayesian persuasion abstract rothschild and stiglitz 1970 represent random variables as convex functions integrals of the cumulative distribution function combining this representation with blackwell s theorem 1953 we characterize distributions of posterior means that can be induced by a signal this characterization provides a novel way to analyze a class of bayesian persuasion problems

financial integration and the wealth effect of exchange rate fluctuations abstract recent years have witnessed a large increase in international financial integration in the form of largely offsetting cross holdings across countries we assess how such financial leverage affects the international transmission of monetary shocks and find that it leads to sizable welfare differentials that far exceed the impact due to nominal rigidities we document the relevance of the exact nature of holdings with bond holdings associated with larger effects than equity holdings the impact of financial leverage on welfare is also sensitive to the extent of exchange rate pass through and the substitutability between goods produced in different countries

optimal selling strategies when to haggle when to hold firm a seller encountering risk neutral buyers one at a time should if commitments are feasible quote a single take it or leave it price to each this strategy is superior to any other for finite or infinite buyer populations whether there is learning or the distribution of buyer prices is known at the outset with one object for sale or many although haggling may offer advantages in terms of price discrimination these gains are more than offset by the losses it generates by encouraging buyers to refuse purchases at high prices

pareto price discrimination abstract as the collection of consumer data becomes more common online merchants are better equipped to price discriminate now more than ever before while standard first degree price discrimination benefits merchants and harms consumers relative to uniform pricing i derive an alternative first degree pricing strategy that achieves efficiency and pareto improves upon the uniform pricing equilibrium furthermore i show that price ceilings can enforce these pareto price discrimination strategies making pareto price discrimination a viable option for merchants and policy makers

monopoly price discrimination and demand curvature this paper presents a general analysis of the eects of monopolistic third degree price discrimination on welfare and output when all markets are served su cient conditions involving straightforward comparisons of the curvatures of the direct and inverse demand functions in the dierent mar kets are presented for discrimination to have negative or positive eects on

valuation effects and the dynamics of net external assets abstract valuation effects can imply that the traditional current account is an inaccurate measure of the change in the net foreign asset nfa position this paper uses new developments in the analysis of portfolio choice in general equilibrium to investigate valuation effects in a two country model broadly speaking the valuation effects in the model correspond to those observed in the data but there is a key distinction between unanticipated and anticipated valuation effects unanticipated effects can be large dominating the movement in nfa but anticipated effects arise only at higher orders of approximation and are small for reasonable parameterizations

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

a century of global equity market correlations in this paper we use a unique long run dataset of regulatory constraints on capital account openness to explain stock market correlations since stock returns themselves are highly volatile any examination of what drives correlations needs to focus on long runs of data this is particularly true since some of the short term changes in co movements appear to reverse themselves delroy hunter 2005 we argue that changes in the co movement of indices have not been random rather they are mainly driven by greater freedom to move funds from one country to another in related work geert bekaert and campbell harvey 2000 show that equity correlations increase after liberalization of capital markets using a number of case studies from emerging countries we examine this pattern systematically for the last century and find it to be most pronounced in the recent past we compare the importance of capital account openness with one main alternative explanation the growing synchronization of economic fundamentals we conclude that greater openness has been the single most important cause of growing correlations during the last quarter of a century though increasingly correlated economic fundamentals also matter in the conclusion we offer some thoughts on why the effects of greater openness appear to be so much stronger today than they were during the last era of globalization before 1914 this abstract was borrowed from another version of this item

the process of socialist economic transformation in this paper we consider the reform process in those central and east european countries that have made the decision to move from a more or a less planned socialist system to a private market economy one in which private ownership predominates and most resources are allocated through markets because the reform process is both complex and intertwined with political factors especially the shift towards representative democracy and because there are substantial differences among the reforming countries no single detailed road map can guide the way to the new systems rather the paper sets out general considerations that provide a framework for reform and relates the choices to some initial conditions of the various reforming countries the framework applies also to the soviet union or in the event of its disintegration to its successor states as they move to market systems

price discrimination and social welfare studies the effect of price discrimination on social welfare using methods from duality theory features of the reservation model presented quasi linear utility and consumers surplus upper and lower bounds on welfare change bounds on welfare change with optimal price discrimination from ebsco

globalisation pass through and the optimal policy response to exchange rates abstract in this paper we examine how monetary policy should respond to nominal exchange rates in a new keynesian open economy model that allows for a non trivial role for sterilised intervention the paper develops the argument against the backdrop of the evolving policy making environment of asian economies sterilised intervention can be a potent tool that offers policymakers an additional degree of freedom in maximising global welfare we show that the gains to sterilised intervention are greater when goods market integration is low and exchange rate pass through is high however increased financial internationalisation reduces the effectiveness of sterilised intervention as the international policy trilemma becomes more relevant unsterilised intervention may also have a role to play although the potential welfare gains from this are generally smaller most central banks in asia have actively used sterilised foreign exchange intervention as a policy tool to smooth exchange rates but over time declining exchange rate pass through and the increasing international integration of financial and goods markets will tend to reduce the efficacy of sterilised intervention given the limited effectiveness of unsterilised intervention our model implies that the role of exchange rate movements in the optimal setting of monetary policy in asia is decreasing

examining asymmetries in the transmission of monetary policy in the euro area evidence from a mixed cross section global var model abstract i estimate the transmission of a common euro area monetary policy shock across individual euro area economies to do so i develop a global var model in which all euro area economies are included individually while at the same time their common monetary policy is modelled as a function of euro area aggregate output growth and inflation the results suggest that the transmission of monetary policy across euro area economies displays asymmetries and that in line with economic theory these are driven by differences in economies structural characteristics in particular euro area economies in which a higher share of aggregate output is accounted for by sectors servicing interest rate sensitive demand exhibit a stronger transmission of monetary policy to real activity similarly even though the evidence is less conclusive euro area economies which feature more real wage and or fewer unemployment rigidities also appear to display a stronger transmission of monetary policy to real activity

managing adjustment costs political authority and the implementation of adjustment programs with special reference to african countries abstract the degree to which a government implements a program given no disruptive factors depends critically on its legitimate authority to carry out the program and the degree to which management aspects notably management costs of the program were satisfactorily dealt with at the design stage program designers should understand the nature dimensions justification and basis of legitimate authority when the government s legitimate authority is inadequate program designers must advise the government to obtain it a properly designed program should also include measures to speed up entry prevent inefficient exit and minimize unemployment and underutilization of capacity have a framework for ensuring competitive and open markets and arm the program manager with tools to alleviate social tensions arising from certain distributional consequences and to respond to predictable nationalistic preferences

reform without revolt the political economy of economic reform in the gambia abstract the gambia s economic recovery program differed from most adjustment programs in sub saharan africa because the economy quickly recovered and because the government implemented the reforms with remarkably little public opposition this paper examines the politics of reform in the gambia focusing on both government decisions regarding reform and subsequent public reactions the analysis highlights the importance of the gambia s democratic political traditions the rural political power base the relationship with neighboring senegal weak opposition groups strong leadership and lucky breaks the gambia provides an example of a democracy that successfully implemented a strong reform program preceding a national election

impacts of monetary and macroeconomic factors on food prices in eastern and southern africa eastern and southern africa has been experiencing relatively large increases in real food prices since the early 1980s real food prices in some african countries grew as much as 11 per year during the 1980 1996 period the huge volatility in food prices coincided with the implementation of structural adjustment programmes in several african countries this study examines the impacts of monetary and macroeconomic factors on real food prices in eastern and southern africa using the technique of cointegration and error correction modelling to test the long run relationship between real food prices and the factors that influence their behaviour in selected african countries demand elasticities for food are estimated for selected countries the empirical results show that changes in domestic food production coupled with income trade exchange rate and monetary policies have significant impacts on real food prices with wide implications for food availability and food security in the region

information design bayesian persuasion and bayes correlated equilibrium abstract a set of players have preferences over a set of outcomes we consider the problem of an information designer who can choose an information structure for the players to serve his ends but has no ability to change the mechanism or force the players to make particular action choices we describe a unifying perspective for information design we consider a simple example of bayesian persuasion with both an uninformed and informed receiver we extend information design to many player and relate it to the literature on incomplete information correlated equilibrium

financial globalization and monetary policy abstract recent data show substantial increases in the size of gross external asset and liability positions the implications of these developments for optimal conduct of monetary policy are analyzed in a standard open economy model which is augmented to allow for endogenous portfolio choice the model shows that monetary policy takes on new importance due to its impact on nominal asset returns nevertheless the case for price stability as an optimal monetary rule remains in fact it is reinforced even without nominal price rigidities price stability is optimal because it enhances the risk sharing properties of nominal bonds

a theory of grand innovation prizes abstract the past decade has witnessed a resurgence in innovation awards in particular of grand innovation prizes gips which are rewards to innovators developing technologies reaching performance goals and requiring breakthrough solutions gips typically do not preclude the winner also obtaining patent rights this is in stark contrast with mainstream economics of innovation theories where prizes and patents are substitute ways to generate revenue and encourage innovation building on the management of innovation literature which stresses the difficulty to specify ex ante all the technical features of the winning technologies we develop a model in which innovative effort is multi dimensional and only a subset of innovation tasks can be measured and contracted upon we show that in this environment patent rights and cash rewards are complements and that gips are often preferable to patent races or prizes requiring technologies to be placed in the public domain moreover our model uncovers a tendency for patent races to encourage speed of discovery over quality of innovation which can be corrected by gips we explore robustness to endogenous entry costly public funds and incomplete information by gip organizers on the surplus created by the technology

political explanations of macroeconomic management a survey abstract this paper surveys eight overlapping types of political explanation for patterns of macroeconomic management in the third world 1 historical traditions 2 socio structural determinants 3 the self interest of politically powerful sectors 4 entrenched characteristics of the political system 5 formal properties of the political institutions 6 the influence of economic ideologies 7 vicious virtuous circles and 8 a residual category of conjunctural factors it then considers the scope and limitations of such explanations and reassesses the notion of political constraints on economic optimization

information control in the hold up problem we study the use of information control to mitigate hold up risks we identify a distinction between asymmetric information that creates an ex ante investment incentive and asymmetric information that causes ex post inefficiency which then allows ex post inefficiency to be eliminated without compromising the ex ante investment incentive we characterize the properties of the optimal information structure and the payoffs and welfare achievable with information control in the presence of hold up risks

bubbles and persuasion with uncertainty over market sentiment abstract recent empirical studies suggest that during times of unexpected innovation agents heterogeneously update their beliefs about an asset fundamental value and are uncertain of other agents beliefs about it in this paper i show that when there is uncertainty over the market sentiment defined as other investors beliefs about an asset fundamental value market manipulation can act through a previously unconsidered channel by misleading agents learning on the market sentiment this novel type of market manipulation could strengthen existing financial bubbles or even give rise to new ones

naivete based discrimination we initiate the study of naivete based discrimination the practice of conditioning offers on external information about consumers naivete knowing that a consumer is naive increases a monopolistic or competitive firm s willingness to generate inefficiency to exploit the consumer s mistakes so naivete based discrimination is not pareto improving can be pareto damaging and often lowers total welfare when classical preference based discrimination does not moreover the effect on total welfare depends on a hitherto unemphasized market feature the extent to which the exploitation of naive consumers distorts trade with different types of consumers if the distortion is homogeneous across naive and sophisticated consumers then under an arguably weak and empirically testable condition naivete based discrimination lowers total welfare in contrast if the distortion arises only for trades with sophisticated consumers then perfect naivete based discrimination maximizes social welfare although imperfect discrimination often lowers welfare if the distortion arises only for trades with naive consumers then naivete based discrimination has no effect on welfare we identify applications for each of these cases in our primary example a credit market with present biased borrowers firms lend more than is socially optimal to increase the amount of interest naive borrowers unexpectedly pay creating a homogeneous distortion the condition for naivete based discrimination to lower welfare is then weaker than prudence

the external wealth of nations measures of foreign assets and liabilities for industrial and developing countries abstract although capital flows are closely monitored surprisingly little is known about the accumulated stocks of foreign assets and liabilities held by various countries especially in the developing world this paper constructs estimates of foreign assets and liabilities and their equity and debt subcomponents for a sample of 67 industrial and developing countries it characterizes the stylized facts of international balance sheets and asks whether there are trends in net foreign asset positions and shifts in debt equity ratios over time finally it explores the sensitivity of estimated stock positions to the treatment of valuation effects not captured in balance of payments data

welfare increasing third degree price discrimination when demand functions in different markets are derived from distributions of reservation prices that differ only in their means conditions exist such that third degree price discrimination leads to greater total output and greater total welfare welfare is higher with discrimination than with a uniform price when demand functions are derived from logistic distributions with different means welfare and consumer surplus are higher with discrimination for demands derived from a distribution related to the pareto in general whether discrimination increases total output depends on demand being more convex in markets in which prices fall with discrimination than in those in which prices rise

informationally robust trade and limits to contagion abstract two agents can each accept or reject a proposed deal whose value for each agent depends on an unknown state and may be positive or negative the deal takes place only if both accept each agent can be imperfectly informed in an arbitrary way about both her own value and the other agent s in such environments contagious adverse selection may prevent the deal from being reached even when it is mutually beneficial ex post we give an upper bound on the ex ante expected welfare loss in equilibrium due to such contagion valid for any information structure the welfare loss is small if negative values are unlikely ex ante and under an assumption of known aggregate gains from the deal our bound is sharp the bound has a succinct description even though the equilibrium itself in any given information structure may be hard to describe explicitly

preventives versus treatments preventives are sold ex ante before disease status is realized while treatments are sold ex post even if the mean of the ex ante distribution of consumer values is the same as that ex post the shape of the distributions may differ generating a difference between the surplus each product can extract if for example consumers differ only in ex ante disease risk then a monopolist would have more difficulty extracting surplus with a preventive than with a treatment because treatment consumers having contracted the disease no longer differ in disease risk we show that the ratio of preventive to treatment producer surplus can be arbitrarily small in particular when the distribution of consumer values has a zipf shape and the disease is rare the firm s bias toward treatments can be reversed for example if the source of private information is disease severity learned ex post the difference between the producer surplus earned from the products can result in distorted rd the deadweight loss from this distortion can be as large as the entire producer surplus difference calibrations for hiv and heart attacks based on risk factors in the u s population suggest that the distribution of disease risk is sufficiently zipf similar to generate substantial differences between producer surplus from preventives and treatments empirically we find that proxies for the zipf similarity of the disease risk distribution are associated a significantly lower likelihood of vaccine development but not drug development jel codes o31 l11 i18 d42

global corporate bond issuance what role for us quantitative easing the paper analyses the link between global corporate bond issuance and us quantitative easing qe it finds that purchases and holdings of mbs and treasuries by the fed have a strong impact on gross corporate bond issuance across advanced and emerging economies the results are robust to a large number of checks including controlling for the reduced supply of domestic and international bank loans in the aftermath of the global crisis which might have induced the corporate sector to issue more bonds our results support the gap filling theory greenwood et al 2010 where corporate bonds replace the assets removed from the market by large scale asset purchases specifically asset holdings and purchases crowded out investors from the markets where the fed intervened and accelerated portfolio rebalancing across assets and countries leading to stronger corporate bond issuance across the globe a counterfactual analysis shows that bond issuance in emerging markets since 2009 would have been halved without qe

financial globalisation and monetary policy effectiveness abstract in theory financial globalisation has an ambiguous effect on monetary policy effectiveness on the one hand exposure to global financial cycles dampens the output effect of a tightening in monetary policy in financially integrated economies and thereby reduces monetary policy effectiveness on the other hand another salient feature of financial globalisation is that economies have become increasingly net long in foreign currency which amplifies monetary policy effectiveness economies experience larger valuation losses and wealth effects on their external balance sheets in response to an exchange rate appreciation when monetary policy is tightened hence triggering stronger output effects we quantify empirically the net impact of financial globalisation on monetary policy effectiveness through these two opposing channels we find that since the 1990s the second channel has dominated so that financial globalisation has amplified monetary policy effectiveness in the typical advanced and emerging market economy by our estimates the output effect of a tightening in monetary policy has increased by 25 due to financial globalisation our results imply that financial globalisation has modified the transmission of monetary policy by strengthening the importance of the exchange rate channel

ecb spillovers and domestic monetary policy effectiveness in small open economies abstract in this paper we examine whether financial spillovers from the european central bank s monetary policy have consequences for the effectiveness of domestic monetary policy in three small open economies soes that are highly integrated with the european monetary union denmark norway and sweden we find significant spillovers that are particularly strong for longer maturity yields at the same time domestic monetary policy in norway and sweden is effective for the shorter end of the yield curve but much less so for the longer end of the curve recent work suggests that the trilemma in international economics as we used to know it may be a dilemma soes can only have effective monetary policies when the capital account is managed our results imply something in between although spillovers impose challenges on domestic monetary policy effectiveness small open economies still have some control over their yield curve

the gender dimensions of economic adjustment policies potential interactions and evidence to date abstract many developing countries have implemented stabilization and structural adjustment programs over the last 20 years the success of these programs depends critically on individual level responses to changing economic incentives access to control of and an ability to move productive economic resources between sectors is determined in part by gender if an individual s gender impedes their ability to fully participate in the economic adjustment process by inhibiting resource access control or movement adjustment will be impaired this paper discusses the potential gender dimensions of structural adjustment policies and examines the evidence to dale

can neoclassical economics underpin the reform of centrally planned economies te here s a curious symmetry between the arguments propounded over the last century in advocacy of socialism and the present popular discussion of the reform of centrally planned economies in those old discussions the vision of socialism was utopian which was contrasted with the dickensian realities of capitalism now the disasters of central planning are contrasted with the benefits flowing from perfectly functioning markets in the conventional wisdom of reform the vision of markets is utopian and that of central planning concentrates on the awful reality what is largely missing in the conventional wisdom is a satisfactory attempt to come to grips with the central question that should be answered in formulating reform plans how does one explain the differences in performance of market capitalist and centrally planned economies of course capitalism has outperformed central planning the developed west is therefore an obvious source of ideas for reforms but the institutions of capitalism come in many varieties and cannot be put in place instantaneously there are many alternative reform paths depending upon the importance attributed to each of these institutions thus there remains the problem of tracing the source of the superiority of capitalist economies to specific characteristics this point was made clear to me on hearing a vietnamese official justify single party rule by noting the economic success of taiwan and singapore reformers need a filter that interprets the experience of capitalist and socialist systems this is exactly where economic theory plays a vital role

making corruption harder asymmetric information collusion and crime we model criminal investigation as a principal agent monitor problem in which the agent can bribe the monitor to destroy evidence building on insights from laffont and martimort s 1997 paper we s

who makes economic policy in africa and how abstract to understand the considerable detorioration in the economic policies of many african countries during the 1970s it is essential to go beyond the economist s analytical models the pressing drive of authoritarian rulers to survive adds an important dimension to economic policy choices although constrained to varying degrees by ethnic regional and class loyalties among populations they govern african rulers enjoy a measure of autonomy in making policy they did not react speedily to the growing economic crisis during the early 1980s however most reforms were undertaken under pressure and many policy efforts failed some countries managed to sustain reforms but the important question is how to go beyond these idiosyncratic cases

the limits of price discrimination we analyze the welfare consequences of a monopolist having additional information about consumers tastes beyond the prior distribution the additional information can be used to charge dierent prices to dierent segments of the market i e carry out third degree price discrimination we show that the segmentation and pricing induced by the additional information can achieve every combi nation of consumer and producer surplus such that i consumer surplus is non negative ii producer surplus is at least as high as pro ts under the uniform monopoly price and iii total surplus does not exceed the e cient gains from trade as well as characterizing the welfare impact of price discrimination we examine the limits of how prices and quantities can change under price discrimination we also examine the limits of price discrimination in richer environments with quantity discrimination and limited ability to segment the market

third degree price discrimination and consumer surplus this paper considers the effects of monopoly third degree price discrimination on aggregate consumer surplus discrimination is likely to reduce surplus relative to that obtained with a uniform price but surplus can rise under reasonable conditions if the ratio of the pass through coefficient to the price elasticity at the uniform price is higher in the market with the higher price elasticity then surplus is larger with discrimination for a large set of demand functions the relatively high pass through coefficient implies a large price reduction in this market with logit demand functions surplus is higher with discrimination if pass through is above 0 5

after the decision implementing policy reforms in developing countries abstract implicit in many reform proposals is a model of the policy process that is roughly linear a proposed reform gets on the agenda for government action a decision is made on the proposal and the new policy or institutional arangement is implemented either successfully or unsuccessfully this article presents an alternative interactive model of implementation that focuses on the conflict and reactions that are evoked by efforts to bring about changed policy or institutional contexts for development and the resources that policy makers and managers are likely to require to sustain a reform in the face of such reactions central to the analysis is the assertion that characteristics of the reform being implemented will largely determine the kind of conflict it engenders where such reaction is likely to become manifest and what resources are needed for sustainability the analysis suggests a framework for the strategic management of reform initiatives

does trade integration alter monetary policy transmission abstract this paper explores the role of trade integration or openness for monetary policy transmission in a medium scale new keynesian model allowing for strategic complementarities in price setting we highlight a new dimension of the exchange rate channel by which monetary policy directly impacts domestic inflation a monetary contraction which appreciates the exchange rate lowers the local currency price of imported goods this in turn induces domestic producers to lower their prices too we pin down key parameters of the model by matching impulse responses obtained from a vector autoregression on time series for the us relative to the euro area our estimation procedure yields plausible parameter values and suggests a strong role for strategic complementarities counterfactual simulations show that openness alters monetary transmission significantly while the contractionary effect of a monetary policy shock on inflation and output tends to increase in openness we find that monetary policy s control over inflation increases as the output decline which is necessary to bring about a given reduction of inflation is smaller in more open economies

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

international currency exposures valuation effects and the global financial crisis abstract we examine the evolution of international currency exposures with a particular focus on the 2002 12 period during the run up to the global financial crisis there was a widespread shift towards positive net foreign currency positions such that relatively few countries exhibited the archetypal emerging market short foreign currency position on the eve of the global financial crisis during the crisis the upheaval in currency markets generated substantial currency generated valuation effects much of which were not reversed there is some evidence that the distribution of valuation effects was stabilizing in the sense of showing a negative covariation pattern with pre crisis net foreign asset positions