an international comparison of prices and exchange rates a new test of purchasing power parity abstract this paper introduces a new approach based on divisia index numbers to test ppp with both short run and long run data for all major currencies simultaneously the short run results indicate that the predictions of ppp do not hold up at all well on the other hand however the long run data are quite consistent with the ppp hypothesis the results also identify five years as a broad measure of the length of the long run insolar as ppp is concerned

innovative olive growing models an environmental and economic assessment the italian olive growing sector has to face both the growing competition on the international olive oil market and the shift of the common agricultural policy cap from market and price policies towards direct aids decoupled from production in addition the olive growers as other farmers have to comply with stricter obligations to manage their farms in sustainable ways cross compliance in this scenario the sector needs new competitive strategies to address these new challenges in this paper we assess if innovative olive growing models like the high trees density orchards are able to reduce production costs without worsening environmental sustainability indeed the intensive olive systems produce higher yields within a few years of planting and allow a higher level of mechanization pruning and harvesting but they could generate higher environmental impacts in this study we perform an environmental and economic assessment of two olive growing systems the high density hdo and the super high density shdo the analysis integrates the life cycle assessment lca and the life cycle costing lcc methods by using a common database the environmental analysis carried out through lca has shown a better performance of the hdo system for all the impact categories due to a lower use of energy and chemical inputs and to higher olive yields also from an economic point of view the hdo could be considered more convenient than the shdo in fact despite the lower operating costs of the latter due to the complete mechanization of pruning and harvesting operations these costs are counterbalanced by higher initial investment costs that the company has to face which are three times those of the hdo system the total result is that the net present value is better for the hdo for each olive price level this result is mainly driven by lower plantation costs longer production cycle higher production of olives and higher efficiency in the use of inputs which characterize the hdo model

equilibrium relationships between money and other economic variables central to the quantity theory of money are a number of important propositions about the long run equilibrium effects of changes in the nominal stock of money on other economic variables a standard way of testing these propositions is to use quarterly or annual data explicitly model the lag structure and then derive the long run solution of the model from the empirical estimates an alternative is to use some type of smoothing procedure to approximate positions of equilibrium and then to use these transformed data directly in testing hypotheses the national bureau technique of averaging data over reference cycle phases is one such method robert lucas s application of fourier transforms in two illustrations of the quantity theory of money 1980 is another and john geweke s method 1982 of frequency decomposition is a third an entirely different way of approaching the problem is to use cross country average rather than time series data as the basic units of observation the advantage according to lucas is that since the two quantity theoretic laws that he examines are obtained as characteristics of steady states or limiting distributions of theoretical models the ideal experiment for testing them would be a comparison of long term average behavior across economies with different monetary policies but similar in other respects p 1006 in this paper i conduct such an experiment the data that i use are for 20 oecd countries over the period 1956 80 the specific relationships that i examine are those between money and the price level money and real income money and interest rates and money and exchange rates in the main the data accord well with the quantity theoretic model classical neutrality holds there is evidence of a fisher effect albeit a less than complete effect on interest rates finally the data are consistent with long run purchasing power parity and hence correspondingly with a long run monetary approach to exchange rate determination

a reexamination of purchasing power parity a multicountry and multiperiod study abstract this paper re examines the purchasing power parity ppp theory in a multiple exchange rate world owing to a lack of precision in estimating the parameters many authors concluded that ppp did not hold very well in the 1970s using a time series cross sectional estimation procedure we are unable to reject the hypothesis that ppp holds in several currencies simultaneously in addition the parameters are precisely estimated this result follows from the estimation procedure which allows us to exploit the cross sectional variation in the data and the contemporaneous correlation in the deviations from ppp

how puzzling is the ppp puzzle an alternative half life measure of convergence to ppp summary evidence of lengthy half lives for real exchange rates in the presence of a high degree of exchange rate volatility has been considered as one of the most puzzling empirical regularities in international macroeconomics this paper suggests that the measure of half life used in the literature might be problematic and proposes alternative measures with desirable properties their focus on the cumulative effects of the shocks distinguishes them from the measures used in the literature an empirical analysis of bilateral us dollar real exchange rates employing the alternative half life measure produces results consistent with theory and indicates that the ppp puzzle is less pronounced than initially thought copyright 2012 john wiley sons ltd

purchasing power parity in the 1920s and the 1970s a note abstract in a recent article of the european economic review frenkel 1981 claims that purchasing power parity ppp held farily well in the 1920s but collapsed in the 1970s frenkel s study does not include the swiss case the present paper aims to answer three questions 1 to what extend does the evidence of the 1920s and the 1970s support ppp for switzerland 2 is there a significant difference of price level and exchange rate behavior between the 1920s and the 1930s as claimed by frenkel and 3 is the swiss experience significantly different from that of the countries

monetary policy transmission in the euro area new evidence from micro data on firms and banks this paper presents an overview of the results of a research project on monetary transmission pursued by the eurosystem which has analysed micro data on firms and banks in several countries of the euro area in great detail there is strong empirical support for an interest rate channel working through firm investment furthermore a credit channel can be identified with firm micro data on the bank side there is evidence that lending reacts differently to monetary policy according to bank balance sheet characteristics in particular banks that have a less liquid asset composition show a stronger loan supply response this finding may be due to banks drawing on their liquid assets to cushion the effects of monetary policy on their loan portfolio which is in line with the existence of close relationships between banks and their loan customers

real dollar exchange rate under the bretton woods and floating exchange rate regimes abstract the focus of the paper is on real exchange rates for the dollar over the period 1957 to 1985 most such exchange rates followed an almost steplike pattern showing relatively little movement in the late 1950s and 1960s falling abruptly and then remaining low in the 1970s and finally in the 1980s rising back to levels close to those that prevailed initially contrary to much recent commentary therefore the period that appears different is not the last five years but the decade that preceded them an important factor underlying this pattern of exchange rate movement according to results presented in the paper was the behavior of monetary policy and hence inflation in the united states what remains to be established is the precise mechanism linking money and real exchange rates and the relative strength of those links

heterogeneous transmission mechanism monetary policy and financial fragility in the eurozone the eurozone economic activity and banking sector have shown substantial fragility over the last years with remarkable country heterogeneity using detailed data on lending conditions and standards we analyse along several key dimensions of heterogeneity how financial fragility has affected the transmission mechanism of the single eurozone monetary policy the analysis shows that the monetary transmission mechanism is time varying and influenced by the financial fragility of the sovereigns banks firms and households the impact of monetary policy on aggregate output is stronger during the financial crisis especially in countries facing increased sovereign financial distress this amplification mechanism moreover operates through the credit channel both the bank lending and the non financial borrower balance sheet channels our results suggest that the bank lending channel has been to a large extent neutralized by the ecb non standard monetary policy interventions but the policy framework until the end of 2011 was insufficient to overcome credit availability problems stemming from deteriorated firm net worth and risk conditions especially for small firms in countries under stress matteo ciccarelli angela maddaloni and jose luis peydro

a model of exchange rate dynamics this model treats the exchange rate as an asset price that depends on expectations concerning exogenous real and monetary factors that will affect relative prices and absolute price levels in future periods changes in exchange rates reflect both expected changes in these exogenous factors and changes in expectations occasioned by new information the model explains the random component in exchange rate behavior the source of divergences from purchasing power parity the anticipatory response of exchange rates to future expected disturbances and the causes of exchange rate overshooting

why are services cheaper in the poor countries in their important work on international comparisons of national incomes and of comparative price structure kravis heston and summers i982 p 8 have noted that services are much cheaper in the relative price structure of a typical poor country than in that of a rich country this phenonomen has been documented now fairly systematically by the data gathered under their guiding hand of the united nations international comparison icp which covers 34 countries table i reproduced from their work i982 and fig i based on rows 3 and ii 13 indeed show this tendencyfor the relationship between relative service prices and real per capita gdp in this kravis heston summers 34 country 6 group sample the tendency is strongly evident except for the intermediate groups iii and iv

the collapse of purchasing power parities during the 1970 s one of the striking facts concerning the relationship beiveen prices and exchange rates during the 1970 s has been the dismal performance of the predictions of the simple versions of the purchasing power parity doctrine ppp that doctrine in its absolute version states that the equilibrium exchange rate between domestic and foreign currencies equals the ratio of domestic to foreign price levels the relative version of the doctrine relates equilibrium changes in exchange rates to changes in the ratio of domestic to foreign prices during the 1970 s short run changes in exchange rates bore little relationship to short run differentials in national inflation rates and frequently divergences from purchasing power parities have been cumulative this paper reviews and analyzes the empirical record of exchange rates and prices during the 1970 s and the analysis is based on the experience of the dollar pound the dollar frecch franc and the dollar dm exchange rates section 2 presents the evidence on ppp during the 1970 s and contrasts it with the evidence from the 1920 s a period during which the doctrine held up reasonably well this analysis is relevant for assessing whether the flexible exchange rate system was successful in providing national economies with an added degree of insulation from foreign shocks and whether it provided policymakers with an added instrument for the conduct of macroeconomic policy the evidence regarding devia tions from purchasing power parities is also relevant for determining whether there is a case for managed float section 3 attempts to explain what went wrong with

the ecb and the interbank market this paper analyses the impact on the macroeconomy of the ecb s non standard monetary policy implemented in the aftermath of the collapse of lehman brothers in the fall of 2008 we study in particular the effect of the expansion of the intermediation of transactions across central bank balance sheets as dysfunctional financial markets seize up which we regard as a key channel of transmission for non standard monetary policy measures our approach is similar to lenza et al 2009 but we introduce the important innovation of distinguishing between private intermediation of interbank transactions in the money market and central bank intermediation of bank to bank transactions across the eurosystem balance sheet we do this by exploiting data drawn from the aggregate monetary and financial institutions mfi balance sheet which allows us to construct a new measure of the policy shock represented by the ecb s increasing role as a financial intermediary we find that bank loans to households and in particular to non financial corporations are higher than would have been the case without the ecb s intervention in turn the ecb s support has a significant impact on economic activity two and a half years after the failure of lehman brothers the level of industrial production is estimated to be 2 higher and the unemployment rate 0 6 percentage points lower than would have been the case in the absence of the ecb s non standard monetary policy measures

does bank ownership affect lending behavior evidence from the euro area abstract we analyze the differences in lending policies across banks characterized by different types of ownership using micro level data on euro area banks during the period 1999 2011 to detect possible variations in bank lending supply responses to changes in monetary policy our results identify a general difference between stakeholder and shareholder banks following a monetary policy contraction stakeholder banks decrease their loan supply to a lesser extent than shareholder banks a detailed analysis of the effect among stakeholder banks reveals that cooperative banks continued to smooth the impact of tighter monetary policy on their lending during the crisis period 2008 2011 whereas savings banks did not stakeholder banks propensity to smooth their lending cycles suggests that their presence in the economy has the potential to reduce credit supply volatility

optimal monetary policy in a currency area abstract this paper investigates how monetary policy should be conducted in a two region general equilibrium model with monopolistic competition and price stickiness this framework delivers a simple welfare criterion based on the utility of the consumers that can be used to evaluate monetary policy in a currency area if the two regions share the same degree of nominal rigidity the terms of trade are completely insulated from monetary policy and the optimal outcome is obtained by targeting a weighted average of the regional inflation rates these weights coincide with the economic sizes of the region if the degrees of rigidity are different the optimal plan implies a high degree of inertia in the inflation rate but an inflation targeting policy in which higher weight is given to the inflation in the region with higher degree of nominal rigidity is nearly optimal

bank lending and monetary transmission in the euro area to what extent does the availability of credit depend on monetary policy and does this relationship vary with bank characteristics based on a common source of balance sheet data for the four largest economies of the eurozone over the period 1999 2011 we find that the effects of monetary policy on bank lending are significant and heterogeneous in germany and italy which are characterized by a large number of banks but are weaker and more homogeneous in spain and france whose banking industry has a higher degree of market concentration in particular monetary policy appears to exert larger effects on cooperative and savings banks with lower liquidity and lesser capital in germany and savings banks with smaller size in italy our results highlight that the transmission of monetary policy over bank lending in the eurozone is highly heterogeneous from a policy perspective the increased large number of cooperative and savings banks which have had access during the last financial crisis to the refinancing operations of the european central bank bodes well for the improvement of the monetary transmission mechanism the analysis also suggests that competition policy measures aiming at reducing entry barrier might facilitate the transmission mechanism roberto a de santis and paolo surico

purchasing power parity and relative price variability evidence from the 1970s abstract one curious fact to emerge from the return to flexible exchange rates in the 1970s was the failure of empirical tests of simple versions of the purchasing power parity ppp doctrine this paper seeks to establish whether that observed poor performance of ppp can be attributed to uncertainty regarding the rate of inflation due to the large variations in relative prices experienced during the 1970s the evidence is found to be unsupportive of the notion