one sided performance measures under gram charlier distributions angel leon would like to acknowledge the financial support from the spanish ministry for science and innovation through the grant eco2014 58434 p and from the grant prometeoii 2013 015 manuel moreno gratefully acknowledges financial support by grants p12 sej 1733 and ppii 2014 030 p

success survive or escape aspirations and poverty traps i present a model of occupational choice where an agent decides whether to invest in a project that yields risky returns or a project that yields safe returns an agent s utility is affected by the presence of an aspiration level which will only be satisfied if their final income is above the poverty line i show that agents who are sufficiently above the poverty line will invest in the risky project and are able to aspire for success an agent however who is just above the poverty line may be so concerned about falling into poverty that they choose to invest in the safe project these individuals aspire only to survive alternatively if an agent is sufficiently below the poverty line then they will invest in the risky project even if expected returns are lower than the safe project these individuals have nothing left to lose and therefore aspire to escape two forms of poverty traps emerge from the resulting equilibria one above the poverty line and one below the poverty line finally i offer empirical support for the model based on individual level survey data across a large number of countries

hedging with options under variance uncertainty an illustration of pricing new crop soybeans the behavior of a commodity s price return variance over time is critical to both the theory and practice of commodity option valuation in this paper three models are used to forecast soybean price variance for the period during which a seasonal increase in variance has been found in previous studies a time series model outperforms the ordinary least squares and naive models the significance of the forecast error levels is then examined in terms of expected deviations above and below a price target for a put hedge the resulting trade off between risk and return is shown by strike price and variance expectation

monetary policy with asset backed money we study the use of asset backed money in a neoclassical growth model with illiquid capital a mechanism is delegated control of productive capital and issues claims against the revenue it earns these claims constitute a form of asset backed money the mechanism determines i the number of claims outstanding ii the dividends paid to claim holders and iii the structure of redemption fees we find that for capital rich economies the first best allocation can be implemented and price stability is optimal however for sufficiently capital poor economies achieving the first best allocation requires a strictly positive rate of inflation in general the minimum inflation necessary to implement the first best allocation is decreasing in capital wealth

integration of spatial markets studies of spatial market integration draw their implications from a theory which assumes that there are no intraregional transport costs an alternative theory is offered based on the assumptions that buyers and sellers are spatially dispersed and intraregional transport costs are significant this implies that the market is a linked oligopoly or oligopsony and that market integration tests are tests of alternative oligopoly price formation processes for example collusive basing point pricing produces results typically assumed to imply efficiently integrated markets while competitive fob pricing does not the theoretical implications are illustrated with an analysis of hog prices in canada

pricing free bank notes abstract during the pre civil war period us banks issued distinct private monies called bank notes a bank note is a perpetual risky non interest bearing debt claim with the right to redeem on demand at par in specie this paper investigates the pricing of this private money taking into account the enormous changes in technology during the period namely the introduction and rapid diffusion of the railroad a contingent claims pricing model for bank notes is proposed and tested using monthly bank note prices for all banks in north america together with indices of the durations and costs of trips back to issuing banks constructed from pre civil war travelers guides evidence is produced that market participants properly priced the risks inherent in these securities suggesting that wildcat banking was not common because of market discipline

commodity price forecasting with large scale econometric models and the futures market this paper compares the accuracy of major commercial price forecasts for corn wheat soybeans soybean oil soybean meal cotton live cattle and hogs the price forecasting information in futures prices is evaluated by comparison the results among commercial forecasters are mixed but futures prices perform relatively better on average although not universally so these results have important implications for operational risk management

can currency competition work abstract can competition among privately issued fiat currencies work only sometimes and partially to show this we build a model of competition among privately issued fiat currencies a purely private arrangement fails to implement an efficient allocation even though it can deliver price stability under certain technological conditions although currency competition creates problems for monetary policy it is possible to design a policy rule that uniquely implements an efficient allocation

the speculative efficiency hypothesis the hypothesis that forward prices are the best unbiased forecast of future spot prices is often presented in the economic and financial analysis of futures markets this paper considers the hypothesis independently of its implications for rational expectations or market efficiency and in order to stress this fact the term speculative efficiency is used to characterize the state envisaged under the hypothesis if a market is subject to efficient speculation the supply of speculative funds is infinitely elastic at the forward price that is equal to the expected future spot price the expected future spot price is a market price determined as the solution to the underlying rational expectations macroeconomic model although the paper is primarily concerned with testing this hypothesis in the foreign exchange market the methodology introduced in the paper is of general application to all futures markets this abstract was borrowed from another version of this item

on the economics of private money abstract the application of laissez faire to the monetary system is a key ingredient of important proposals for monetary reform both new and old that seek to discipline government creation of money through competition this paper provides an overview of issues to be encountered in the construction of theoretical models of private monetary economies including consideration of market imperfections that have been hypothesized to arise in these systems further some descriptive history of the less regulated monetary systems of 19th century new york is undertaken with an emphasis on discussing the nature of market generated banking and monetary institutions in light of these critiques

currency competition a hayekian perspective on international monetary integration currency internationalization is examined from the vantage point of friedrich hayek s contributions in the 1970s compared with received commentaries in which only an idealized case for private money is attributed to hayek this paper underscores other dimensions of hayek s work on money and currency hayek s case for choice in currency draws on his theory of competition anticipates competition between government suppliers of fiat money accommodates many aspects of international monetary integration and embodies a distinctive approach to monetary independence choice of exchange rate regime and the transnationalization of currency hayekian predictions are outlined for future developments in currency competition

the ban on indexed bonds 1933 77 in a recent article in this review nissan liviatan and david levhari attempt to explain the phenomenon that in spite of recent marked inflationary trends the important capital markets have not developed a significant free private enterprise market for cost of living linked bonds p 366 they note that the familiar theoretical complete dominance of indexed bonds over nonindexed bonds holds unambiguously only in an economy in which there are no nominal assets they demonstrate that borrowers may in theory insist on hedging the inflation risk on their nonindexed cash balances by issuing some nonindexed bonds at a discount that makes them attractive in spite of the risk they impose on lenders their model leads them to conclude that indexed bonds might not completely dominate nonindexed bonds however they do not claim that their model explains the phenomenon they set out to explain why is it that the free market to use their expression has come up with virtually no indexed bonds at all fortunately a simple explanation for the nonexistence of indexed bonds in the united states was provided two years

a critical evaluation of etzioni s socioeconomic theory implications for the field of business ethics given the pervasive influence of neoclassical economic theory on the field of business the opposition of the standard economists to the inclusion of moral factors in economic decisions provides an intellectual resistance to the ideas of many business ethicists etzioni 1988 offers a theoretical alternative to the neoclassical model an alternative that includes a moral dimension this article 1 highlights the differences between etzioni s proposed model and the neoclassical economic paradigm 2 describes and critically evaluates etzioni s proposed theory in view of his objective of synthesizing the neoclassical paradigm with a duty based morality and 3 discusses the implications of etzioni s proposed paradigm for the field of business ethics

information learning and the stability of fiat money abstract we analyze the stability of monetary regimes in an economy where fiat money is endogenously created by the government information about its value is imperfect and learning is decentralized we show that monetary stability depends crucially on the speed of information transmission in the economy our model generates a dynamic on the acceptability of fiat money that resembles historical accounts of the rise and eventual collapse of overissued paper money it also provides an explanation of the fact that despite its obvious advantages the widespread use of fiat money is only a recent development

the semi strong form efficiency of the london metal exchange 1983 the semi strong form efficiency of the london metal exchange applied economics vol 15 no 5 pp 681 698

the use of risk and return models for multiattribute decisions with decomposable utilities normatively oriented approaches to decision making under uncertainty occupy a major portion of the literature of decision analysis among the proposed approaches the von neumann morgenstern expected utility eu theory has been the most prominent model of rational choice despite some controversies that surround this model with respect to its descriptive ability as well as the plausibility of utility assessment in actual decision situations 6 10 although most applications of the eu model have been concerned with decisions involving monetary outcomes its scope is not limited to any particular class of conse quences the basic appeal of the model is attributable partly to its generality in this regard and more importantly to the apparent reasonableness of its preferentialaxioms in the context of decisions with monetary outcomes several alternatives to the eu model have been proposed including the mean variance and mean semivariance models that have found popularity in the economies and finance litera ture see 4 8 and 9 in contrast to the eu theory where a decision maker s preferences among uncertain prospects are assumed given preferences in these models are formulated in terms of two attributes that are presumed to character ize all available choices in the mean semivariance model for example uncer tain prospects are viewed entirely in terms of their means and below target semivariances a generalization of this model was examined by fishburn 2 who showed that the general mean risk model exhibits a certain degree of compatibility with the eu model more recently holthausen 5 showed that this compatibility is significantly enhanced when mean is replaced by a return measure de fined as a probability weighted function of above target deviations specifically holthausen proved that this model yields the same preferences as the eu model whenever the expected utility function has the form

forecasting vector autoregressions with bayesian priors the paper explores the justification for and application of bayesian priors in forecasting a vector autoregression a nonsymmetric random walk prior outperforms three alternative time series representations in forecasting five series of the u s hog market

the central banker as a risk manager estimating the federal reserve s preferences under greenspan we derive a natural generalization of the taylor rule that links changes in the interest rate to the balance of the risks implied by the dual objective of sustainable economic growth and price stability this monetary policy rule reconciles economic models of expected utility maximization with the risk management approach to central banking within this framework we formally test and reject the standard assumption of quadratic and symmetric preferences in inflation and output that underlies the derivation of the taylor rule our results suggest that fed policy decisions under greenspan were better described in terms of the fed weighing upside and downside risks to their objectives rather than simply responding to the conditional mean of inflation and of the output gap

evaluating the integration of contiguous discontinuous markets this paper applies the concepts of structural models of markets market integration and market discontinuity to show that discontinuous markets alter the integration characteristics of continuous markets when analyzing systems of contiguous markets some of which are discontinuous it appears that the continuous markets are less well integrated when the discontinuous markets are operating than when they are not operating

financial futures markets and tabular standards the goal of a monetary system that provides assurance against fluctuations in purchasing power is ancient one frequently suggested and repeatedly rediscovered proposal is to attain that result by linking the currency unit to a price index that device was proposed in the nineteenth century by w stanley jevons and by alfred marshall who named it a tabular standard it has been repeatedly rediscovered in marshall s version it required no governmental action except the issuance of a price index number something which has of course become widely prevalent individuals would simply in their own interest be led to make contracts specified not in terms of the nominal number of monetary units the number of dollars but in terms of the purchasing power equivalent of the present number of monetary units that is the contract would call for paying a given number of dollars multiplied by the ratio of a price index as of that date to the date on which the contract was entered into despite the theoretical attractiveness of this idea and the absence of any effective hindrance to its adoption it has never become popular it is a particular version of the generally attractive idea of widespread indexation yet indexation has been extensive only when inflation has been extremely high and variable as in some south american countries and israel and has generally fallen into disuse when inflation has been conquered the only area in which there are any large number of indexed contracts is the area of labor contracts and even here the use of indexation is by no means dominant and tends to rise and decline as inflation rises and declines

the business responsibility for wealth distribution in a globalized political economy merging moral economics and catholic social teaching if it is accepted that the real marketplace does not necessarily distribute wealth in the manner that the ideal market would have done and that societal institutions have an obligation to bring the real and ideal market distributions into accord then it can be argued that economic actors have a responsibility to consider the effects of their activities on the distribution of wealth in society this paper asserts that businesses have a responsibility to consider the wealth distribution effects of their wealth creating decisions we use arguments from moral economics and catholic social teaching to support this assertion deriving decision principles that we apply to the starbucks fair trade coffee case

joint production quasi fixed factors of production and investment in finished goods inventories inventory investment has long been an important area of inquiry for empirical work in macroeconomics this is due in large measure to the fact that inventory investment is a major source of fluctuations in aggregate output empirical work on inventories however has been dominated by the use of simple univariate flexible accelerators 1 the major objective of this paper is to propose and test a multivariate flexible accelerator model for inventory investment the model is tested with data on finished goods inventories from the manufacturing sector of the u s economy there are two reasons for undertaking such a task first at a theoretical level a univariate flexible accelerator model asserts that investment in say finished goods inventories is proportional to the gap between the desired and actual stocks of finished goods such a model presumes that decisions by firms on finished goods inventories are made independently of decisions on other stocks but theory suggests that when firms make simultaneous decisions on a variety of stocks which includes not only finished goods but also goods in process inventories the size of the work force etc decisions on finished goods will interact with decisions on

the dynamics of household beef consumption in cameroon abstract recent changes in economic conditions have introduced notable changes in household beef consumption patterns in cameroon while consumers are concerned about the short and long run effects of these factors on beef consumption habits policy makers are more worried about the appropriate period necessary for households to make complete adjustments in consumption since this information is vital for planning production static and dynamic demand frameworks involving the nerlovian partial adjustment pa model are used to capture the dynamic nature of beef consumption parameters maximum likelihood estimates of the pa model reveal that the conditioning variables explain 79 of the variation in beef consumption income previous consumption own price and prices of fish and pork are jointly important in explaining beef consumption habits beef is a normal good with pork and fish as substitutes and chicken as a complement long run price and income elasticities are greater than but not significantly different from their short run values suggesting that adjustment in consumption is fast with above 80 of the difference between actual and desired consumption being completed in about 2 years projections show that demand for beef will reach 109 620 t by the year 2000 giving an incremental total and per capita demand of 31 730 tons and 1 84 kg respectively

where to draw lines stability versus efficiency what kinds of assets should financial intermediaries be permitted to hold what kinds of liabilities should they be allowed to issue should a government or a central bank offer explicit deposit insurance or implicit deposit insurance by acting as a lender of last resort this paper reviews how tensions involving stability versus efficiency and regulation versus laissez faire have for centuries run through macroeconomic analysis of these questions

a study of automobile inventory investment the volatile fluctuations in automobile inventory levels are explained well by the stock adjustment model estimated in this paper on monthly time series data in contrast to the findings of most previous inventory studies fluctuations in financial inventory carrying costs as measured by a service cost of capital are found to influence the target auto stocks in both a statistically significant and economically important manner also the speed of adjustment of automobile inventories to their target level is estimated to be relatively fast about thirty percent per month

adam smith and the ethics of contemporary capitalism this paper presents a theoretical elaboration of the ethical framework of classical capitalism as formulated by adam smith in reaction to the dominant mercantilism of his day it is seen that smith s project was profoundly ethical and designed to emancipate the consumer from a producer and state dominated economy over time however the various dysfunctions of a capitalist economy e g concentration of wealth market power became manifest and the utilitarian ethical basis of the system eroded contemporary capitalism dominated as it is by large corporations entrenched political interests and persistent social pathologies bears little resemblance to the system which smith envisioned would serve the common man most critiques of capitalism are launched from a marxian based perspective we find however that by illustrating the wide gap between the reality of contemporary capitalism and the model of amoral political economy developed by smith the father of capitalism proves to be the most trenchant critic of the current order

futures market efficiency in the soybean complex 13 1 rev division of agricultural sciences university of ifornla working paper no 139 r i j futures market efficiency in the soybean complex gordon c rausser and colin carter giannini foundation of agricultural economics l ibraili v im california agric u l tural elqieriment station giannini foundation of agricultural economics march 1982

endogenous supply of fiat money abstract we consider whether reputation concerns can discipline the behavior of a long lived self interested agent who has a monopoly over the provision of fiat money we obtain that when this agent can commit to a choice of money supply there is a monetary equilibrium where it never overissues we show however that monetary equilibria with no overissue do not exist when there is no commitment this happens because the incentives this agent has to maintain a reputation for providing valuable currency disappear once its reputation is high enough more generally we prove that in the absence of commitment overissue happens infinitely often in any monetary equilibrium we conclude by showing that imperfect memory can restore the positive result obtained with commitment

quantifying the risk of deflation we propose formal and quantitative measures of the risk that future inflation will be excessively high or low relative to the range preferred by a private sector agent unlike alternative measures of risk our measures are designed to make explicit the dependence of risk measures on the private sector agent s preferences with respect to inflation we illustrate our methodology by estimating the risks of deflation for the united states germany and japan for horizons of up to 2 years the question of how large these risks are has been subject to considerable public debate we find that as of september 2002 when this question first arose there was no evidence of substantial deflation risks for the united states and for germany contrary to some conjectures at the time in contrast there was evidence of substantial deflation risks in japan

data envelopment analysis of mutual funds based on second order stochastic dominance abstract although data envelopment analysis dea has been extensively used to assess the performance of mutual funds mf most of the approaches overestimate the risk associated to the endogenous benchmark portfolio this is because in the conventional dea technology the risk of the target portfolio is computed as a linear combination of the risk of the assessed mf this neglects the important effects of portfolio diversification other approaches based on mean variance or mean variance skewness are non linear we propose to combine dea with stochastic dominance criteria thus in this paper six distinct dea like linear programming lp models are proposed for computing relative efficiency scores consistent in the sense of necessity with second order stochastic dominance ssd the aim is that being ssd efficient the obtained target portfolio should be an optimal benchmark for any rational risk averse investor the proposed models are compared with several related approaches from the literature

risk value models restrictions and applications abstract sarin and weber european journal of operational research 70 1993 135 and others have argued for the expression of preferences under risk by the use of risk value models which have the intuitively appealing property that absence of certainty enters the decision maker s preference function only through a well defined risk argument the present paper proposes axioms which should be satisfied by any such model and explores the restrictions that the axioms place on the preference function implications for absolute and relative risk aversion are considered and the usefulness of the approach is demonstrated with applications to portfolio theory and the theory of the firm

causality tests in livestock markets bivariate time series models and related topics of exogeneity and granger causal orderings have received much attention from economists over the last decade examples in the macroeconomic literature include relationships between money and income sims 1972 feige and pearce money and interest rates pierce and wages and prices geweke 1975 in agricultural markets research in this area includes the sorting out of leads and lags between farm wholesale and retail prices heien miller acreage allotments and acreage supply response weaver and alternative price quotes for eggs bessler and schrader the methods used in these studies are empirical because they allow the data to specify the dynamic relationship between two variables economic theory is used only to suggest the variables to be related often theory is ambiguous on the explicit lead lag relationships between important variables and the variables themselves in such cases one can or must rely on strictly empirical methods burks discusses the complementary relationship between empirical and theoretical methods in scientific investigations agriculturalists interested in explaining producer behavior and forecasting livestock price and quantity movements have long grappled with problems of leads and lags attempts to explain short run movements in live cattle and hog inventories or slaughter levels using price variables have at times yielded unsatisfactory results for example shortrun quantity response to price change was found to be negative for cattle nelson and spreen myers havlicek henderson however a positive relation begins to appear with longer lengths of run the theory of optimal investment under risk explains this type of relationship that is treating cattle as both investment goods and as final products will generate the negative short run response of quantity to price such theory however will not be explicit about the particular lead lag relationships to be encountered most modern theories of decision making under risk suggest that such lags are dependent upon subjective probabilities of individual economic agents if one is unwilling to accept the existence of a rational probability following definetti then he will not be able to specify a priori the explicit leads and lags in a particular investment problem one must look at the data and infer such relationships this paper examines the lead lag relationships between livestock prices and various causal variables suggested by theory it explicitly tests the exogeneity of cattle on feed cattle slaughter and income on live cattle prices and the exogeneity of sow farrowings hog slaughter and income on live hog prices although explicit dynamic multivariate models are not formulated the paper s results do provide background evidence useful for their ultimate construction granger and newbold 1977 chap 7

has government any role in money abstract recent interest in monetary reform has been sparked by the emergence of a world irredeemable paper money system in light of this interest we review the current validity of four good reasons friedman advanced in 1960 to rationalize government intervention we conclude that the forces that produced government involvement in the past will persist deregulation of financial intermediaries is desirable on grounds of market efficiency though it is an open question whether government should continue as lender of last resort we expect that the present world fiat money standard will neither degenerate into hyperinflation nor revert to a commodity standard

third degree stochastic dominance here f x and g x are less than cumulative probability distributionis where x is a continuous or discrete random variable representing the outcome of a prospect the closed interval a b is the sample space of both prospects the integral shown in rule 2 and those shown throughout the paper are stieltjes integrals recall that the stieltjes integral fb f x dg x exists if one of the functions f and g is continuous and the other has finite variation in a b let d1 d2 and d3 be three sets of utility functions x d1 is the set containing all utility functions with 4 x and 1 x continuous and 41 x 0 for all xe a b d2 is the set with x 1 x 2 x continuous and q j x 0 02 x o for all xc a b d3 is the set with x 1 x 2 x 3 x continuous and 1 x 04 2 x o o for all xc a b here 1 x denotes the ith derivative of x hadar and russell proved that rule 1 is valid for all cd1 and rutle 2 is valid for all ed2 the authors point out that the set of probability distributions that can be ordered by means of second degree stochastic dominance is in general larger than that which can be ordered by means of first degree stochastic dominance note that in rule 2 they assume that x is not only an increasing function of x but also exhibits weak global risk aversion a condition guaranteed by requiring the second derivative of x to be nonpositive in this paper a condition which will be called third degree stochastic dominance is considered it is based on the following assumption about the form of the utility function x from a normative point of view one expects the risk premium associated with an uncertain prospect to become smaller the greater is the individual s wealth the plausibility and implications of this assumption h ave been explored by john pratt as well as others the risk premium of an uncertain prospect is that amount by which the certainty equivalent of the prospect differs from its expected value in mathematical terms given the prospect f x with expected value a the corresponding risk premium t is obtained by solving the following equation rb

laissez faire monetary theorists in late nineteenth century america economists have recently begun to reconsider many forms of regulation of money and banks from what may be termed a laissez faire perspective some have questioned fundamentally the rationale for any government role this development raises an interesting question for historians of thought what intellectual support did the concept of a free market monetary system receive in the 19th century the heyday of classical liberalism and laissez faire thought this paper takes up the question by critically surveying american monetary writings from the last half of the 19th century 2 we find that the idea of a laissez faire monetary policy was never very popular in the united states though it did have proponents whose work was often insightful most of the relevant literature was written in response to consequences wrought by the monetary legislation of the civil war that legislation included not only the national bank acts 1863 4 but also an ancillary measure effective 1866 placing a prohibitive tax on state bank notes these laws forced banks of issue to become national banks and thus to buy federal bonds as collateral for their notes which had the intended effect of creating an extra demand for the federal government s wartime debt in addition congress authorized the issue of legal tender greenback currency by the treasury a frequent theme in the post bellum monetary literature was the alleged deficiency or inelasticity of the currency supply some the greenbackers and silverites wanted the government to increase its contributions to the money supply others especially toward the end of the century argued for the establishment of a centralized agency with special powers of note issue a handful of writers renewed the radical jacksonians campaign for laissez faire in money and banking 3 in their view the defects of existing arrangements could best be solved by deregulation of banking and by removal of the federal government from the business of supplying money

environmental constraints and sigmoid utility implications for value risk sensitivity and social status abstract friedman and savage journal of political economy 4 1948 279 proposed sigmoid utility theory to model the relationship between social class and risk sensitivity their proposal has not been explicitly modeled to allow for full testing of the concept we argue that sigmoid utility arises naturally from boundary conditions imposed by finite environmental resources that engender competition we also present a sigmoid formulation and examine its empirical warrant by considering economic data from anthropological historical and sociological cases studies standard risk sensitivity measures such as arrow pratt and downside risk aversion provide expectations for which individuals are most risk prone insights from prospect theory indicate under what conditions sigmoid utility may be most useful we consider the implications of environmental constraint in the context of the sigmoid model as an explanation for the nature of political turmoil during the collapse of maya civilization ca ad 850 we consider the role lack of constraint played in the american revolution and we explore how sigmoid utility can enrich our understanding of contemporary american voting behavior

interpreting new evidence about china and u s silver purchases abstract this paper offers a reinterpretation of the influence on china of america s silver policy in the early 1930 s recently compiled evidence about events in china are described and interpreted in light of a model of free banking under a commodity standard our interpretation is that the u s silver purchase program did not set off a chain of bad economic events which eventually forced china off silver and onto a fiat standard rather china was forced off silver by its own government which wanted to make itself the beneficiary of the capital gain associated with the appreciation of silver and to relieve itself of the restrictions that are imposed on government finance by a commodity standard

asymmetric price risk an econometric analysis of aggregate sow farrowings 1973 86 aggregate sow farrowing response to price risk is estimated where price risk is defined as the difference between expected price at decision time and realized price at acquisition or selling time asymmetric unfavorable deviations and symmetric favorable and unfavorable deviations forms of price risk are estimated utilizing cash and futures prices statistical results suggest that an asymmetric form of risk analysis is preferred to a symmetric form for both cash and futures markets

the characteristics of a monetary economy a keynes schumpeter approach mainstream monetary theory considers money only as an instrument meant to facilitate trading without having any effect on income or on the evolution of the economic system the aim of this paper is to elaborate a monetary theory capable of supporting the thesis of money non neutrality based on the arguments developed by keynes and schumpeter the synthesis of the theories of these two great economists will be formulated starting from the two points which are common in the views of keynes and schumpeter first in contrast with mainstream theory keynes and schumpeter state that the diffusion of a fiat money induces a radical modification into the way in which the economic system works second when keynes and schumpeter describe the reasons why money and financial aggregates are not neutral they highlight the fundamental role of the credit market and of banks in contrast with the mainstream theory they do not consider the credit market as the mirror image of the goods market

milton friedman s monetary economics and the quantity theory tradition abstract this article provides a selective review of milton friedman s contributions to monetary economics focusing on five areas in particular the demand for money the joint historical and empirical work with anna j schwartz the theoretical and empirical analyses of the phillips curve monetary policy and monetary dynamics

an examination of the necessary and sufjicient conditions for market eflciency the case of hogs the pricing efficiency of the live hog futures market is examined utilizing both necessary and sufficient conditions out of sample forecasts from an econometric model an arima model and a composite forecasting model are compared with the forward prices of the futures market within a mean squared error framework at least one model and frequently all of them forecast more accurately than the futures market a necessary condition for market efficiency the sufficient condition is assessed using simulated market trading strategies based o n the most accurate model forecasts results suggest that informational inefficiencies exist in the live hog futures market

financial structure and aggregate economic activity an overview this paper surveys literature that explores the possible links between the financial system and aggregate economic behavior the survey is in two parts the first reviews the traditional work and the second discusses new research copyright 1988 by ohio state university press

variable risk preferences and adaptive aspirations abstract observations of human decision making indicate that risk preferences depend on the values of possible outcomes relative to levels of aspiration a model of such variable risk preference is specified it suggests that some risk averse behavior may result from a human tendency to focus on targets and from the adaptation of those targets to experience rather than from a fixed trait of risk aversion in addition the model shows how risk preferences varying around adaptive aspirations produce both a greater long run likelihood of survival and a higher average return for survivors than do fixed risk preferences

forecasting and hedging an illustration of risk reduction in the hog industry hog producers and first handlers can reduce the risk of unfavorable price fluctuations by combining the information from forecasting models with a selective hedging strategy six quarterly price forecasting approaches econometric arima expert naive and two composites were evaluated over the 1976 82 period using a simple yet pragmatic hedging decision rule the results indicate that relatively modest improvements in prices received by producers or paid by first handlers relative to cash marketing were possible statistically significant reductions in short term risk exposure were achieved by both groups through most of the approaches evaluated

private production of scrip money in the isolated community this paper examines the appearance of one type of privately produced currency which had the generic label scrip this money appeared at widely different times and places in the united states between 1820 and 1940 in spite of federal laws prohibiting its issue the most sophistic ated and best developed example of scrip seems to have occurred in th e coal mining regions of appalachia especially in west virginia thi s experience and its implications for monetary behavior are examined here copyright 1987 by ohio state university press

separating risk and return in the capm a general utility based model abstract the author proposes a new utility function which captures trade offs between return and a large body of risk measures as defined by popular risk return models in the management science literature while exhibiting desirable properties for a financial investor this function forms the basis for an extension to the capital asset pricing model which links general asymmetric risk measures and risk value models with equilibrium asset pricing

composite forecasting an application with u s hog prices producers processors and distributors of agricultural commodities make decisions in a risky environment uncertain production and relatively low price elasticities of demand provide the setting for rather large fluctuations in commodity prices sensible decision making thus requires information about the likelihood of many alternative outcomes such information can be obtained from both private and public sources through price forecasts decision makers often have several forecasts on

profit margin hedging some extension economists and others recommend profit margin hedging as a way to choose the timing of crop sales however the theory behind this strategy recommendation is not well developed this article determines the producer s utility function and price processes where profit margin hedging is optimal profit margin hedging is shown to be an optimal strategy under a highly restricted target utility function even in an efficient market profit margin hedging is profitable if prices are mean reverting copyright 2010 oxford university press

extensification of agriculture and deforestation empirical evidence from sudan extensification of agriculture is one of the major factors contributing to the destruction of forests in africa in sudan such horizontal expansion comes at the expense of land devoted to trees and other vegetation thereby inducing conditions that are inimical to sustainable agricultural production different factors have contributed to extensification although high economic returns from crop mainly sorghum production was an important factor encouraging extensification of rainfed mechanized farming other factors outside agriculture have also contributed to that expansion this paper uses data from eastern sudan and an acreage response model to identify the most important factors influencing acreage expansion different measures and forms of risk were used in the acreage response model the paper shows how policies in the energy sector can indirectly influence acreage expansion in the agricultural sector

the impact of price risk on sow farrowings 1967 78 several studies have attempted with varying degrees of success to quantify price risk variables for crops at various levels of aggregation just behrman traill and lin price risk in particular market situations is an empirical issue and difficult to predict ex ante several factors suggest the potential for a risk response in sow farrowings the limited ability of hog futures market prices to forecast subsequent cash prices leuthold and hartman martin and garcia indicates that the level of uncertainty about future price is high this coupled with livestock producers reticence to use the futures market as a hedging mechanism leuthold suggests that producers exposure to existing price risk may be prevalent this analysis quantitatively examines the importance of input and output price risk on aggregate sow farrowings first the price risk model is reviewed briefly then a conventional adaptive expectations model is used to develop price and risk variables alternative definitions of risk are assessed finally futures prices are used to generate expected price and risk variables

an index of loss aversion to a considerable extent risk aversion as it is commonly observed is caused by loss aversion several indexes of loss aversion have been proposed in the literature the one proposed in this paper leads to a clear decomposition of risk attitude into three distinct components basic utility probability weighting and loss aversion the index is independent of the unit of payment the main theorem shows how the indexes of different decision makers can be compared through observed choices

the resource cost of irredeemable paper money since 1971 no major currency has a formal link to a commodity for the first time in history every currency is wholly irredeemable not as a temporary expedient but as a permanent matter monetary economists have generally treated irredeemable paper money as involving negligible real resource costs compared with a commodity currency to judge from recent experience that view is clearly false as a result of the decline in long term price predictability a key question for the future is what if any substitute for a commodity standard will emerge as a long term anchor for the price level

the transition from barter to fiat money how did it become possible to exchange apparently valueless pieces of paper for goods this paper provides an equilibrium account of the transition between barter and fiat money regimes the explanation relies on the intervention of a self interested government that must be able to promise credibly to limit the issue of money to achieve credibility the government must offset the benefits of seigniorage by internalizing some of the macroeconomic externalities generated by the issue of fiat money the government s patience and the extent of its involvement in the economy are key determinants of whether the transition can be accomplished copyright 1995 by american economic association

a simple preference foundation of cumulative prospect theory with power utility most empirical studies of rank dependent utility and cumulative prospect theory have assumed power utility functions both for gains and for losses as it turns out a remarkably simple preference foundation is possible for such models tail independence a weakening of comonotonic independence which underlies all rank dependent models together with constant proportional risk aversion suffice in the presence of common assumptions weak ordering continuity and first stochastic dominance to imply these models thus sign dependence the different treatment of gains and losses and the separation of decision weights and utility are obtained free of charge

a risk return model with risk and return measured as deviations from a target return two attribute risk and return models are very popular in the economics and finance literature for analyzing decisions under uncertainty their popularity stems primarily from the intuitive appeal of the dichotomy into risk and return and from the ease with which the concepts can be diagrammed in two dimensions the most commonly used risk return model is the mean variance model in which risk is measured as the variance and return by the mean of the probability distribution over outcomes the mean variance model has a number of shortcomings which are widely known but of particular concern here are the facts that 1 mean variance dominance is neither necessary nor sufficient for second degree stochastic dominance 2 unless the form of the probability distribution is restricted mean variance is consistent with von neumann morgenstern utility theory only if the utility function is quadratic and 3 as peter fishburn has noted

variance vs downside risk is there really that much difference abstract the popularity of downside risk among investors is growing and mean return downside risk portfolio selection models seem to oppress the familiar mean variance approach the reason for the success of the former models is that they separate return fluctuations into downside risk and upside potential this is especially relevant for asymmetrical return distributions for which mean variance models punish the upside potential in the same fashion as the downside risk the paper focuses on the differences and similarities between using variance or a downside risk measure both from a theoretical and an empirical point of view we first discuss the theoretical properties of different downside risk measures and the corresponding mean downside risk models against common beliefs we show that from the large family of downside risk measures only a few possess better theoretical properties within a return risk framework than the variance on the empirical side we analyze the differences between some us asset allocation portfolios based on variances and downside risk measures among other things we find that the downside risk approach tends to produce on average slightly higher bond allocations than the mean variance approach furthermore we take a closer look at estimation risk viz the effect of sampling error in expected returns and risk measures on portfolio composition on the basis of simulation analyses we find that there are marked differences in the degree of estimation accuracy which calls for further research

portfolio selection in multidimensional general and partial moment space abstract this paper develops a general approach for the single period portfolio optimization problem in a multidimensional general and partial moment space a shortage function is defined that looks for possible increases in odd moments and decreases in even moments a main result is that this shortage function ensures sufficient conditions for global optimality it also forms a natural basis for developing tests on the influence of additional moments furthermore a link is made with an approximation of an arbitrary order of a general indirect utility function this non parametric efficiency measurement framework permits to differentiate mainly between portfolio efficiency and allocative efficiency finally information can in principle be inferred about the revealed risk aversion prudence temperance and other higher order risk characteristics of investors

the ethical wealth of nations michael porter argues that some nations manifest a competitive advantage deriving from key elements of their economic structure some nations are thus disposed by structure to possess what porter calls a competitive advantage of nations porter 1990 in this paper i examine the prospect of an ethical advantage of nations and in particular of a set of advantages that extend far beyond the simple dimension of trust so often discussed i consider further how such a range of ethical features would be structured and what the implications of those features would be three conclusions are reached 1 morality may create economic advantages for nations in ways that extend beyond the notion of an idealized market 2 in order for ethics to drive economic advantage ethical concepts must rise to the status of intrinsic value and 3 if claims for national ethical success factors are true then nations should attend to the issue of moral education

the evolution of monetary policy rules abstract this article examines the evolutionary forces involved in the development of monetary policy rules over time considering in particular how these relate to proposals made by milton friedman and walter bagehot the lines between money and credit and between monetary and fiscal policy are given special focus

modeling beef supply response and price volatility under cap reforms the case of greece abstract this study examines the supply response of the greek beef market and the possible effect of the european union s common agricultural policy cap on the greek beef sector during the period 1993 2005 a generalized autoregressive conditional heteroskedasticity garch process is used to estimate expected price and price volatility while several different symmetric asymmetric and non linear garch models are estimated the empirical results show that price volatility and feed price are important risk factors in the supply response function while the negative asymmetric price volatility that was detected implies that producers have a weak market position furthermore the empirical findings confirm that the annual premium paid by the eu to beef producers had a positive impact on the production level and also the change of the eu price support regime after 2006 is having negative effects on beef production level in greece

time varying risk premium further evidence in agricultural futures markets research has provided mixed results regarding the presence of a time varying risk premium in agricultural futures markets in this article we test for the presence of a time varying risk premium focusing on the properties of the underlying data our results show that accounting for the structural break in the 1970s plays a key role in the findings in contrast to recent research we find only limited evidence of time varying risk premium for a two month horizon the corn soybean meal and hog markets show no signs of a risk premium while very weak support for a time varying premium emerges in live cattle for the four month horizon no evidence of a time varying risk premium appears for any of the markets