inflation persistence alternative interpretations and policy implications in this paper i consider the policy implications of two alternative structural interpretations of observed inflation persistence which correspond to two alternative specifications of the new keynesian phillips curve nkpc the first specification allows for some degree of intrinsic persistence by way of a lagged inflation term in the nkpc the second is a purely forward looking model in which expectations farther into the future matter and coefficients are time varying in this specification most of the observed inflation persistence is attributed to fluctuations in the underlying inflation trend which are a consequence of monetary policy rather than a structural feature of the economy with a simple quantitative exercise i illustrate the consequences of implementing monetary policy assuming a degree of intrinsic persistence that differs from the true one the results suggest that the costs of implementing a stabilization policy when the policymaker overestimates the degree of intrinsic persistence are potentially higher than the costs of ignoring actual structural persistence the result is more clear cut when the policymaker minimizes a welfare based loss function

input versus emission taxes environmental taxes in a mass balance and transaction costs perspective the standard policy recommendation to limit pollution is to use taxes or tradeable quotas on emissions a general emphasis on emissions does not however take proper account of the characteristics of the material flow through the economy an analysis of the relationships between transaction costs and features of this flow shows that it may be less costly to tax inputs into the economy the paper focuses on the advantages of a mass flow perspective in environmental economics the trade off between the precision of an environmental regulation and its implementation costs and develops criteria for choosing between input and emission related instruments

why has u s inflation become harder to forecast we examine whether the u s rate of price inflation has become harder to forecast and to the extent that it has what changes in the inflation process have made it so the main finding is that the univariate inflation process is well described by an unobserved component trend cycle model with stochastic volatility or equivalently an integrated moving average process with time varying parameters this model explains a variety of recent univariate inflation forecasting puzzles and begins to explain some multivariate inflation forecasting puzzles as well

the effect of inflation targeting on the behavior of expected inflation evidence from an 11 country panel abstract inflation targets were introduced in the 1990s in australia canada new zealand sweden and the united kingdom change in the behavior of expected inflation in the five targeting countries is measured in a panel that includes six non targeting countries france germany italy the netherlands japan and the united states the level of expected inflation in targeting countries falls after the announcement of targets with controls for country effects year effects ongoing inflation reduction and the business cycle neither the variability of expected inflation nor the average absolute forecast error falls after the announcement of targets with controls for the level and variability of past inflation both targeting and non targeting countries experience unexpected disinflation

is the growth of regionalism as significant as the headlines suggest lessons from agricultural trade the proliferation of regional trade agreements rtas has motivated a significant number of ex post econometric studies investigating their agricultural trade impacts the general conclusion is that rtas increase members trade by as much as 150 on average in this article we demonstrate that previous empirical work likely misrepresents the impact of rtas because of considerable heterogeneity in the depth of economic integration pursued by these agreements contrary to previous studies the results reveal that rtas are not universally trade creating and some agreements appear to provide very little benefit deep integration agreements on the other hand are largely responsible for the impressive agricultural trade flow increases reported in the literature testing the hierarchy of rtas largely confirms the theory the benefits of regionalism are an increasing function of the depth of economic integration

reconsidering the relationship between inflation and relative price variability it has long been popularly believed that the relationship between inflation and relative price variability rpv is positive and stable using disaggregated cpi data for the united states and japan however this study finds that the relationship is neither linear nor stable over time the overall relationship is approximately u shaped around a nonzero threshold inflation rate rpv therefore changes not with the inflation rate per se but with the deviation of inflation from the threshold inflation rate more importantly the relationship is by no means stable over time but instead varies significantly in a way that coincides with regime changes of inflation or monetary policy the relationship was positive during the period of high inflation of the 1970s and the early 1980s as has been documented by a number of previous studies whereas it takes a u shape profile during the great moderation the results are robust to the use of core inflation which excludes the traditionally volatile prices of food and energy this paper then presents a modified version of the calvo type sticky price model to describe the observed empirical regularities simulation experiments show that the modified calvo model fits the data well and that the underlying relationship hinges upon the degree of price rigidity which is systematically related to inflation regime for countries and periods with low inflation rates the relationship takes a u shape as price adjustment is more sticky in a high inflation environment when price setting becomes more flexible the u shaped profile vanishes

the effect of inflation targets on the level of expected inflation in five countries did inflation targets reduce the level of expected inflation in australia canada new zealand sweden and the united kingdom in this note predictions of forecasts by professional forecasters are constructed for five consecutive 12 month periods after the announcement of targets these predictions use a variety of information variables known to forecasters at the time they make their forecasts the results show that after the announcement of targets predicted forecasts are less than actual forecasts in australia canada new zealand and sweden this is evidence that targets reduced the level of expected inflation no evidence of such effects is found in the united kingdom

north american tomato market a spatial equilibrium perspective this paper studies the north american tomato market in a world market perspective for this purpose a spatial equilibrium model with endogenous prices is constructed and solved by quadratic mathematical programming method six scenarios involving the impacts from transportation costs tariffs and north american free trade agreement nafta were modelled the solutions illustrate their impacts on production consumption trade flows prices and net social welfare due to nafta mexico became the main tomato exporter to the usa

to value or not to value that is not the question abstract should we reject money when we value nature like most environmentalists ecological economists are increasingly divided on this question synthesizing political ecology with ecological economics we argue that this way of framing the question is limited we propose a reformulation of the question into when and how to value with money and under what conditions we recommend four criteria for a sound choice environmental improvement distributive justice and equality maintenance of plural value articulating institutions and confronting commodification under neo liberalism we call for due attention to the socio political context within which a valuation is placed and the political goals it serves the relevance of this framework is demonstrated by applying it to three practical cases pollution damages water pricing and payments for ecosystem services

evidence on the functional relationship between relative price variability and inflation with implications for monetary policy this paper considers the functional relationship between relative price variability rpv and inflation using quarterly personal consumer expenditure data in the us over 1967q1 2003q1 deriving some implications for monetary policy non parametric regression techniques are used to explore the shape of the rpv function and this shape is related to the theory outlined by rotemberg 1982 1983 the empirical rpv function yields a plausible optimal value of inflation in the region of five percentage points which is consistent with this theory and lies within the range of values cited by recent evaluations of sand and grease effects

inflation inflation uncertainty and relative price dispersion evidence from bivariate garch m models abstract one potential real effect of inflation is its influence on the dispersion of relative prices in the economy menu cost models generally imply that higher trend inflation will increase price dispersion in contrast signal extraction models predict that increased inflation uncertainty will raise relative price dispersion existing empirical studies do not distinguish between these separate hypotheses we constuct a bivariate garch m model of inflation and relative price dispersion to test these differing explanations in a single model and find that inflation uncertainty dominates trend inflation as a predictor of relative price dispersion

an econometric view on the estimation of gravity models and the calculation of trade potentials this paper presents an ar 1 model in the spirit of hausman and taylor zero differences between actual and in sample predicted trade flows large systematic differences between observed and in sample predicted trade flows only indicate model misspecification and econometric problems out of sample predictions make sense if countries of interest are in an early stage of the transformation process the gravity model remains an interesting tool for the calculation of counterfactuals e g the impact of catching up in gdp per capita in the ceec or of the reduction of trade costs via infrastructure investments or tariffs on bilateral trade etc for this line of research the difference between short term and long term influences could provide interesting insights

yes in my backyard spatial differences in the valuation of forest services and local co benefits for carbon markets in mexico forests provide many and large benefits including cost efficient climate change mitigation however international carbon markets have not stimulated the demand for forestry offsets domestic market mechanisms are emerging in many countries and forests could be highly valued through these policies as most of the benefits produced by forests are enjoyed locally here a choice experiment explores drivers of valuation and willingness to pay for forest carbon services in voluntary markets in mexico by comparing the valuation of citizens from four regions to test geographical preference for projects n 645 findings from multinomial logit models show valuation of forest carbon services is transferable and citizens would pay more for offsets from projects closer to their homes proximate forests provide a range of co benefits to local users including environmental services and opportunities for recreation factors related to valuation include sense of responsibility previous knowledge of carbon emissions previous visits to the sites regional identification and the valuation of local environmental services e g improvements in local air quality knowledge of spatial heterogeneity in valuation of the use of forest services can help to design market based instruments by identifying highly valued areas for environmental services programs and carbon markets

designing payments for environmental services in theory and practice an overview of the issues abstract payments for environmental services pes have attracted increasing interest as a mechanism to translate external non market values of the environment into real financial incentives for local actors to provide environmental services es in this introductory paper we set the stage for the rest of this special issue of ecological economics by reviewing the main issues arising in pes design and implementation and discussing these in the light of environmental economics we start with a discussion of pes definition and scope we proceed to review some of the principal dimensions and design characteristics of pes programs and then analyze how pes compares to alternative policy instruments finally we examine in detail two important aspects of pes programs their effectiveness and their distributional implications pes is not a silver bullet that can be used to address any environmental problem but a tool tailored to address a specific set of problems those in which ecosystems are mismanaged because many of their benefits are externalities from the perspective of ecosystem managers pes is based on the beneficiary pays rather than the polluter pays principle and as such is attractive in settings where es providers are poor marginalized landholders or powerful groups of actors an important distinction within pes is between user financed pes in which the buyers are the users of the es and government financed pes in which the buyers are others typically the government acting on behalf of es users in practice pes programs differ in the type and scale of es demand the payment source the type of activity paid for the performance measure used as well as the payment mode and amount the effectiveness and efficiency of pes depends crucially on program design

rtas proliferation and trade diversion effects evidence of the spaghetti bowl phenomenon this paper investigates the trade diversion effects of regional trade agreements rtas so called spaghetti bowl phenomenon sbp in multilateral trade the sbp is due to the proliferation of rtas thus we investigate the relationship between the number of rtas concluded by a country and the additional trade value attributed to an rta the main finding reveals a negative trade effect between them confirming the existence of sbp multilateral trade however results could not conclude evidence of a negative effect of overlapping rtas involving the existence of sbp within north north north south or south south trade but the additional trade value attributed to an rta concluded with eu countries or us seems to confirm significantly a trade diversion effect because of the number of rtas signed by these countries

market based instruments economists have long recommended market based instruments for efficient environmental policy making taxes tradable permits auctions of property rights etc so why is progress on them so slow the reality is that any environmental policy faces many political institutional and technical obstacles but market based instruments face more than most many relate to false perceptions although some are real most have solutions some do not

the relationship between relative prices and the general price level it is very nearly a truismi amaong neoclassical economists that the public is wont to confuse changes in the general price level with relative price changes correspondingl y one might speak of the independence between the two as one of the central postulates of the neoclassical tradition william stanley jevons was aml ong the first to identify this basic dichotomin economic life as well as to attempt to explain the ordinary citizen s seenming incapacity to understand it

assessing the impact of unilateral trade policies eba and agoa on african beneficiaries exports using matching econometrics the existing literature studying the impact of non reciprocal preferential trade agreements nrptas assumes implicitly nrptas are non randomly assigned without showing the evidence of that using a matching methodology this paper investigates whether the african growth and opportunity act agoa and the everything but arms eba unilateral trade concessions have had an impact and in what magnitude on the exports of african beneficiary countries in the light of the evidence of the non random nature endogeneity of nrptas methodologically previous studies using the matching procedure focused on bi or multilateral trade agreements our work focuses on nrptas that depend only on donors conditions accordingly we show that for nrptas gravity covariates cannot be used for the matching procedure we propose to use political variables as determinants for obtaining non reciprocal trade preferences in order to address the endogenous nature of nrpta assignment our main results confirm that a country becomes eligible for a nrpta only when it meets certain conditions defined by their donors such as political stability and economic regulation for agoa and freedom of expression and human development for eba results also show that both agoa and eba policies have had a positive impact on african beneficiary countries exports to nrpta s providers even if the magnitude impact of eba is significantly lower than that of agoa

revisiting the concept of payments for environmental services this article revisits the payments for environmental services pes concept and reviews existing pes definitions based on weberian philosophy of science it is argued that an ideal pes type strongly embedded in pes theory is needed to understand their logic many broader empiricist definitions fail to distinguish pes from the larger generic family of positive environmental incentives thus eroding their meaning by excessive vagueness arguably pes definitions should focus on describing a functional tool rather than normatively integrating desirable pes outcomes a modified narrow pes definition is proposed outlining conditionality as the single defining feature avoiding the buyer seller terms and linking pes to offsite externalities extensive explanatory guidelines address many valid conceptual concerns raised in the recent pes literature

inflation and relative price variability new evidence for the united states this article provides new evidence on the empirical relationship between inflation and relative prices in the united states in line with the predictions of recent monetary search models we find that the impact of expected inflation on relative price variability rpv has disappeared during the recent period when inflation expectations have been stabilized on a low level endogenous break point tests are applied to identify the timing and to confirm the significance of the changing role of inflation for rpv the empirical findings are robust with respect to different price indices disaggregation levels and measurement concepts

are regional trading arrangements trade creating an application of extreme bounds analysis in this study we use extreme bounds analysis to test the robustness of the hypothesis that regional trading arrangements rtas are trade creating extreme bounds analysis provides a more rigorous test of specification uncertainty than traditional econometric theory by incorporating prior information and using a systematic approach to testing the fragility of coefficient estimates the results show that the trade creation effect of most rtas is fragile using a least squares estimator where all weight is attached to the sampling distribution eight or more of the twelve rtas considered are found to be trade creating when the relative weight in the estimation is shifted from the sampling to the prior distribution the number of rtas that are trade creating falls to six at the 95 percent likelihood ellipsoid moreover when we specify that not all rtas are trade creating four rtas increase trade at the 95 percent likelihood ellipsoid at the extreme bounds when all weight is attached to the prior distribution none of the rtas are found to be trade creating as a result we conclude that the pervasive trade creation effect found in the literature reflects not the information content of the data but rather the unacknowledged beliefs of the researchers

exporting to new destinations and the effects of tariffs the case of meat commodities this study uses a random parameter probit estimation to examine the effects of tariff liberalization on the probability of establishing new trading relationships in meat commodities our simulation results indicate that the effects of tariff reductions decrease with distance but increase with the level of development the probabilities of trade increase at an increasing rate with the size of tariff reductions thus justifying calls for ambitious liberalization schemes canada and mexico are the nafta countries that are most likely to export in response to eu tariff reductions on bovine and poultry meats while brazil and argentina emerge as the mercosur countries most likely to penetrate the eu bovine meat market after eu tariff reductions uruguay s probability to export poultry meat is most responsive to eu tariff reductions

permanent and transitory policy shocks in an empirical macro model with asymmetric information abstract an empirical model that allows for shifts in the inflation target and imperfect policy credibility is estimated imperfect credibility defined by differences between the perceived and actual inflation target obtains because private agents cannot correctly distinguish between permanent target shocks and transitory funds rate shocks learning affects responses to structural shocks important features include the absence of a price puzzle permanent nominal effects of aggregate supply shocks due to partial policy accommodation and the ability to examine responses to a permanent target change and expectations shocks perceptions of permanent target shocks explain sizable movements in bond yields and inflation

modeling the interplay between sanitary and phytosanitary measures and tariff rate quotas under partial trade liberalization non tariff measures particularly sanitary and phytosanitary measures and tariff rate quotas are two critical policy barriers that impede agricultural trade unlike simple tariffs both measures contain non linear effects and binding conditions that make their treatment in modeling trade liberalization challenging in addition the coexistence of these measures carries important interactive effects that restrict trade this study investigates these joint effects by developing a conceptual framework that considers different partial liberalization scenarios our framework points to three cases that may arise a binding tariff rate quota non prohibitive sanitary and phytosanitary measure b non binding tariff rate quota non prohibitive sanitary and phytosanitary measure and c non binding tariff rate quota prohibitive sanitary and phytosanitary measure we then use a computable general equilibrium model to examine partial trade liberalization scenarios for these cases using the ongoing transatlantic trade and investment partnership negotiations as our motivation our simulations provide a more nuanced analysis of complex trade liberalization and demonstrate the importance of modeling the interplay between these different types of barriers

complementarities of trade advantage and trade competitiveness measures the complementarities of trade advantage and trade competitiveness measures for agro food trade of five central european ce 5 countries with the european union are analysed the stability and duration of the trade measures over time is investigated by the survival analysis using the nonparametric kaplan meier product limit estimator and the consistency test between the trade measures is conducted by the stratified cox proportional hazard model the ce 5 countries experienced a greater number of products with relative trade disadvantages and greater significance of one way imports unlike the czech republic poland slovakia and slovenia hungary experienced relative trade advantages rtas for bulk raw commodities processed intermediates and horticulture with the greatest significance of successful quality competition and one way exports and the lowest significance of unsuccessful price and unsuccessful quality competition the duration of rtas is longer than the duration for the successful trade co

impacts of free trade agreements on agricultural trade creation and trade diversion this paper evaluates agricultural trade creation and diversion effects of the most important free trade agreements ftas trade creation and diversion effects are estimated using a poisson pseudo maximum likelihood ppml estimator with various fixed effects to deal with heteroskedasticity and zero trade observations the analysis finds that ppml estimation is preferred to ols and the estimated impacts of ftas are different if zero trade observations are considered the asean china preferential trade agreement eu 15 eu 25 and southern african development community agreements have generated large increases in agricultural trade among their members

relative price variability and inflation regression studies have established that there tend to be convex nonsymmetric relationships between relative price variability and the inflation rate unanticipated inflation and the change in the inflation rate this paper shows that such regression results follow as definitional artifacts for a simple but quite general stochastic model of price changes the analysis is based on the fact that the definitions of relative price variability the inflation rate unanticipated inflation and the change in the inflation rate imply a particular structure for the covariances among these variables the structure of these covariances has implications for the regression coefficients copyright 1991 by ohio state university press

inflation targeting and relative price variability what difference does inflation targeting make author affiliation chi young choi cychoi uta eduyoung se kim acknowledgment the authors are grateful to coeditor kent kimbrough and two anonymous referees for constructive comments that helped to improve this article the authors also wish to thank steve cecchetti kang liu shin ichi nishiyama margie tieslau taka tsuruga and the seminar participants at the academia sinica national chung cheng university national sun yat sen university national taiwan university texas tech university and the university of texas at arlington for helpful comments and vikas kakkar for providing cpi data for hong kong any remaining errors are the authors 1 introductionvariability in relative prices is known to be a major channel through which inflation can induce welfare costs by impeding an efficient allocation of resources in the economy consequently substantial effort has been devoted in the literature to examining the link between relative price variability rpv and aggregate inflation although much of the existing theoretical and empirical literature points to a positive monotonic relationship newer contributions suggest that the relationship between inflation and rpv is more complicated particularly in terms of its sensitivity to the inflation regime 1the primary purpose of this study is to investigate whether the connection between inflation and rpv is influenced in an important way by the monetary policy framework chosen by a central bank specifically this article focuses on exploring whether the adoption of an inflation targeting it framework exerts any significant impact on rpv as measured by the standard deviations of sectoral inflation rates relative to the aggregate rate since it was first implemented in new zealand more than two decades ago the popularity of it has spread with some twenty five countries worldwide implementing the framework to date freedman and laxton 2009 the literature is now replete with studies pointing to reductions in both the level and the volatility of inflation in countries that have adopted it e g mishkin and schmidt hebbel 2007 2 while studies of the impact of it on aggregate inflation performance are plentiful little attention has been paid to the impact of it on rpv the question of whether and indeed how it affects rpv is an important one for several reasons first exploring the potential connection between it and rpv is a worthwhile exercise given the popularity of it as a monetary framework and the centrality of rpv to the current generation of macromodels the importance of rpv is recognized in standard new keynesian dynamic stochastic general equilibrium dsge models where the variance of relative prices is viewed as a useful summary statistic as noted by amano ambler and rebei 2007 for example in dsge models the optimal rate of target inflation and the optimal variability of inflation relative to output depend on the quantitative effects of price dispersion on macroeconomic equilibrium second answering the question helps us identify the driving force behind the change in rpv distinguishing between it adoption itself and its subsequent impact on inflation if the relationship is monotonically positive as is often believed in the literature one should expect that it adoption would bring about a decline in rpv in the same way as it has led to a decline in inflation if the relationship is more complex however the effect of it adoption on reducing rpv may hinge on the change in inflation regimes after it adoption third our answer to the question also sheds additional light on the empirical evidence for the relative effectiveness of it across different stages of development while there is strong evidence that developing countries benefit more from it than industrial countries in combating inflation and its volatility e g petursson 2004 lin and ye 2009 we are aware of no empirical research that has assessed this issue with respect to rpv

regionalism in the western hemisphere and its impact on u s agricultural exports a gravity model analysis the last fifteen years of the twentieth century were marked by important achievements in the area of agricultural trade liberalization in the western hemisphere in north america canada mexico and the united states forged the north american free trade agreement nafta this accord which took effect on 1 january 1994 is dismantling most tariff and non tariff barriers for trading between its members nafta also incorporates the canada u s free trade agreement cfta an accord similar to nafta that took effect

effects of spatial density on veterinarian income where are all of the veterinarians with increased numbers of veterinarians in the market it is critical to understand how this increased competition affects income potential at multiple levels this study presents an empirical appr

monetary policy for inattentive economies we offer a contribution to the analysis of optimal monetary policy we begin with a critical assessment of the existing literature arguing that most work is based on implausible models of inflation output dynamics we then suggest that this problem may be solved with some recent behavioral models which assume that price setters are slow to incorporate macroeconomic information into the prices they set a specific such model is developed and used to derive optimal policy in response to shocks to productivity and aggregate demand optimal policy is price level targeting base drift in the price level which is implicit in the inflation targeting regimes currently used in many central banks is not desirable in this model when shocks to desired markups are added optimal policy is flexible targeting of the price level that is the central bank should allow the price level to deviate from its target for a while in response to these supply shocks but it should eventually return the price level to its target path optimal policy can also be described as an elastic price standard the central bank allows the price level to deviate from its target when output is expected to deviate from its natural rate

the ideology of efficiency searching for a theory of policy analysis the potential pareto improvement criterion and other measures of economic efficiency do not pass the test of consistency and coherence within economic theory nor do such measures accord with what public decision makers seek in policy advice from economists such efficiency measures are nonetheless durable components of the ideology of economics in general and benefit cost analysis in particular the objectivity of the policy scientist has been confused with the objectivity of the science while economic efficiency has no claim to objectivity the policy scientist can be an objective analyst of policy choices

the inflation aversion of the bundesbank a state space approach abstract a simple backward looking taylor rule is estimated in a time varying coefficient framework with quarterly german data for the period 1975 1998 the main finding is that the inflation aversion of the bundesbank was not constant over time and exhibits some sudden and large shifts during the period of monetary targeting there are phases with low and with high inflation aversion these findings provide an explanation why the estimated inflation coefficient in backward looking taylor rules often does not exceed one and violates the implications of theoretical models moreover the results provide evidence that the bundesbank followed the so called opportunistic approach to disinflation

ad valorem tariff and spatial equilibrium models the objectives of this article are to illustrate theoretically and empirically how to incorporate an ad valorem tariff in spatial equilibrium models and show the equivalence of three approaches primal dual and mcp of spatial equilibrium trade modelling the article lays out in detail the theory empirical applications and the results for all three approaches so that trade modellers can easily follow and apply them in their work the primal approach is commonly used by spatial equilibrium modellers though the dual approach corresponds to the textbook depiction of consumer surplus producer surplus and gains from trade the mixed complementarity problem mcp is not commonly used by spatial equilibrium modellers though it is relatively simpler if the modeller knows the equilibrium conditions this article also presents advantages and disadvantages of each approach

effects of trade diversion and trade creation of mercosur on us and world apple markets apples are the third most valuable fruit in the united states and account for 18 of us fruit exports chile is a major competitor to the united states in the mercosur market since it is one of the leading apple producing countries and enjoys the tariff reductions as a member of mercosur consequently chilean exports displace us exports in mercosur in addition other mercosur members import more from lower cost chile leading to a reduction in production and an increase in consumption in these countries this study develops a theoretical and an empirical model of world apple market to quantify the trade diversion and trade creation effects of the mercosur free trade agreement and to estimate the welfare impacts

choices without prices without apologies valuing is usually regarded as a process of compressing information about attributes into a single metric armed with this reduced form of compact information the consumer can consider a particular object with a particular price attached or implied and make an informed decision but the process of valuing is less straightforward than we ordinarily suppose when environmental goods and services become the object of information compaction it is possible that important information is lost we comment on the choice problem germane to environmental goods and services and challenge the presumption that environmental choices made without explicit pricing are inferior to those in which hypothetical valuation studies are undertaken

whose equity matters national to local equity perceptions in vietnam s payments for forest ecosystem services scheme this paper focuses on the assessment of legislative considerations and local perceptions of equity in vietnam s payments for forest ecosystem services scheme pfes equity perceptions are powerful determinants of human behaviour and consequently many environmental conflicts arise from contested visions of what constitutes as equitable environmental management therefore equity can play an instrumental role in shaping outcomes of pfes schemes this paper analyzes how contextual procedural and distributive equity considerations are reflected in national pfes legislation and implementation how equity outcomes are perceived locally and whether local perceptions match legislative considerations we reviewed national legislation and government reports conducted expert interviews on the national and provincial level as well as surveys focus group discussions and in depth interviews on the local level our findings reveal that equity outcomes are very much affected by contextual factors such as how the forest land allocation regulation determines the distribution of use rights in the implementation of pfes national aspirations and rationales of equity as outlined in legislation were not met due to technical constraints financial costs and social and institutional conflicts the implementation on the ground contrasts with local interests our results show that on the local level the preference for a distributive equity principle is very much influenced by the degree of transparency of the payment distribution process the prevailing perceptions of equitable benefit distribution by local pfes participants correspond to a merit based principle of compensation for the effort of forest protection

a spatial equilibrium analysis of trade policy reforms on the world wheat market since a few countries produce most of the world s wheat and consumption is widespread across the world wheat is one of the most commonly traded agricultural commodities in recent years the wheat market has been going through difficult phases as wheat prices are depressed the fall in wheat prices is attributed to a supply glut and restrictive trade barriers this study develops a large scale spatial equilibrium trade model for wheat to analyse the effects of removing trade barriers tariffs and subsidies on each country s region s price supply demand trade welfare and bilateral trade flows the results show that trade liberalization leads to an increase decrease in prices in the exporting importing countries production and exports increase in the exporting country and consumption and imports increase in the importing country consequently the volume of trade also increases the welfare of most countries rises and thus world welfare also rises

allowance price drivers in the first phase of the eu ets abstract in the first phase of the eu emissions trading scheme eu ets the price per ton of co 2 initially rose to over 30 the price then collapsed to essentially zero by mid 2007 by deriving a structural model of the allowance price under the assumption of efficient markets i examine the extent to which this variation in price can be explained by marginal abatement costs i then gradually relax the model by allowing for delayed adjustment of price to fundamentals as well as by introducing lagged lhs variables the pattern of results suggests that while prices were not initially driven by marginal abatement costs this inefficiency was largely corrected after the accounting of 2005 emissions in april 2006

the former soviet union and the world wheat economy the impacts of the former soviet union leaving the world wheat market as a consistent net importer are investigated using a modified spatial trade equilibrium model the simulation results suggest that the former soviet union following bigman s stochastic trade hypothesis can have a stabilizing role in the future world wheat economy

changes in the federal reserve s inflation target causes and consequences this paper estimates a new keynesian model to draw inferences about the behavior of the federal reserve s unobserved inflation target the results indicate that the target rose from 1 1 4 percent in 1959 to over 8 percent in the mid to late 1970s before falling back below 2 1 2 percent in 2004 the results also provide some support for the hypothesis that over the entire postwar period federal reserve policy has systematically translated short run price pressures set off by supply side shocks into more persistent movements in inflation itself although considerable uncertainty remains about the true source of shifts in the inflation target jel e31 e32 e52

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

in markets we trust setting the boundaries of market based instruments in ecosystem services governance abstract a growing tendency to frame environmental problems as a failure to price ecosystem services has coincided with the rise of so called market based instruments mbis the aim of this introductory article to the special section in markets we trust contrasting views on the performance and legitimacy of market based instruments in global environmental governance is to promote critical reflection about the nature scope and limits of mbis in ecosystem services governance and to provide guidance on where the boundaries for the application of markets ought to be set first we examine the role that methodological assumptions and implicit normative positions play in shaping academic perception of the effectiveness and legitimacy of mbis second we examine mbis in the broader ideological context and socio political processes that have favored their development and implementation third we test claims of the literature on mbis against insights and data from case studies presented in the special section fourth we discuss the scope and limits of markets in ecosystem services governance in the light of biophysical institutional and normative boundaries we end with a summary of concluding remarks from the special section and by identifying critical tasks for the scientific and policy agenda on ecosystem services governance

economic integration among developed developing and centrally planned economies a comparative analysis we examine six integration schemes and decompose their ability to increase inter member trade into environmental policy and system effects environmental factors caused the greatest variation in trade creation with inter member distance the most important environmental variable the cacm and efta have followed more effective integration policies than the eec lafta and the andean pact although integration can thus benefit developed and developing countries alike for some such as those in latin america inter member distances severely limit its effectiveness while the combination of policy and system has kept the cmea fromrr achieving its full potential for increasing inter member trade its effectiveness does not differ from that of unions among market economies

is there any asymmetry in the effect of inflation on relative price variability abstract it is widely perceived that relative prices are more dispersed in periods of price decreases than in periods of price increases we show that the asymmetry results from misspecifying the true u shaped underlying model with a piecewise linear regression model

the history of ecosystem services in economic theory and practice from early notions to markets and payment schemes article i nfo this paper reviews the historic development of the conceptualization of ecosystem services and examines critical landmarks in economic theory and practice with regard to the incorporation of ecosystem services into markets and payment schemes the review presented here suggests that the trend towards monetization and commodification of ecosystem services is partly the result of a slow move from the original economic conception of nature s benefits as use values in classical economics to their conceptualization in terms of exchange values in neoclassical economics the theory and practice of current ecosystem services science are examined inthelight ofthis historicaldevelopment from thisreview we conclude thatthefocus onmonetary valuation and payment schemes has contributed to attract political support for conservation but also to commodify a growing number of ecosystem services and to reproduce the neoclassical economics paradigm and the market logic to tackle environmental problems

inflation and relative price variability in the short and long run new evidence from the united states this paper presents new evidence that a positive association exists between inflation and relative prices and relative inflation rates in very disaggregated data for the united states over the period 1975 through 1992 there is also evidence that the response of relative prices and relative inflation rates to inflation varies inversely with the information content of a given shock to inflation the relationship is studied from two cross sectional perspectives using individual price series collected from forty eight u s cities evidence on the persistence of the effects of inflation on relative prices is also presented results here demonstrate the absence of a long run relationship between inflation and relative price dispersion i e the two series are not cointegrated finally results from vector autoregressions further imply the effect is smaller than indicated by typical estimates copyright 1996 by ohio state university press

the macroeconomic effects of nonzero trend inflation we study the macroeconomic effects of nonzero trend inflation in a simple dynamic stochastic general equilibrium model under three common time dependent pricing schemes calvo truncated calvo and taylor we show that regardless of the pricing mechanism trend inflation leads to a reduction in the stochastic means of output consumption and employment and an increase in the stochastic mean of inflation beyond its deterministic steady state level the variability of most aggregates also increases these effects are quantitatively much stronger with calvo pricing

contesting legitimacy of voluntary sustainability certification schemes valuation languages and power asymmetries in the roundtable on sustainable palm oil in colombia voluntary certification schemes aimed at assuring producer compliance with a set of sustainability criteria have emerged as market based instruments mbis of sustainability governance however the impacts they tackle can be part of a complex arena of socio environmental conflict where values and powers of business and local actors compete legitimacy of these schemes not only results from compliance by business actors but also depends on acceptance by local actors affected by or resisting the industries that these mechanisms aim to govern this paper explores the influence of different local actors values and powers on legitimacy granting or contestation by local actors during national processes of sustainability criteria development we analyse the case of the roundtable on sustainable palm oil rspo in colombia using an approach that combines concepts of ecological economics and political ecology with the legitimacy literature based on critical sociology in colombia the palm oil industry led the initiative to implement certification under national interpretation of rspo principles and criteria however the national interpretation process revealed power asymmetries among stakeholders and clashes between their different values this resulted in strong contestation of rspo legitimacy by local actors who resist expansion of oil palm cultivation

effects of global trade liberalization on softwood lumber markets this study develops a world spatial equilibrium softwood lumber model comprised of the major importing and exporting countries regions to analyse the impacts of global trade reform on the world softwood lumber market the results show that free trade leads to an increase in lumber trade and canadian producers and us consumers are the biggest beneficiaries trade liberalization improves the overall world welfare as world producer and consumer surpluses increase the result highlights the importance of moving towards free trade in the global softwood lumber market

conjoint analysis of industry location preferences evidence from the softwood lumber industry in the us conjoint analysis ca was used to study location preferences among members of the softwood lumber industry in the southern and western regions of the us this industry was selected as an example of a resource based industry to test several hypotheses derived from location theory decision makers owners and managers identified price of logs and distance to sources for logs as the most important location factors a secondary category included wages and energy costs other variables such as cost of land quality of access roads and distance to markets are less important there were statistically significant differences in the part worth estimates of raw materials and wage costs among decision makers but not between regions in an ordered model for site preference marginal analysis of the price of logs stressed its importance as the major location factor in the softwood lumber industry

ecosystems contingent valuation and ethics the case of wetland re creation this paper addresses a current issue in environmental valuation namely the extent to which environmental preferences depart from the usual economic paradigm to incorporate some lexicographic elements after a theoretical discussion the paper reviews attempts to explore this question empirically by supplementing contingent valuation analyses with an exploration of the motives behind willingness to pay responses including zero bids and refusals to answer this is followed by the presentation of new evidence investigating respondents willingness to pay for the creation of a wetland taken from 713 personal interviews of the british public 2000 elsevier science b v all rights reserved

does inflation targeting really make a difference evaluating the treatment effect of inflation targeting in seven industrial countries abstract we evaluate the treatment effect of inflation targeting in seven industrial countries that adopted this policy in the 1990s to address the self selection problem of policy adoption we make use of a variety of propensity score matching methods recently developed in the treatment effect literature our results show that inflation targeting has no significant effects on either inflation or inflation variability in these seven countries further evidence from long term nominal interest rates and income velocity of money also supports the window dressing view of inflation targeting

does inflation targeting make a difference in developing countries we evaluate the treatment effect of inflation targeting in thirteen developing countries that have adopted this policy by the end of 2004 using a variety of propensity score matching methods we show that on average inflation targeting has large and significant effects on lowering both inflation and inflation variability in these thirteen countries however the effectiveness of inflation targeting on lowering inflation is found to be quite heterogeneous the performance of a given inflation targeting regime can be affected by country characteristics such as government s fiscal position central bank s desire to limit the movements of exchange rate its willingness to meet the preconditions of policy adoption and the time length since the policy adoption

export liberalization and household welfare the case of rice in vietnam vietnam has rapidly become one of the three largest rice exporters in the world in spite of a binding export quota this article uses a multimarket spatial equilibrium model to examine the effect of further liberalization on regional rice prices household data are then used to calculate the welfare impact of these price changes on different household groups the results suggest that although rice export liberalization would raise food prices and exacerbate regional inequality it would also increase average real income and reduce slightly the incidence and severity of poverty we explore several explanations of these apparently paradoxical results

markets in environmental governance from theory to practice abstract the aim of this paper is to clarify what is meant by markets for ecosystem services es the defining characteristic of markets is interaction through trade two main dimensions are identified as basis for classifying markets in es firstly we have markets with and without intermediaries secondly some markets for es are created by defined liabilities like caps on emissions while other trades come about voluntarily altogether six forms of markets are identified with two being incomplete the paper also offers an analysis of the most important existing markets for es using the developed classification regarding payments for ecosystem services pes most are not markets not even incomplete this is so as most resources are raised through taxes or fees command not trade moreover most payments are best characterized as subsidies cap and trade systems like those for carbon qualify as markets but depend crucially on the politically defined cap moreover it is this cap that protects the environment while the idea with markets in es is to escape command and control it is observed that c c is essential for these markets to work

ecosystem services concepts and approaches in conservation just a rhetorical tool many commentators have raised questions about the recent focus on ecosystem services es concepts in conservation but little empirical analysis exists we present a novel empirical analysis using interviews and q methodology to examine how conservation practitioners and organisations are interpreting and using es concepts and associated approaches we find that these concepts are being adopted for instrumental imperatives to broaden constituencies and with an expectation of extending funding sources we uncover concerns within conservation that the utilitarian emphases of es concepts may compromise the ability to make non utilitarian arguments for nature in the future in relation to changing practice we examine shifts in partnerships and funding where es ideas provide a shared language about flows of value apparently accelerating the integration of conservation and the private sector whilst many respondents noted the significance of shifts related to es ideas some attempted to play these down presenting their organisation s adoption of these ideas as just a rhetorical tool however we argue that the adoption of es concepts cannot be presented as solely rhetorical given that these increasingly underpin and inform planning tools and policy instruments

us brazil cotton dispute and the world cotton market us policies for its cotton producers depress world cotton prices adversely affecting exporters such as brazil which filed a complaint to the wto despite wto rulings in brazil s favour meting out the right to enact retaliatory countermeasures the united states continues to subsidise its cotton farmers after prolonged negotiations brazil and the united states reached an agreement which allowed the united states to pay brazil to refrain from enforcing the countermeasures to capture the adverse effects of us policies theoretical analyses are conducted the theoretical model is extended by constructing an empirical model of the world cotton market the adverse effects of us policies on brazil are estimated and compared to the compensation the united states pays brazil

the welfare impacts of u s trade restnctions against the canadian softwood lumber industry a spatial equilibrium in this paper we estimate the production and welfare impacts of various u s trade restrictions on canadian lumber after building a model that incorporates the regional character of the north american lumber market we simulate a variety of tariffs and quotas now advocated by a number of u s lawmakers we find that the tariff losses incurred by canadian producers could be substantial depending on the elasticity of their export supply voluntary restraint agreements however might lead to canadian gains as high as 40 per cent of their pre existing profits

taking stock a comparative analysis of payments for environmental services programs in developed and developing countries abstract payments for environmental services pes are an innovative approach to conservation that has been applied increasingly often in both developed and developing countries to date however few efforts have been made to systematically compare pes experiences drawing on the wealth of case studies in this special issue we synthesize the information presented according to case characteristics with respect to design costs environmental effectiveness and other outcomes pes programs often differ substantially one from the other some of the differences reflect adaptation of the basic concept to very different ecological socioeconomic or institutional conditions others reflect poor design due either to mistakes or to the need to accommodate political pressures we find significant differences between user financed pes programs in which funding comes from the users of the es being provided and government financed programs in which funding comes from a third party the user financed programs in our sample were better targeted more closely tailored to local conditions and needs had better monitoring and a greater willingness to enforce conditionality and had far fewer confounding side objectives than government financed programs we finish by outlining some perspectives on how both user and government financed pes programs could be made more effective and cost efficient

agricultural trade and the gatt wto does membership make a difference recent empirical studies have estimated the trade flow effect of membership in the world trade organization wto and its predecessor the general agreement on tariffs and trade gatt one important although largely untested conclusion from this literature is that the gatt wto works well if we ignore trade in agriculture one of the institutions seemingly apparent failures this article investigates this conclusion using a large panel of agricultural and non agricultural trade flows the results are impressive the multilateral institution has delivered significant positive effects on members agricultural trade despite its sensitive nature and the reluctance of members to undertake serious reform these findings are robust to various slices of the data and recent advances in the specification and estimation of the gravity equation to account for sample selection issues and the extensive margin of trade copyright 2012 oxford university press

trend inflation indexation and inflation persistence in the new keynesian phillips curve purely forward looking versions of the new keynesian phillips curve nkpc generate too little inflation persistence some authors add ad hoc backward looking terms to address this shortcoming we hypothesize that inflation per sistence results mainly from variation in the long run trend component of inflation which we attribute to shifts in monetary policy we derive a version of the nkpc that incorporates a time varying inflation trend and examine whether it explains the dynamics of inflation when drift in trend inflation is taken into account a purely forward looking version of the model fits the data well and there is no need for backward looking components jel e12 e31 e52 in this paper we consider the extent to which guillermo calvo s 1983 model of nominal price rigidities can explain inflation dynamics without relying on arbitrary backward looking terms in its baseline formulation the calvo model leads to a purely forward looking new keynesian

regional trading arrangements natural or supernatural members of the customs union the potential unfavorable effects arise from the introduction of distortions in the relative price between the goods of members and nonmembers in terms of classic customs union theory the trade off is between trade creation and trade diversion the entire exercise assumes that the firstbest solution of worldwide free trade is not attainable for political reasons thus the choice between a status quo of nondiscriminatory most favored nation mfn tariffs and a move to preferential trading arrangements pta s is an exercise in the theory of the second best this paper summarizes recent research by the authors we make an evaluation of the

do regional trade agreements increase members agricultural trade the gravity model is used extensively to investigate the trade flow effects of regional trade agreements rtas a notable feature common to previous research is the use of aggregate trade data these studies typically report conflicting and even negative results of the effect of rtas on members trade using recent developments in the gravity equation suggested by baier and bergstrand 2007 and anderson and van wincoop 2003 this article demonstrates that rta effects on members trade depend fundamentally on whether the analysis focuses on agricultural or nonagricultural sectors on the particular agreement analyzed and on the length of the phase in period that characterizes almost all rtas copyright 2008 oxford university press

scope and limits of the market mechanism in environmental management abstract this paper tries to evaluate the role of the market mechanism in environmental management and warns against reductionist views on the causes and remedies of environmental damages according to some of these views proper pricing of the environment and extensive use of market mechanisms in environmental management would solve environmental problems but various conditions tell against such simplifications namely the complex causality behind environmental damages the complexity of the functions and values of nature as well as limitations of the market mechanism in coping with the functions and services of nature several of those limitations the difficulties of defining and enforcing property rights to nature s functions and services the pervasiveness of externalities conditioned by the public goods characteristics of many environmental functions and values the difficulties in enticing processing and using information about environmental goods and the high transaction costs caused by all these circumstances often rule out contracts and trading of environmental services it is less known that the basic cause of market existence and extension namely specialization and division of labour have negative environmental effects with respect to environmental policy conceptual problems are analyzed while all kinds of environmental management mechanisms have a regulatory function only quantity mechanisms as a subset of incentive mechanisms are market mechanisms the choice of relevant environmental policy instrument is conditioned by many considerations the issue of the superior efficiency properties of market mechanisms in environmental management is not yet settled satisfactorily extensive empirical tests are still lacking

payments for ecosystem services from local to global abstract payment for ecosystem services pes is becoming increasingly popular as a way to manage ecosystems using economic incentives the environmental economics approach to pes tries to force ecosystem services into the market model with an emphasis on efficiency the ecological economics approach in contrast seeks to adapt economic institutions to the physical characteristics of ecosystem services prioritizing ecological sustainability and just distribution and requiring a transdisciplinary approach this paper summarizes the results of a participatory atelier workshop held in costa rica we developed a set of principles the heredia declaration for pes systems and report on evolving initiatives in several countries we discuss how the distinction between ecosystem goods which are stock flow resources and ecosystem services which are fund service resources and the physical characteristics of the fund services affect the appropriate institutional form for pes we conclude that pes systems represent an important way to effectively manage fund service resources as public goods and that this represents a significant departure from conventional market institutions

inflation and the distribution of relative prices the role of productivity and money supply shocks this paper examines the role of aggregate productivity and money supply shocks in determining the relationship between inflation and the distribution of relative commodity prices i estimate a restricted var that includes aggregate variables and individual commodity prices and compute the cross sectional distribution of the dynamic responses of commodity prices to these aggregate shocks the findings indicate that both shocks lead to positive correlation between inflation and the dispersion of relative prices and that the response of prices across commodities is not uniform even in the long run

reconciling theory and practice an alternative conceptual framework for understanding payments for environmental services article i nfo this article provides an alternative and novel theoretical approach to the conceptualization and analysis of payments for environmental services pes we devote special emphasis to institutional and political economy issues which have been somewhat neglected in the literature on pes we argue that the coasean and pure market approach dominating the conceptualization of pes in the literature cannot be easily generalized and implemented in practice by contrast taking into account complexities related to uncertainty distributional issues social embeddedness and power relations permits acknowledging the variety of contexts and institutional settings in which pes operate the alternative approach presented in this introductory article to the special section may be more appealing to pes practitioners since while avoiding restrictive and prescriptive standpoints it allows some key sources of complexities they usually deal with on the ground to be more easily understood

the pes conceit revisiting the relationship between payments for environmental services and neoliberal conservation payments for environmental services pes has become a popular means to neoliberalize biodiversity conservation throughout the world yet research on pes is increasingly focused on debating exactly how neoliberal programmes really are documenting complexities in pes implementation and concluding that few programmes are very market based in practice while we agree that ideal neoliberal implementation of pes does not and cannot exist we argue that focusing only on micro politics misunderstands the importance of analysing pes as a form of neoliberal conservation the question is not just whether pes is innately neoliberal but how it functions within a broader neoliberal political economy by focusing on the overarching governance and power structures that gave rise to pes in the first place we more clearly see what we call the pes conceit namely that the approach implicitly accepts neoliberal capitalism as both the problem and the solution to the ecological crisis this strategy is not only contradictory but also commonly fails to achieve intended outcomes falling far short of conservation objectives while also often exacerbating socioeconomic inequality this problematic conceit we conclude cannot be addressed through only micro oriented studies it demands connecting micro and macro political economic analyses to confront broader neoliberal power structures

designing more efficient markets lessons from los angeles smog control market based approaches for environmental protection are beginning to take root around the world this article attempts to improve our understanding of the performance of environmental markets by constructing and evaluating an information base on trades in los angeles which includes the first detailed data on trading prices the analysis suggests that trading activity has been shaped by the detailed regulations governing the market in addition transaction costs have played a crucial role we argue that the move toward adopting market based approaches for environmental protection needs to be accompanied by a vigorous effort to assess the properties of these systems as they are actually implemented

disaggregated trade and disaggregated currency unions a ranking of common currency effects andrew rose has long argued that a common currency has a large effect on increasing trade recently rose has called into question the reliability of this conclusion as new techniques have emerged for estimating gravity equations this article uses the sector specific gravity model developed by anderson and yotov 2010a to investigate if disaggregated trade can provide a reliable estimate of a common currency s effect disaggregating trade alone is insufficient to obtain a reliable estimate of a currency union regardless of econometric technique when the effect of a common currency on trade is uniform across all unions disaggregating the universe of currency unions with individual effects provides a reliable ranking of currency unions independent of estimation method by the effect that each union s currency has on increasing trade these rankings differ across sectors

term structure views of monetary policy under alternative models of agent expectations abstract term structure models and many descriptions of the transmission of monetary policy rest on the empirical relevance of the expectations hypothesis small differences in the perceived policy reaction function in var models of agent expectations strongly influence the relevance in the transmission mechanism of the expected short rate component of bond yields mean reverting or difference stationary characterizations of interest rates require large and volatile term premiums to match the observable term structure however short rate descriptions that capture shifting perceptions of long horizon inflation evident in survey data support a more substantial term structure role for short rate expectations

reprint of ecosystem services concepts and approaches in conservation just a rhetorical tool abstract many commentators have raised questions about the recent focus on ecosystem services es concepts in conservation but little empirical analysis exists we present a novel empirical analysis using interviews and q methodology to examine how conservation practitioners and organisations are interpreting and using es concepts and associated approaches we find that these concepts are being adopted for instrumental imperatives to broaden constituencies and with an expectation of extending funding sources we uncover concerns within conservation that the utilitarian emphases of es concepts may compromise the ability to make non utilitarian arguments for nature in the future in relation to changing practice we examine shifts in partnerships and funding where es ideas provide a shared language about flows of value apparently accelerating the integration of conservation and the private sector whilst many respondents noted the significance of shifts related to es ideas some attempted to play these down presenting their organisation s adoption of these ideas as just a rhetorical tool however we argue that the adoption of es concepts cannot be presented as solely rhetorical given that these increasingly underpin and inform planning tools and policy instruments

estimating the federal reserve s implicit inflation target a state space approach abstract existing estimates of the federal reserve s implicit inflation target typically rely on the assumption that it is constant for the duration of the period of analysis this paper relaxes this assumption and estimates the implicit inflation target using a time varying parameter model and the kalman filter in applying this method to the volcker greenspan period it finds significant time variation in the implicit target that is consistent with hypotheses about opportunistic disinflation and the recent deflation scare