on the existence of markov consistent plans under production uncertainty strotz 1956 and pollak 1968 were among the first to study the behaviour of an economic agent whose preferences change over time they suggested that such an agent would choose a consistent plan which they described as the best plan that he would actually follow a markov consistent plan has a particularly simple structure current decisions are independent of past decisions except insofar as past decisions affect the current values of state variables unfortunately markov consistent plans do not generally exist in this paper we demonstrate that the existence problem dissappears for finite horizon problems when one introduces even a small amount of smooth uncertainty into production

what accounts for the changes in u s fiscal policy transmission using vector autoregressions on u s time series for 1957 79 and 1983 2004 we find government spending shocks to have stronger effects on output consumption and wages in the earlier period we try to account for this observation within a dsge model featuring price rigidities and limited asset market participation specifically we estimate the structural parameters of the model for both periods by matching impulse responses model based counterfactual experiments suggest that most of the changes in fiscal policy transmission are accounted for by increased asset market participation and the more active monetary policy of the volcker greenspan period

the random walk hypothesis of the exchange rate abstract we show that the exchange rate can follow a random walk without assuming risk neutrality we are thus able to derive a random walk hypothesis for the exchange rate which is associated with a risk premium that may differ from zero

existence of stationary bargaining equilibria abstract this paper addresses the question of existence of stationary markov perfect equilibria in a class of dynamic games that includes many known bargaining models and models of coalition formation general sufficient conditions for existence of equilibria are currently lacking in a number of interesting environments e g models with non convexities consumption lower bounds or an evolving state variable the main result establishes existence of equilibrium under compactness and continuity conditions without the structure of convexity or strict comprehensiveness used in the extant literature the proof requires a precise selection of voting equilibria following different proposals using a generalization of fatou s lemma

challenges of existing in a market as a small low quality producer this paper explores the strategy of a small firm entering a monopolist s market thereby creating a duopoly market the small firm avoids competing with the larger incumbent firm by producing a lower quality product at a lower price the model here establishes an equilibrium under a specific set of assumptions and examines how exogenous factors affect prices qualities and profits although the strategy might allow the firm to enter and earn a profit the market conditions may make this position much less desirable to that of the large firm for several reasons in the case explored here where tastes for the product are uniformly distributed the small firm s profit is about six percent of that of the larger firm the smaller firm is more severely threatened by the entrance of a third firm furthermore even if the smaller firm can cut costs its position is not well suited for exploiting such increases in efficiencies

stochastic saddlepoint systems stabilization policy and the stock market abstract we examine the effects of introducing stochastic shocks into a linear rational expectations model with saddlepoint dynamics generated by a forward looking asset price we derive the fundamental differential equation governing the path of the asset price as a function of the sluggish variable the equation does not admit closed form solutions in general but we provide a complete qualitative characterization of the solution paths which are symmetric about equilibrium these are the relevant solutions to consider in the presence of symmetric boundary conditions we present an application of the analysis to fiscal stabilization policy where public expenditures are only adjusted when gnp moves outside a threshold around a target level the impact of such a policy on the level of the stock market is considered and it is shown how the market will anticipate such state contingent policy changes whether the expectations are stabilizing or not is shown to depend on whether the stock market is positively or negatively correlated with gnp

short term and long term interest rates in a monetary model of a small open economy abstract this paper analyzes the effects of both anticipated and unanticipated monetary and fiscal disturbances on the dynamic behavior of a monetary model of a small open economy it focuses on the adjustment of the short term and long term interest rates and the divergence of their transitional paths particularly in anticipation of these disturbances the analysis demonstrates how anticipation of a future policy change can generate perverse short run behavior the essential reason for the divergence between the short and long rates is that the latter is dominated by long term expectations while the former is primarily determined by current influences

which way is up in upgrading trajectories of change in the value chain for south african wine summary global value chain gvc analysis uses the concept of upgrading to highlight paths for developing country firms to move up the value chain usually through the lenses of four categories product process functional and inter sectoral upgrading the implicit normative expectation is that these firms move toward producing higher value added products and or take on more sophisticated functions along a value chain in this article upgrading is approached more broadly as reaching a better deal including a balance between rewards and risk the case study of south african wine shows that better product quality improved processes and some functional upgrading have co existed with processes of downgrading higher risks and limited rewards especially in traditional export markets a reflection on further conceptual development and directions for empirical research is also provided

effects of anticipated central bank actions on tobin s q share prices and exchange rate in a small open economy abstract qualitative features of response patterns of domestic share price the exchange rate and tobin s q are analyzed to compare the effects of three types of anticipated central bank policies in a small open economy exchange of domestic money with domestic shares exchange of domestic money with foreign bonds and exchange of domestic shares with foreign bonds all of equal values in domestic currency tobin s q adjusts monotonically to a new equilibrium in response to all three anticipated actions aside from the initial discontinuous changes when anticipated actions are first announced under a set of plausible assumptions on the model parameters the exchange rate and the share price are shown to respond non monotonically to the announced exchange of domestic money with foreign bonds if the announcement is made sufficiently far in advance the paper also demonstrates that the exchange of domestic shares with foreign bonds is most effective in moving the terms of trade the paper establishes conditions for nonmonotone response patterns in terms of real rate of return to the domestic shares after distinguishing overshooting response pattern from another non monotone pattern called misadjusting in this paper where the initial response of a variable to a shock is a movement away from equilibrium these response patterns are characterized in terms of two parameters and their relative sizes with respect to the implementation lags of announced actions

foreign interest rate disturbance financial flows and physical capital accumulation in a small open economy this paper focuses on the interaction of financial capital movements and accumulation of physical capital in a small open economy faced with a foreign interest disturbance it is shown that endogenizing physical capital has important implications for the exchange rate dynamics not captured by models which assume a fixed capital stock an increase in the foreign interest rate leads to decumulation of physical capital reduces the full employment level of output increases foreign debt and depreciates the currency appropriate monetary and fiscal policies could counteract the effects on domestic wealth and the reduction in the stock of capital

can geographical indications modernize indonesian and vietnamese agriculture analyzing the role of national and local governments and producers strategies summary this paper investigates the way geographical indications gis are implemented by national and local governments in indonesia and vietnam the two states are active at all stages of gi development from the selection of the products candidates for gi registration to the supervision of the gi implementation thanks to the involvement of national experts from public agencies in the establishment of the codes of practices cop they are able to push for the substitution of traditional local techniques with good practices i e mostly those recommended by research centers worldwide thus they put gis at the service of agricultural modernization when gis apply more conventionally to specific products based on traditional know how however the implementation of the cops and thus the achievement of this objective of modernization depend on the perceived interest of producers in the whole gi dynamic indeed the cases studied in indonesia and vietnam highlight the variable level of participation of local producers in the gi in the four studied cases the cops are mainly based on expert knowledge which differs from the actual practices of farmers and processors moreover gis are implemented in order to create or reinforce reputations rather than legally protecting preexisting ones for these two reasons producers motivation to invest in gi certification is weak which makes difficult the necessary collective involvement in both countries the involvement of local governments in gi construction and management modifies the situation thanks to their knowledge of local situations and stakes they are more likely than national experts to identify the most strategic supply chains at local level enable participatory approaches in gi construction and facilitate the involvement of local producers in the gi managing group but if competences have been given to local governments in the indonesian and vietnamese legal frameworks the distribution of roles between central and provincial governments in gis are not clearly enough specified the nature and the importance of local public intervention differ from one case to another finally this paper recognizes the legitimacy of state intervention in gi development at least as long as producers awareness of gis is still low however this state intervention should not only let enough space for producers in gi governance but also design a frame for arousing their interest and adhesion and for facilitating their collective involvement that may be facilitated by a concrete and clearly established decentralization of competences in national policies

stock market conditions and monetary policy in a dsge model for the u s abstract this paper investigates the interactions between stock market fluctuations and monetary policy within a dsge model for the u s economy first we design a framework in which fluctuations in households financial wealth are allowed but not necessarily required to exert an impact on current consumption this is due to the interaction in the financial markets of long time traders holding wealth accumulated over time with newcomers holding no wealth at all importantly we introduce nominal wage stickiness to induce pro cyclicality in real dividends additional nominal and real frictions are modeled to capture the pervasive macroeconomic persistence of the observables employed to estimate our model we fit our model to post wwii u s data and report three main results first the data strongly support a significant role of stock prices in affecting real activity and the business cycle second our estimates also identify a significant and counteractive response of the fed to stock price fluctuations third we derive from our model a microfounded measure of financial slack the stock price gap which we then contrast to alternative ones currently used in empirical studies to assess the properties of the latter to capture the dynamic and cyclical implications of our dsge model the behavior of our stock price gap is consistent with the episodes of stock market booms and busts occurred in the post wwii as reported by independent analyses and closely correlates with the current financial meltdown typically employed proxies of financial slack such as detrended log indexes or growth rates show limited capabilities of capturing the implications of our model consistent index of financial stress cyclical properties of the model as well as counterfactuals regarding shocks to our measure of financial slackness and monetary policy shocks are also proposed

markov perfect equilibria in intergenerational games with consistent preferences abstract this paper considers the subgame perfect equilibria in markov strategies of an abstract intergenerational game in which the generations preferences are consistent in the sense that they admit recursive aggregators given biconvergence i show that such equilibria exist and are equivalent both to the solutions of bellman s recursive optimality equations and to the optima of the first generation s utility function these results are then applied to a simple model casting new light on the neutrality of government debt and to another accommodating impure altruism finally two new examples crisply illustrate how the paper s equivalences fail when biconvergence fails

monetary and fiscal policy interactions in the post war u s abstract a new keynesian model allowing for an active monetary and passive fiscal policy ampf regime and a passive monetary and active fiscal policy pmaf regime is estimated to fit various u s samples from 1955 to 2007 the results show that data in the pre volcker periods strongly prefer an ampf regime even with a prior centered in the pmaf region the estimation however is not very informative about whether the federal reserve s reaction to inflation is greater than one in the pre volcker period because much lower values can still preserve determinacy under passive fiscal policy in addition whether a pmaf regime can generate consumption growth following a government spending increase depends on the degree of price stickiness an income tax cut can yield an unusual negative labor response if monetary policy aggressively stabilizes output growth

markov perfect equilibria in altruistic growth economies with production uncertainty this paper concerns the existence of markov perfect equilibria in altruistic growth economies previous work on deterministic models has established existence only under extremely restrictive conditions we show that the introduction of production uncertainly yields an existence theorem for aggregative infinite horizon models with very general forms of altruism journal of economic literature classification numbers

discounted stochastic games with no stationary nash equilibrium two examples we present two examples of discounted stochastic games each with a continuum of states finitely many players and actions that possess no stationary equilibria the first example has deterministic transitions an assumption undertaken in most of the early applications of dynamics games in economics and perfect information and does not possess even stationary approximate equilibria or markovian equilibria the second example satisfies in addition to stronger regularity assumptions that all transitions are absolutely continuous with respect to a fixed measure an assumption that has been widely used in more recent economic applications this assumption has been undertaken in several positive results on the existence of stationary equilibria in special cases and in particular guarantees the existence of stationary approximate equilibria

clearing up the fiscal multiplier morass bayesian prior predictive analysis of five nested dsge models suggests that model specifications and prior distributions tightly circumscribe the range of possible government spending multipliers multipliers are decomposed into wealth and substitution effects yielding uniform comparisons across models by constraining the multiplier to tight ranges model and prior selections bias results revealing less about fiscal effects in data than about the lenses through which researchers choose to interpret data when monetary policy actively targets inflation output multipliers can exceed one but investment multipliers are likely to be negative passive monetary policy produces consistently strong multipliers for output consumption and investment

the latte revolution regulation markets and consumption in the global coffee chain abstract coffee is a truly global commodity and a major foreign exchange earner in many developing countries the global coffee chain has changed dramatically as a result of deregulation new consumption patterns and evolving corporate strategies from a balanced contest between producing and consuming countries within the politics of international coffee agreements power relations shifted to the advantage of transnational corporations a relatively stable institutional environment where proportions of generated income were fairly distributed between producing and consuming countries turned into one that is more informal unstable and unequal through the lenses of global commodity chain analysis this paper examines how these transformations affect developing countries and what policy instruments are available to address the emerging imbalances

perfect equilibrium timing of a backstop technology limit pricing induced by trigger zones this paper considers strategic use of r d in the context of an exhaustible resource market where the consuming countries control r d and a cartel controls the resource it is shown that r d investments to develop a backstop technology can be used as a credible threat to induce a low price profile for the resource the price path associated with the unique perfect equilibrium exhibits limit pricing the backstop is eventually introduced but in a period before this event the cartel keeps the price sufficiently low to make delayed investment the preferred alternative for the consuming nations

bargaining without a common prior an immediate agreement theorem in sequential bargaining models without outside options each player s bargaining power is ultimately determined by which player will make an offer and when this paper analyzes a sequential bargaining model in which players may hold different beliefs about which player will make an offer and when excessive optimism about making offers in the future can cause delays in agreement the main result states that despite this if players will remain sufficiently optimistic for a sufficiently long future then in equilibrium they will agree immediately this result is also extended to other canonical models of optimism

money demand and the effects of fiscal policies this paper reexamines the choice of the scale variable in the money demand function a variety of evidence suggests that consumer spending is a better scale variable than gnp changing the money demand specification along these lines can profoundly affect the standard keynesian analysis of a tax cut copyright 1986 by ohio state university press

contract negotiation and the coase conjecture a strategic foundation for renegotiation proof contracts what does contract negotiation look like when some parties hold private information and negotiation frictions are negligible this paper analyzes this question and provides a foundation for renegotiation proof contracts in this environment the model extends the framework of the coase conjecture to situations in which the quantity or quality of the good is endogenously determined and to more general environments in which preferences are nonseparable in the traded goods as frictions become negligible all equilibria converge to a unique outcome which is separating efficient and straightforward to characterize

geographical indications public goods and sustainable development the roles of actors strategies and public policies summary the protection of geographical indications gis is being explored more and more worldwide as a tool for supporting local sustainable development focusing on wine and coffee value chains this paper will set out in what way gi protection schemes can contribute to the provision of public goods and illustrate how this contribution is being threatened by different failures that may occur within both valorization strategies and legal protection policies by examining how private collective and public interventions front these failures this paper will put forward economic arguments supporting a more comprehensive policy approach to ensure gis contribution to sustainable development

the price stability oriented monetary policy of the ecb an assessment the definition of price stability adopted by the ecb has recently been criticized in the literature particularly for being unable to fully anchor inflation expectations and creating a deflation risk in the paper empirical evidence is provided against these claims despite the unfavourable macroeconomic conditions for the euro area since 2001 monetary policy management has lead to the setting of the policy rate at levels compatible with trend inflation the long run inflation forecast in the range 1 3 and therefore without affecting negatively the inflation outlook

fiscal stimulus with learning by doing using a bayesian svar analysis we document that an increase in government purchases raises private consumption the real wage and total factor productivity tfp while reducing inflation each of these facts is hard to reconcile with both neoclassical and new keynesian models we extend a standard new keynesian model to allow for skill accumulation through past work experience following chang gomes and schorfheide 2002 an increase in government spending increases hours and induces skill accumulation and higher measured tfp and real wages in subsequent periods future marginal costs fall lowering future expected inflation and through the monetary policy rule the real interest rate consumption increases as a result

government investment and fiscal stimulus effects of government investment are studied in an estimated neoclassical growth model the analysis focuses on two dimensions that are critical for understanding government investment as a fiscal stimulus implementation delays for building public capital and expected fiscal adjustments to deficit financed spending implementation delays can produce small or even negative labor and output responses to increases in government investment in the short run anticipated fiscal adjustments matter both quantitatively and qualitatively for long run growth effects when public capital is insufficiently productive distorting financing can make government investment contractionary at longer horizons

the timing of contracting with externalities abstract this paper endogenizes the timing of bilateral contracting between one principal and multiple agents in the presence of externalities contracting simultaneously with all agents is optimal for the principal if externalities become weaker the more an agent trades if instead externalities become stronger sequential negotiations might benefit the principal as they lower the agents outside options under some linearity conditions the principal s preferences with respect to different timings of contracting are opposed to their efficiency ranking

the response of asset prices to monetary policy shocks stronger than thought standard macroeconomic theory predicts rapid responses of asset prices to monetary policy shocks small scale vector autoregressions vars however often find sluggish and insignificant impact effects using the same high frequency instrument to identify monetary policy shocks we show that a large scale dynamic factor model finds overall stronger and quicker asset price reactions compared to a benchmark var both on euro area and us data our results suggest that incorporating a sufficiently large information set is crucial to estimate monetary policy effects

nonpaternalistic intergenerational altruism abstract the paper develops a concept of equilibrium behaviour and establishes its existence in a model of nonpaternalistic intergenerational altruism each generation derives utility from its own consumption and the utilities of its successors equilibrium capital stocks are time monotone and therefore converge to a steady state finally when each generation s utility depends on that of at least two successors equilibria may be inefficient this is shown by an example where feasible programs exist providing greater consumption compared to the equilibrium path for every generation

poverty and self control we argue that poverty can perpetuate itself by undermining the capacity for self control in line with a distinguished psychological literature we consider modes of self control that involve the self imposed use of contingent punishments and rewards we study settings in which consumers with quasi hyperbolic preferences confront an otherwise standard intertemporal allocation problem with credit constraints our main result demonstrates that low initial assets can limit self control trapping people in poverty while individuals with high initial assets can accumulate indefinitely thus even temporary policies that initiate accumulation among the poor may be effective we examine implications concerning the effect of access to credit on saving the demand for commitment devices the design of financial accounts to promote accumulation and the variation of the marginal propensity to consume across income from different sources we also explore the nature of optimal self control demonstrating that it has a simple and behaviorally plausible structure that is immune to self renegotiation

dynamic allocation in an altruistic overlapping generations economy abstract this paper is concerned with the issue does there exist a social security program which can be maintained period after period to address this issue the paper considers dynamic allocation in an altruistic overlapping generations economy the altruism is intergenerational nonpaternalistic and two sided it is assumed that generations coexisting in the same period agree on a social welfare function which evaluates the consumption of various generations and play a game against those living in different periods a perfect equilibrium of this game is shown to exist and its properties are examined journal of economic literature classification numbers c72 d62 h55

strength of protection for geographical indications promotion incentives and welfare effects we address the question of how the strength of protection for geographical indications gis affects the gi industry s promotion incentives equilibrium market outcomes and the distribution of welfare geographical indication producers engage in informative advertising by associating their true quality premium relative to a substitute product with a specific label emphasizing the gi s geographic origin the extent to which the names words of the gi label can be used and or imitated by competing products which depends on the strength of gi protection determines how informative the gi promotion messages can be consumers heterogeneous preferences vis a vis the gi quality premium are modeled in a vertically differentiated framework both the gi industry and the substitute product industry are assumed to be competitive with free entry the model is calibrated and solved for alternative parameter values results show that producers of the gi and of the lower quality substitute good have divergent interests gi producers are better off with full protection whereas the substitute good s producers prefer intermediate levels of protection but they never prefer zero protection because they benefit indirectly if the gi producers incentives to promote are preserved for consumers and aggregate welfare the preferred level of protection depends on the model s parameters with an intermediate level of protection being optimal in many circumstances

vertical product differentiation with entry abstract this paper examines the non cooperative behaviour of established firms that compete in product quality and prices while foreseeing the effects of their rivalry on the decisions made by the later entrants we prove an existence and uniqueness of the equilibrium and show that the dominant firms engage in maximal product differentiation i e select the highest and lowest technologically feasible qualities later entrant however always selects an intermediate quality moreover we show that the equilibrium configuration is identical to that generated by perfect foresight equilibrium in a model of sequential entry furthermore the profits earned by each firm are ranked in the same order as the qualities implifying that the later entrant despite being the last mover ends up with higher profits and larger market share than one of the incumbents

global private regulation and value chain restructuring in indonesian smallholder coffee systems summary consumer concerns over the environmental and social conditions of coffee production have led to the proliferation of sustainability codes certification schemes and labeling claims in the sector this paper addresses how the global private regulation of ethical and environmental standards is having several implications for value chain structures and institutions in the smallholder coffee systems of indonesia global private regulation is driving structural changes in modes of farmer organization trader farmer relationships and is resulting in the increased upstream penetration of multinational trading companies into coffee producing areas across indonesia an unintended consequence of these changes in the future may be to increase transaction costs along the value chain and to exert an overall downward pressure on farm gate prices

financial variables and real activity in canada in this paper we utilize canadian and u s data to investigate the relationship between financial market variables canadian and u s and canadian output growth using a non parametric technique the financial variables examined are those that are often associated with future output growth namely stock prices interest rates interest rate spreads and monetary aggregates our results show that as the number of autocovariances that are assigned a non zero weight increases the feedback from selected canadian or u s financial variables to future canadian output growth increases in particular we find that stock prices as well as yield spreads and monetary aggregates are useful predictors of output growth this is in line with earlier parametric studies in the literature that find these variables to be good predictors of economic activity variables financieres et niveau d activite reelle au canada ce memoire utilise des donnees canadiennes et americaines pour analyser la relation entre les variables des marches financiers au canada et aux e u et la croissance du produit canadien a l aide d une technique non parametrique les variables financieres analysees sont celles qui sont generalement associees a la croissance du produit national dans l avenir i e le prix des actions les taux d interet les ecarts entre taux d interets et les agregats monetaires les resultats montrent que a proportion que le nombre des auto covariances auquel on assigne une valence zero s accroit les effets d echos variables financieres sur la croissance future du produit canadien s accroissent en particulier il appert que les prix des actions les ecarts entre taux d interets et les agregats monetaires sont des predicteurs utiles de la croissance du produit voila qui confirme les resultats d etudes parametriques

psychological expected utility theory and anticipatory feelings we extend expected utility theory to situations in which agents experience feelings of anticipation prior to the resolution of uncertainty we show how these anticipatory feelings may result in time inconsistency we provide an example from portfolio theory to illustrate the potential impact of anticipation on asset prices

do contractionary monetary policy shocks expand shadow banking summary using var models for the usa we find that a contractionary monetary policy shock has a persistent negative impact on the level of commercial bank assets but increases the assets of shadow banks and securitization activity to explain this waterbed effect we propose a standard new keynesian model featuring both commercial and shadow banks and we show that the model comes close to explaining the empirical results our findings cast doubt on the idea that monetary policy can usefully get in all the cracks of the financial sector in a uniform way

output the stock market and interest rates this paper develops a simple model of the determination of output the stock market and the term structure of interest rates the model is an extension of the is lm model and borrows from it the assumption that output is determined by aggregate demand and that the price level can only adjust over time to its equilibrium value however whereas the is lm emphasizes the interaction between the interest rate and output this model emphasizes the interaction between asset values and output asset values rather than the interest rate are the main determinants of aggregate demand and output current and anticipated output and income are in turn the main determinants of asset values it is this interaction that the model intends to capture its goal is to characterize the joint response of asset values and output to changes in the environment such as changes or announcement of changes in monetary and fiscal policy as the above brief description makes clear anticipations are central to the story the assumption made in this paper will be one of rational expectations the paper is organized as follows section i describes the model and sections ii iv characterize the behavior of the economy under the extreme but convenient assumption that prices are fixed forever sections v and vi extend the analysis to the case where prices adjust over time to their equilibrium value

what are the effects of fiscal policy shocks we propose and apply a new approach for analyzing the effects of fiscal policy using vector autoregressions specifically we use sign restrictions to identify a government revenue shock as well as a government spending shock while controlling for a generic business cycle shock and a monetary policy shock we explicitly allow for the possibility of announcement effects i e that a current fiscal policy shock changes fiscal policy variables in the future but not at present we construct the impulse responses to three linear combinations of these fiscal shocks corresponding to the three scenarios of deficit spending deficit financed tax cuts and a balanced budget spending expansion we apply the method to us quarterly data from 1955 to 2000 we find that deficit financed tax cuts work best among these three scenarios to improve gdp with a maximal present value multiplier of five dollars of total additional gdp per each dollar of the total cut in government revenue 5 years after the shock copyright 2009 john wiley sons ltd

inducing efficiency externalities missing markets and the coase theorem the capacity of side payments to induce an efficient outcome as predicted by the coase theorem is studied side payments are formally introduced in a bimatrix game involving externalities and the resulting equilibrium is called an induced equilibrium when induced equilibria exist they weakly pareto dominate a nash equilibrium of the original game without side payments when because of externalities one market is missing an induced equilibrium always exists is uniquely valued and is pareto efficient when more than one market is missing induced equilibria may not exist may be pareto inefficient and may be pareto ranked copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

on the economics of labels how their introduction affects the functioning of markets and the welfare of all participants are labels good or bad for consumers and firms the answer may seem straightforward since labels improve information yet economic theory reveals situations where their introduction reduces the welfare of at least some market participants this essay reviews the theoretical literature on labels in order to identify and explain the main reasons that may cause labeling to produce undesirable side effects in contrast to earlier reviews that either concentrate on narrow topics or treat the subject in a more or less informal way we bring together the main results from all the relevant topics by presenting and discussing the assumptions and model building techniques that underpin them the advantage of this approach is that it identifies the origin of the differences between results thus allowing the synthesis of results that sometimes appear even to be contradictory we focus on quality labels and examine the impact of labeling on market structure the side effects of costly certification issues related to the label s trustworthiness the rationale for mandatory vs voluntary labeling the level at which the label s standard is set according to the agency that selects it the political economy of labels that is pro or anti label lobbying lobbying to affect the label s standard and lobbying in favor or against the label s mandatory imposition these topics cover a wide range of applications including genetically modified organism gmos organic produce geographic indicators controlled origin eco labels etc we conclude by identifying topics that require further research

macroeconomic and stock market interactions with endogenous aggregate sentiment dynamics abstract this paper studies the implications of heterogeneous capital gain expectations on output and asset prices we consider a disequilibrium macroeconomic model where agents expectations on future capital gains affect aggregate demand agents beliefs take two forms fundamentalist and chartist and the relative weight of the two types of agents is endogenously determined we show that there are two sources of instability arising from the interaction of the financial with the real part of the economy and from the heterogeneous opinion dynamics two main conclusions are derived on the one hand perhaps surprisingly the non linearity embedded in the opinion dynamics far from the steady state can play a stabilizing role by preventing the economy from moving towards an explosive path on the other hand however real financial interactions and sentiment dynamics do amplify exogenous shocks and tend to generate persistent fluctuations and the associated welfare losses we consider alternative policies to mitigate these effects

coalition formation with binding agreements we study coalition formation in real time a situation in which coalition formation is intertwined with the ongoing receipt of pay offs agreements are assumed to be permanently binding they can only be altered with the full consent of existing signatories for characteristic function games we prove that equilibrium processes whether or not these are history dependent must converge to efficient absorbing states for three player games with externalities each player has enough veto power that a general efficiency result can be established however there exist four player games in which all markov equilibria are inefficient from every initial condition despite the ability to write permanently binding agreements copyright 2007 wiley blackwell

fiscal policy shocks and stock prices in the united states this paper uses a range of structural vars to show that the response of us stock prices to fiscal shocks changed in 1980 over the period 1955 1980 an expansionary spending or revenue shock was associated with modestly higher stock prices after 1980 along with a decline in the fiscal multiplier the response of stock prices to the same shock became negative and larger in magnitude we use an estimated dsge model to show that this change is consistent with a switch from an economy characterised by active fiscal policy and passive monetary policy to one where fiscal policy was passive and the central bank acted aggressively in response to inflationary shocks

real time forecasting with a mixed frequency var this article develops a vector autoregression var for time series which are observed at mixed frequencies quarterly and monthly the model is cast in state space form and estimated with bayesian methods under a minnesota style prior we show how to evaluate the marginal data density to implement a data driven hyperparameter selection using a real time dataset we evaluate forecasts from the mixed frequency var and compare them to standard quarterly frequency var and to forecasts from midas regressions we document the extent to which information that becomes available within the quarter improves the forecasts in real time this article has online supplementary materials

monetary policy uncertainty and the market reaction to macroeconomic news abstract we examine whether monetary policy uncertainty influences the reaction of the equity treasury security foreign exchange and crude oil markets as well as medium term interest rates to u s macroeconomic announcements using intraday futures data we show that in the presence of higher policy uncertainty the response to macroeconomic news weakens in the stock and crude oil markets and strengthens in the treasury interest rate and foreign exchange markets in times of elevated monetary policy uncertainty macroeconomic announcements impact the financial and crude oil markets to a large extent through expectations of future monetary policy

fiscal policy and the great recession in the euro area how much did fiscal policy contribute to euro area real gdp growth during the great recession we estimate that discretionary fiscal measures have increased annualized quarterly real gdp growth during the crisis by up to 1 6 percentage points we obtain our result by using an extended version of the european central bank s new area wide model with a rich specification of the fiscal sector a detailed modeling of the fiscal sector and the incorporation of as many as eight fiscal time series appear pivotal for our result

endogenous games and mechanisms side payments among players we characterize the outcomes of games when players may make binding offers of strategy contingent side payments before the game is played this does not always lead to efficient outcomes despite complete information and costless contracting the characterizations are illustrated in a series of examples including voluntary contribution public good games cournot and bertrand oligopoly principal agent problems and commons games among others

sequential nonzero sum blotto allocating defensive resources prior to attack abstract the strategic allocation of resources across multiple fronts has long been studied in the context of blotto games in which two players simultaneously select their allocations however many allocation problems are sequential for example a state trying to defend against a terrorist attack generally allocates some or all of its resources before the attacker decides where to strike this paper studies the allocation problem confronting a defender who must decide how to distribute limited resources across multiple sites before an attacker chooses where to strike unlike many blotto games which only have very complicated mixed strategy equilibria the sequential nonzero sum blotto game always has a very simple pure strategy subgame perfect equilibrium further the defender always plays the same pure strategy in any equilibrium and the attacker s equilibrium response is generically unique and entails no mixing the defender minmaxes the attacker in equilibrium even though the game is nonzero sum and the attacker strikes the site among its best replies that minimizes the defender s expected losses

geographical indications and the competitive provision of quality in agricultural markets the economics of geographical indications gis is assessed within a vertical product differentiation framework that is consistent with the competitive structure of agriculture it is assumed that certification costs are needed for gis to serve as collective credible quality certification devices and production of high quality product is endogenously determined we find that gis can support a competitive provision of quality and lead to clear welfare gains although they fall short of delivering the constrained first best the main beneficiaries are consumers producers may also accrue some benefit if production of the high quality products draws on scarce factors that they own copyright 2008 oxford university press

in the market but not of it fair trade coffee and forest stewardship council certification as market based social change summary this paper discusses two well known market based social change initiatives fair trade coffee and forest stewardship council certification which harness market forces to pursue social and environmental objectives a serious challenge for both is to operate in the conventional market without undermining their original objectives a global commodity chain analysis approach is combined with insights from economic sociology embeddedness theory to explore the social cultural and organizational factors shaping the initiatives governance structures both initiatives are seen to move along opposite organizational trajectories but face similar pressures from conventional market logics practices and dominant actors a preliminary framework is proposed for comparative assessment focusing on distribution of benefits how conventional market institutions may be questioned and how internal governance manages diverse stakeholder interests and influence

confronting the coffee crisis can fair trade organic and specialty coffees reduce small scale farmer vulnerability in northern nicaragua summary this paper links changing global coffee markets to opportunities and vulnerabilities for sustaining small scale farmer livelihoods in northern nicaragua changing governance structures corporate concentration oversupply interchangeable commodity grade beans and low farm gate prices characterize the crisis in conventional coffee markets in contrast certified fair trade and organic are two alternative forms of specialty coffee trade and production that may offer opportunities for small scale producers a research team surveyed 228 farmers to measure the impact of sales on organic and fair trade markets the results suggest that participation in organic and fair trade networks reduces farmers livelihood vulnerability 2004 elsevier ltd all rights reserved

collective marketing arrangements for geographically differentiated agricultural products welfare impacts and policy implications this paper examines the incentive of atomistic agricultural producers within a specific geographical region to differentiate and collectively market products we develop a model that allows us to analyze the market and welfare effects of the main types of real world producer organizations using it to derive economic insights regarding the circumstances under which these organizations will evolve and describing implications of the results obtained in the context of an ongoing debate between the european union and united states as the anticipated fixed costs of development and marketing increase and the anticipated size of the market falls it becomes essential to increase the ability of the producer organization to control supply in order to ensure the coverage of fixed costs whenever a collective organization allows a market with a new product to exist that otherwise would not have existed there is an increase in societal welfare counterintuitively stronger property right protection for producer organizations may be welfare enhancing even after a differentiated product has been developed the reason for this somewhat paradoxical result is that legislation aimed at curtailing the market power of producer organizations may induce large technological distortions

sufficient information in structural vars abstract necessary and sufficient conditions under which a var contains sufficient information to estimate the structural shocks are derived on the basis of this theoretical result we propose two simple tests to detect informational deficiency and a procedure to amend a deficient var a simulation based on a dsge model with fiscal foresight suggests that our method correctly identifies and fixes the informational problem in an empirical application we show that a bivariate var including unemployment and labor productivity is informationally deficient once the relevant information is included into the model technology shocks appear to be contractionary

backward and forward solutions for economies with rational expectations in models where anticipations of future endogenous variables influence current behavior there exists an infinity of solutions under the assumption of rational expectations this problem has been dealt with in the study of macro economic models by the implicit or explicit use of one of three additional requirements optimality consistency with alleged economic behavior or conformity of the endogenous variables to an imposed stationarity condition these requirements have coincided in existing models leading to the choice of a unique solution a forward solution the purpose of this paper is to review the problem characterize the solutions and examine whether these requirements are acceptable section i presents a simple model and derives the set of solutions the model makes no claim to generality but has the major advantage that the issues are easily understood in this simple case section ii discusses the requirement of consistency with economic behavior section iii discusses the requirement of stationarity and section iv provides some conclusions