interest rates inflation and the aggregate consumption function this paper reports on an empirical study of the effects of interest rates and inflation on aggregate consumption in the united states empirical evidence based on quarterly u s data from the postwar period is first presented in support of the hypothesis that the real rate of interest varies inversely with the rate of inflation at least in the short run regression estimates of an aggregate consumption function for the united states also based on quarterly data from the postwar period are then presented these estimates indicate that the propensity to consume varies inversely with interest rates and directly with the rate of inflation

water pricing policies public decision making and farmers response implications for water policy abstract the problems caused by water scarcity demand important changes in the criteria and objectives of water policies the agricultural sector in spain consumes up to 80 of all available hydric resources and the need to increase the efficiency of current uses of water in the agricultural sector is at the core of the country s national water policy one alternative would be to resort to water pricing policies with the aim of providing incentives to save water consumption although it would inflict a certain degree of income losses to the farmers and raise the revenue collected by the water authorities the objective of this research is to analyze the effect caused by the application of different water pricing policies on water demand farmers income and the revenue collected by the government agency to undertake this analysis a dynamic mathematical programming model has been built that simulates farmers behavior and their response to different water pricing scenarios empirical application of the model has been carried out in several irrigation districts in spain covering varied farm regions and river basins results show that the effects of alternative pricing policies for irrigation water are strongly dependent on regional structural and institutional conditions and that changing policies produce distinct consequences within the same region and water district thus equivalent water charges would create widespread effects on water savings farm income and collected government revenue across regions and districts

imported inputs real wage rigidity and devaluation in the small open economy abstract this paper examines the effects of devaluation upon employment in a tradables nontradables model of the small open economy where there is a rigid real wage and imports consist of both intermediate inputs and final goods it is shown that in general economies importing intermediates are not more prone to contraction than those importing only consumption goods a new reason is also uncovered as to why the existence of an initial trade balance deficit increases the likelihood that devaluation will be contractionary

short run effects of devaluation a disaggregated analysis of latin american exports conventional models examining the relationship between devaluation and exports are based on exchange rate pass through these suggest that after devaluation exports become cheaper relative to other exports and the growing export market is posited to stimulate the economy if devaluation has a differential effect across commodities countries can expect different results depending on their portfolios therefore any accurate analysis of the effects of devaluation must take into account the components of a country s export portfolio the pooled time series estimation for latin american countries reveals a negative short run relationship between real devaluation and export growth for most exports at a disaggregated level the results of this study are far reaching as they suggest that more targeted policies are better suited to stimulate exports

water and energy price impacts on residential water demand in copenhagen while water price effects on residential water demand have been studied for several decades the impact of energy prices does not seem to have received much attention in this paper a residential water demand function derived from a model of household production of final consumption goods taking water energy and an aggregate of other goods as inputs is estimated on pooled time series data we find negative energy cross price elasticities around 0 2 and water price elasticities in the order of 0 1 or smaller

employment policies wage formation and trade union behavior in a small open economy a model of trade union determined wages is developed which provides an explanation of underemployment based on optimizing behavior it is shown that fiscal policy will in general affect employment under perfect foresight and immediate wage flexibility future consequences of short run stabilization policies are discussed ratchet effects with respect to government expenditure and game theoretic interdependence between government and trade union behavior are emphasized if the trade union takes short run policy measures in order to increase employment as an indication of an employment stabilization rule the future behavior of the trade union changes and the result may be a decrease in long run employment

privately operated water utilities municipal price negotiation and estimation of residential water demand the case of france this paper addresses the issue of price negotiation between a municipality and a private water utility operator and its implications for residential water demand estimation we use appropriate econometric procedures to estimate a water demand equation on a panel of french municipalities we find evidence that negotiated water price depends on municipality s characteristics causing endogeneity of price in the demand equation the impact of average household income housing and system features such as metering is investigated both on municipal consumption and price estimated price and income elasticities are significant and close to previous household level studies

does devaluation make sense in the least developed countries the exchange rate is a controversial instrument of economic policy especially in developing countries even in cases where currency overvaluation is clearly a major cause of an acute balance of payments crisis the governments of developing countries are frequently reluctant to devalue apparently for three main reasons a they doubt that export production import demand and domestic expenditures are very responsive to a change in the exchange rate elasticity pessimism b they fear the potentially disruptive side effects of devaluation on inflation employment and output growth as well as on real wages and income distribution and c they want to avoid political risk the focus of the present study is on the effects of devaluation in the deficit prone least developed countries where a large part of the population barely survives on a subsistence wage to be wholly successful devaluation generally requires a reduction of real wages to encourage the expansion of exports and of import substitution without a contraction of national income hence our lead question is devaluation an appropriate method of economic stabilization in the least developed countries where a decrease of real wages or earnings could result in severe economic hardship or even starvation more specifically the aim of our study is twofold 1 to investigate the short to medium term effects of devaluation on macroeconomic performance in the least developed countries subject to the condition that real wages or earnings

examining the differences in self and publicly supplied firms water demands this research examines the fac tors influencing the decision made by manufac turing firms regarding their source of water sup ply and tests whether self supplied firms exhibit demands for intake water different from firms supplied by a public utility the first stage of the estimation model involves a probit analysis of the supply source choice and the second stage employs a regression model with endogenous switching to estimate the demand equations for the two types offirms results indicate that eco nomic factors such as annual connection fees influence the supply source decision jel q25

demand side management policies for residential water use who bears the conservation burden to assess the potential for urban demand side management dsm policies as a water resource management tool we analyze the extent to which price and alternative policy instruments such as use and quantity restrictions and subsidies for water efficient technologies reduce residential demand and their distributional implications by type of household using detailed household level panel data for two california communities the results suggest that the ultimate effects of dsm policies in terms of the reduction in aggregate demand and distribution of water savings among household classes depend both on the policy instrument selected and the composition of aggregate demand

estimation of substitution possibilities between water and other production inputs the traditional approach to measuring the demand for water by industries relies upon fixed water use coefficients water supply planners base decisions about system expansion partly upon fixed coefficients applied to projected levels of industrial growth among the restrictive assumptions implied by this approach is that producers are generally unresponsive to the relative price of water compared with other factors earlier studies focused on industry by industry assessments of present and potential water use technologies and the possibilities for substituting other productive inputs for water most of these studies are economic engineering in form thompson and young and russell are analyses of the steam electric generating industry and the petroleum refining and petrochemical industry respectively because they used linear programming techniques their results must be interpreted cautiously the flexible functional forms which have become

price elasticity of groundwater demand attenuation and amplification bias due to incomplete information measurement errors in both human and natural components of agricultural and environmental systems can be as much a source of estimation bias as omitted variables selfselection simultaneity and reverse causality nonetheless partly because of difficulties in obtaining data there is less literature on measurement error problems than on other endogeneity problems this article examines estimation bias in the price elasticity of groundwater consumption for irrigated agriculture on the intensive margin the price at issue is for the energy used in pumping and pressurizing water for delivery lacking the precise unit irrigation cost previous studies imputed irrigation costs we first consider groundwater irrigation costs and identify factors that can cause measurement errors in the process of imputation under incomplete information about the determinants of irrigation costs we follow this by systematically analyzing the potential bias caused by measurement errors using econometric theory along with monte carlo simulations where appropriate we then quantify actual measurement errors making use of a unique dataset in which energy and groundwater consumption data are matched for individual observations finally we compare regression results using exact irrigation costs as opposed to imputed ones we find evidence of substantial measurement errors resulting in attenuation and amplification bias in the price elasticity of irrigation water consumption on the intensive margin our results indicate that measurement errors in irrigation costs can lead to misleading policy implications related to water and energy pricing as a tool to conserve water we also show that estimating the energy price elasticity of groundwater use is not as straightforward as previously thought

determinants of international trade flows this paper models and estimates import demand and demand for export functions for 19 industrial countries although primary emphasis is placed on the period of generalized floating exchange rates 1972 through 1980 estimates are also provided for the fixed exchange rate years 1957 1970 thus making possible a comparison between the two eras aside from the conventional income and price variables the paper assesses the effect of variations in the exchange rate and in the expected exchange rate on real trade flows additionally it estimates an unrestricted lag structure of the effect of price and exchange rate variations on imports

are devaluations contractionary the case of turkey this article studies the output effects of currency devaluation in turkey using annual data from 1970 to 2004 an empirical model that incorporates monetary fiscal and other external variables in addition to exchange rates is developed before estimating the model time series properties of the data are diagnosed two forms of the model one with real exchange rate and the other with nominal exchange rate and relative price level foreign to domestic price ratio are estimated the results suggest that devaluation is contractionary in the short run expansionary in the medium run and neutral in the long run and the effects emanate from nominal devaluation and not from the changes in relative price level

oil prices inflation and interest rates in a structural cointegrated var model for the g 7 countries sharp increases in the price of oil are generally seen as a major contributor to business cycle asymmetries moreover the very recent highs registered in the world oil market are causing concern about possible slowdowns in the economic performance of the most developed countries in this paper a structural cointegrated var model has been considered for the g 7 countries in order to study the direct effects of oil price shocks on output and prices and the reaction of monetary variables to external shocks our results can be summarized as follows i a stationary money demand as suggested by the classic theory of money can be identified for most countries ii according to the estimated coefficients of the structural part of the model for all countries except japan and u k the null hypothesis of an influence of oil prices on the inflation rate cannot be rejected inflation rate shocks are transmitted to the real economy by increasing interest rates iii impulse response analysis suggests for most countries the existence of an instantaneous temporary effect of oil price innovations on prices iv impulse response functions indicate different monetary policy reactions to inflationary and growth shocks v the simulation exercises directed to estimate the total impact of the 1990 oil price shock indicate that for some countries u s a significant part of the effects of the oil price shock is due to the monetary policy reaction function for other countries canada france and italy however the total impact is offset at least in part by an easing of monetary conditions

the argentine stabilization plan of december 20th abstract in this paper an analytical model is developed to incorporate the essential characteristics of the stabilization plan implemented in argentina in january 1979 the model is based upon a set of simplifying assumptions that only approximate the complexity of the real world it is assumed that the expectations of inflation and the degree of excess demand or supply in the non traded goods market are the main intermediate determinants of the rate of inflation in that market the rate of change of prices of traded goods being determined by the external inflation together with the rate of devaluation treating thus the external rate of inflation as exogenous the only instrument available for influencing the rate of inflation in the long run is the rate of devaluation since the model assumes a fixed exchange rate regime the money supply is endogenous and hence unsuitable as an instrument of economic policy

modeling commercial demand for water exploring alternative prices instrumental variables and heterogeneity in this paper we introduce a previously unused instrumental variable to estimate the elasticity of commercial water demand for firms served by a large municipal utility we then present evidence that firms are more responsive to one period lagged average price than marginal price finally we find notable differences in elasticity among different categories of businesses the findings in this paper are particularly important as water utilities consider how to maintain revenue while coping with limited water supplies and increasing commercial demand

competing wage claims cost inflation and capacity utilization this paper develops a theory of competing wage claims and cost inflation and attempts to integrate this theory into the core of modern macroeconomic analysis specifically the paper proposes an e

endogenous unions and governments a game theoretic approach abstract this paper applies some elements of game theory to the determination of government spending and wages within a simple macroeconomic framework where these variables are ordinarily treated as exogenous in the short run by showing how nominal wages respond to increased government spending and taxes and vice versa the paper attempts to explain the simultaneous tendency of many western economies toward persistent inflation and expansion of the public sector in particular the paper stresses the macroeconomic consequences of the interaction between endogenous utility maximizing governments and labour unions and shows how the response of the economy to changes in government and union behaviour depends on the preferences of both parties with respect to inflation employment real disposable wages and government spending as well as on their view of the relative magnitude of the employment and price effects of such changes

real exchange rates and inflation in exchange rate based stabilizations an empirical examination abstract numerous explanations have been advanced for why real exchange rates typically appreciate after the nominal exchange rate is stabilized but few of them have been directly tested this paper uses an error correction model of mexican inflation to decompose the real appreciation of the peso during 1988 1994 into that part attributable to the peso s initial undervaluation that part explained by growing domestic demand and that part attributable to backward looking inflation the results indicate that the effects of backward looking inflation were highly transitory but that both the expansion of domestic demand and the initial undervaluation of the peso were important in boosting domestic prices and hence appreciating the real exchange rate

trades unions seniority and unemployment the paper offers a general equilibrium model of an economy containing powerful trades unions which set the wage levels to which competitive firms adjust which have some perception of the bearing of their policies on the economy as a whole and within which seniority and majority rule prevail it is shown that increases in the dole or in the size of the workforce increase the level of employment and depress the net wage and that technical improvements have the opposite effect several externalities are identified these make possible less conventional outcomes for instance an increase in the dole sometimes may be unambiguously welfare improving

a discrete continuous choice approach to residential water demand under block rate pricing reply waldman is quite correct in noting that the microeconomic theory of block rate pricing in hewitt and hanemann hh 1995 is given for the general case of a k block rate structure whereas the econometric theory is largely confined to the case of exactly two blocks the extension in waldman to the more general case of k blocks is correct although the extension itself could be even more general if it addressed the nonnegativity of demand as is demonstrated below that no apparent attention was paid to the nonnegativity of demand in hh may be attributed to the fact that the need to do so was negated by a fortuitous assumption in the earlier work although that assumption that the errors are multiplicative and lognormally distributed was only maintained and not tested in hh i now estimate two models with the more common assumptions of linear demand and additive and normally distributed errors both with and without a modification for

on the relationship between the value of the mark and german production this study employs johansen s cointegration technique to determine the long run relationship between exchange value of the dm and german production it is shown that depreciation of the dm has a long run expansionary impact on german production this conclusion is based on a new method of selecting the order of var and the appropriate cointegrating vector simultaneously

output effects of devaluation evidence from asia we study the effect of devaluation on output in six developing countries of asia in an empirical model that includes monetary fiscal and external variables we examine the impact of devaluation as the effect of real exchange depreciation and alternatively as the effect of nominal devaluation and changes in the foreign to domestic price ratio we find that with few exceptions a devaluation fails to make any effect on output over any length of time short run intermediate run or long run whatever effect on output we are able to uncover comes from the relative price level the ratio of foreign to domestic prices but not from nominal devaluation

environmental regulation and sustainable competitiveness evaluating the role of firm level green investments in the context of the porter hypothesis we investigate the impact of environmental regulation on firm performance and investment behavior exploiting the case of a german water withdrawal regulation that is managed on the state level we analyze firms reactions to an increase in the water tax using a regression adjusted difference in differences approach we analyze the individual firm s response to a change in environmental regulation distinguishing between add on and integrated environmental investments this allows us to include innovation diffusion into our analysis which is likely to be of importance for increasing resource efficiency our results show that the regulation in question shows no sign of affecting firms overall competitiveness the results imply that the predicted negative impact of the regulation on firms economic performance that was brought up before the introduction of the tax does not seem to weigh heavily in this case nevertheless when placed into a sustainable competitiveness context the regulation considered does not qualify as an appropriate policy tool for fostering green growth

sticky inflation and the real effects of exchange rate based stabilization abstract this paper tests the empirical validity of the forward looking pricing hypothesis using data from four exchange rate based stabilization erbs episodes it finds that backward looking components of inflation play an important role in inflation dynamics in some cases exceeding the importance of forward looking components the paper then shows that the presence of empirically relevant degrees of inflation stickiness increases the size of the real exchange rate appreciation predicted by an imperfect credibility model of erbs the 12 real appreciation predicted by the sticky inflation model is a 70 improvement over the predictions of the fully forward looking pricing setup but as in other erbs models still falls short of matching the real appreciations observed in practice

expectations and adjustment an alternative approach with an application to overlapping wage contracts in many contexts individual agents behavior depends on their expectations of other agents expectations about which there is no available source of objective information standard rational expectations models have avoided not resolved this problem this paper models an alternative approach involving asymmetric adjustment in response to exogenous shocks this is applied to a model of overlapping wage contracts and causes wages to fall slower in response to deflationary shocks than they rise in response to expansionary shocks this contrasts with standard overlapping contract models incorporating rational expectations in which adjustment is symmetric copyright 1988 by the london school of economics and political science

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

contractionary devaluation substitution in production and consumption and the role of the labor market using a demand determined model involving both consumption goods imports and home goods with imported inputs this paper shows that the condition under which devaluation reduces demand for home goods and thus aggregate output if real exports are fixed basically depends on the sign of one plus the weighted sum of the price elasticities of demand for imported consumer goods and of derived demand for imported inputs this model includes cooper s and krugman taylor s models as special cases and shows that substitution substantially lessens the possibility of contactionary devaluation however these results are dependent on the assumptions regarding the labor market and monetary policy if wages are indexed or are determined in a labor market with labor supply dependent on real wages then output and the balance of payments again become inversely related in these circumstances devaluation alone cannot cure a balance of payments deficit a contraction of aggregate demand is required relative to an unsustainable initial level devaluation should be judged in terms of its longer run impact rather than whether it is contractionary also increased borrowing to avoid a contractionary devaluation is neither relevant nor feasible in many cases

do devaluations improve the trade balance the evidence revisited do devaluations improve the trade balance the evidence revisited this paper reexamines the effectiveness of devaluation in trade balance adjustment the question is addressed in a framework which improves the previous empirical literature in several respects the evidence indicates that devaluations have been a successful tool in inducing trade balance adjustment in particular nominal devaluations are found to result in significant real devaluations that last for at least three years and the real devaluation induces significant trade flows that are distributed over a two to three year period the evidence comes from two different samples 1953 73 and 1975 84 involving twenty seven countries and sixty devaluation episodes 1 introduction do devaluations affect real magnitudes in particular the trade balance a devaluation may effect the trade balance through two channels devaluation of the real exchange rate and a direct effect on domestic absorption the traditional approach stresses the first channel a nominal devaluation is assumed to change the real exchange rate a relative price and thus improve competitiveness in turn if relative prices the terms of trade in a two country two good model affect the trade balance devaluation will be successful in the sense of improving the trade balance ceteris paribus the absorption effect becomes the sole or most important channel in the monetary approach in a world in which all goods and assets are perfect substitutes prices are exogenously given for the small country and wages and prices are flexible in both nominal and real terms a devaluation increases the price level by the same percentage the increase in the price level reduces real balances and thus domestic absorption dornbusch 1973 883 has argued that if such a real balance effect is not present then it might stand to reason that the effects of devaluation are negligible not that there must be other powerful avenues through which it exerts its effects emphasis added the controversy over the effects of devaluation on the trade balance arises because according to frenkel and johnson 1976 42 the monetary approach rejects the emphasis given to the role of relative prices in the analysis of devaluation global monetarists argue that neither of the links in the chain postulated by the traditional approach is likely to hold in practice see laffer 1977 the major disagreement centers on the question of the effectiveness of nominal devaluation to affect the real exchange rate and the importance of the latter in influencing trade flows theoretical arguments have not settled the issue the question is as strongly debated today as it was forty years ago see for example branson 1983 katseli 1983 kaldor 1983 nashashibi 1983 and mckinnon 1981 nor does it seem that the available empirical evidence leads to a consistent answer the best known studies cooper 1971 laffer 1977 salant 1977 miles 1979 gylfason and risager 1984 reach contradictory conclusions 1 cooper and gylfason and risager find that devaluations improve the trade balance or current account while laffer and miles conclude exactly the opposite salant finds that devaluations improve the trade balance but not as often as the overall balance of payments in the face of such diverse findings frenkel 1984 suggests that a reexamination of the issue would be useful indeed himarios 1985 shows that a close examination of miles s widely quoted study reveals serious deficiencies that once addressed lead to opposite results this paper provides new evidence concerning the effectiveness of devaluation in trade balance adjustment the approach differs from past studies in several respects it differs from cooper s laffer s and salant s studies in that it accounts for the effects of other variables that affect the trade balance

applied fairness theory and rationing policy in the past few years several economists notably duncan foley hal varian e a pazner and david schmeidler have produced a novel analytical theory of fairness in the distribution of resources in contradistinction to the efficiency of their allocation this work is primarily philosophical in orientation being concerned primarily with the logical underpinnings of an analysis of fair division rather than with its application here i offer a nontechnical introduction to the subject providing a few new results about the construction but this is only a preliminary to an attempt to show how fairness theory can be used to study policy employing the issue of rationing of commodities as an illustration persons who design public policy are typically at least as concerned with issues of equity as with allocative efficiency the economist s influence is therefore impeded by his inability to deal with issues of fairness in applied problems fairness theory perhaps for the first time provides an analytic instrument for the purpose inevitably it must of course rest upon value judgments as well as observable relationships but what is remarkable about fairness theory is that both the behavioral relationships and the value judgments on which it is based are essentially those used in the standard welfare analysis of resource allocation in both the basic data are consumer preferences and production relationships and in both the basic value judgment is that the desires of the affected individuals rather than those of some superior arbitrator must count our illustrative policy issue the rationing of commodities has reemerged with the fuel problem here i will examine the choice between two points rationing arrangements under which consumers are each issued a fixed number of ration points redeemable at a fixed points price pg per gallon of gasoline or at another coupon price p h per gallon of heating oil etc the consumer is thereby subjected to a second budget constraint expressed in ration points rather than money economists have suggested that the efficiency of such a rationing system can be improved if it is accompanied by a white market in which consumers with unwanted ration coupons can sell them to others at a market clearing money price i will show that while there is a valid efficiency argument favoring the white market arrangement over one in which the sale of ration coupons is prohibited fairness analysis yields a presumption that goes the other way this may provide some justification for the apparently widespread suspicion of the fairness of white markets among noneconomists

the rmb debate empirical analysis on the effects of exchange rate shocks in china and japan for a better understanding of the ongoing debates on the rmb this paper investigates the effects of exchange rate shocks on output and the current account for china and japan we use structural vector auto regression models and find that yen appreciation reduces current account surpluses while having no strong effect on output in japan rmb appreciation on the other hand has an insignificant effect on the current account although it tends to reduce output in china for china dollar pricing with vertical trade integration seems responsible for the insignificant effect on the current account

water reuse in brazilian manufacturing firms this article examines the factors influencing manufacturing firms water reuse decision and analyses whether the structure of intake water demand differs between firms that adopt water reuse practices and those which do not the first stage of the estimation model involves a probit analysis of the water reuse decision and the second stage employs an endogenous switching regression to estimate the intake water demand equations results suggest that water charges may act as an effective mechanism in inducing firms to undertake water reuse investments and in reducing intake water demand estimates of the water demand price elasticities indicate that plants that reuse water are more sensitive to water price increases than plants without access to reuse technologies

evaluating the welfare effects of reforming municipal water prices abstract despite the strong criticisms by economists of water utility pricing practices and the presence of well articulated theoretical models of efficient pricing alternatives few empirical studies have documented the magnitude of the efficiency gains from altering water prices the structures of water supply costs and water demands are estimated using data from vancouver canada a simulation program uses these estimated relationships to compute the impact upon a representative water utility s output and deficit and upon aggregate consumer surplus of a move from its current practice to efficient prices simulation results show that a move to seasonally differentiated pricing with an annual charge calculated to recoup the resulting deficit raises aggregate surplus by approximately 4 this result contrasts with recent water pricing studies that found welfare improvements of approximately 1

estimating the structure of industrial water demands the case of canadian manufacturing this study considers water use by canadian manufacturing firms the estimation of water demands is based on a detailed cross sectional survey of establishment level observations on water prices quantities and expenditures industrial water use is modeled as having four components intake treatment prior to use recirculation and discharge average values for the estimated own price elasticity for water intake range from 0 1534 to 0 5885 water recirculation is found to be a substitute for both water intake and water discharge this confirms that expanding the use of economic incentives e g effluent fees may be effective in encouraging firms to reduce their water use while increasing in plant recirculation

efficiency and equity in natural resources pricing a proposal for urban water distribution service this paper focuses on the design of optimal prices for urban water distribution service in this context pricing should be aimed at achieving efficiency equity financial aspects and or public acceptability and transparency the proposed tariffs are based on the theoretical frameworks suggested by ramsey 1927 and feldstein 1972 as a prior step estimations of urban water demands and water costs are carried out for the spanish municipality of seville finally an empirical comparison in welfare terms is conducted between the proposed tariffs and those applicable in the year 2000

devaluation profitability and investment the role of devaluation in stimulating profitability investment and economic activity is studied in a model characterized by forward looking investment behavior and wage contracts which provide an element of short term nominal wage rigidity the analysis shows that in the case where the real wage is restored through a post devaluation negotiation devaluation leads to a cycle in the optimal investment rate and possibly also in the behavior of output the trade balance effect is uncertain in the short run because devaluation increases both saving and investment in the long run all real variables are unaffected by devaluation

an econometric estimation of industrial water demand in france this study investigates the structure of industrial water demand byestimating the derived demand for water on a sample of industrialestablishments located in the south west of france productiontechnologies are represented by short term variable cost functions andapproximated by a translog form industrial water use is modeled ashaving three components the quantity of water bought to a waterutility the quantity of autonomous water and the quantity of watertreated prior to use we include in this framework water effluents which are considered as a by product of the production process emittedby firms each of the three water components is treated as a separateinput and all are estimated as a system of simultaneous equations themodel is estimated on a sample of 51 industrial plants in the girondedistrict observed from 1994 to 1996 using seemingly unrelated regression sur and feasible generalized least squares fgls results ofestimations show that industrial firms are sensitive to water priceinputs network water elasticity is estimated at 0 29 it variesfrom 0 10 to 0 79 according to the type of industryconsidered autonomous water price elasticity is not significant elasticity for treated water is evaluated at 1 42 at themean sample and varies from 0 90 to 2 21 according to theindustry considered

currency devaluation aggregate output and the long run an empirical study abstract this paper estimates the effect of currency devaluation on the aggregate output level in six asian countries using a unique methodology developed by wickens et al 1988 economic journal 189 205 the estimated results suggest that devaluation in general is neutral in the long run in some cases it even can have a contractionary effect

does devaluation improve the current account this paper incorporates the link between devaluation foreign interest payments and the current acccount into a fairly general macroeconomic model in which exchange rate changes influence aggregate demand through exports imports and expenditures as well as aggregate supply via the cost of imported factors of production on the basis of avaliable statistical estimates of the behavioral and structural parameters of the model an attempt is mafe to assess the empirical importance of this link among others in a group of highly indebted industrial and developing countries by and large the empirical results indicate that high foreign debt and interest payments tend to reduce the short to medium run effect of devaluation on national income expecially in the ldcs but make little difference to its generally positive effect on the current account

wage interdependence through decentralized bargaining abstract the idea that sector specific unions are influenced by the wages obtained by other unions has mainly been used to support the empirical observation that wages are highly correlated among industries the sources of wage interdependence can mainly be found in unions preferences in the nature of technology and in price and demand determination the presence of externalities and of strategic complementarity among unions leads to suboptimal equilibria which generates non desired inflation unemployment and possibly also trade balance deficit this enforces the idea that part of current unemployment can be eliminated by improving the cooperation between social actors

does devaluation cause stagflation the traditional view that devaluation tends to increase domestic real income and output has been challenged in recent years on the grounds that trade flows including factor imports are relatively insensitive to exchange rate changes especially in developing countries this paper presents a simple macro economic model in which devaluation influences real income and output both through the cost of imported inputs on the supply side of the economy and through exports imports and expenditures on the demand side statistical estimates of the structural parameters of the model for a group of ten industrial and developing countries are used to show that the demand effects dominate the cost effects in most cases thus supporting the traditional view that devaluation has positive real effects in these countries in the short to medium run est ce que la devaluation engendre la stagflation le point de vue conventionnel veut que la devaluation tende a accroitre le niveau du revenu et de la production domestiques c est un point de vue qui a ete remis en question ces dernieres annees parce que dit on les flux de commerce international y compris les flux d importation de facteurs de production semblent relativement insensibles aux changements dans le taux de change ce memoire developpe un modele macro economique simple dans lequel la devaluation influence le niveau de revenu et de production en termes reels via le co ut des facteurs de production importes du cote de l offre et via les exportations les importations et les niveaux de depenses du c6te de la demande les auteurs utilisent la calibration statistique des parametres structurels du modele pour un groupe de dix pays industrialises et en voie de developpement pour montrer que les effets du cot6 de la demande dominent les effets de cofuts dans la plupart des cas voila qui supporte le point de vue traditionnel qui veut que la devaluation ait un impact positif reel dans les pays devaluateurs a court et a moyen tenne

evidence on the specification of price in the study of domestic water demand the development of lakefront property in northern wisconsin has prompted in several towns minimum frontage zoning stricter than the state standard such zoning generates an economic loss by constraining development development effect and an economic

exchange rate management and stabilization policies in developing countries abstract we outline three channels via which a devaluation has a direct contractionaly impact on the aggregate supply side of the economy local currency costs of intermediate imports wage indexing in the presence of food imports and reduced volume of real credit to firms contractionary effects via the supply side are more damaging than krugman taylor effects via aggregate demand since a cut in aggregate supply leads to upward pressure on inflation while a cut in aggregate demand tends to abate inflation upward pressure on inflation may over time threaten the increase in competitiveness a nominal devaluation also intends to achieve we also discuss the implications of a substantial foreign debt we demonstrate that a successful devaluation raises the real in terms of domestic goods debt service burden causing a krugman taylor like contractionary effect on aggregate demand we then analyse the effects of a preannounced slowdown of the rate of depreciation our results of course do not imply that a devaluation should never be considered they do suggest however that a devaluation is likely to be an ineffective tool for demand management since it may cut aggregate supply as much or more in the short run

analysing rationing policies drought and its effects on urban users welfare analysing rationing policies during drought the aim of this paper is to study the impact on consumers of rationing policies implemented during water shortages water scarcity gives rise to the need for rationing and various methods including supply cutoffs can be used a model is devised to quantify the welfare losses associated with qualitive and quantitive restrictions based on virtual prices and using the consumer surplus as a welfare measurement welfare variations for different users have been calculated to achieve the aim information relative to seville spain has been used analysing the drought period that took place in the first half of the 1990s it has been possible to observe the main source that led to welfare losses for each kind of user

nominal interest rates consumption booms and lack of credibility a quantitative examination abstract exchange rate based stabilization programs in chronic inflation countries have often been accompanied by an initial expansion of private consumption followed by a contraction this consumption cycle has been attributed to lack of credibility in the sense that the public views the reduction in the devaluation rate as temporary this paper assesses the quantitative relevance of the temporariness hypothesis by comparing the predictions of a simple model to the actual figures for seven major programs the paper concludes that nominal interest rates must fall substantially for the temporariness hypothesis to account for an important fraction of the observed consumption booms

commodity trade between pakistan and the us is there evidence of the j curve abstracta few studies that have attempted to estimate the short run j curve and long run impact of exchange rate depreciation on pakistan s trade balance are either based on aggregate trade data between pakistan and the rest of the world or between pakistan and her bilateral trading partners the findings are mixed at best considering the trade balance between pakistan and the us as one of its major partners no significant effects have been discovered suspecting that the trade flows between the two countries could suffer from another aggregation bias we disaggregate their trade flows by commodity and consider the trade balance of 45 industries that trade between the two countries we find significant short run effects of currency depreciation on the trade balance of 17 industries the short run effects last into the long run in 15 cases the largest industry that account for more than 10 of the trade seems to benefit from real depreciation in the long run

an empirical assessment of currency devaluation in east asian countries the hypothesis of contractionary devaluation has received surprisingly strong empirical support especially in the context of latin american countries in this paper we study whether it applies equally well in seven east asian countries when we use the pre 1997 crisis data and the trade weighted exchange rate we find no evidence of contractionary devaluations in fact currency devaluation appears strongly expansionary in several countries this is contrasted to the case of chile and mexico where the evidence of devaluation is persistent we find that the results are somewhat sensitive to the definition of the exchange rate and the period of estimation

current account effects of a devaluation in an optimizing model with capital accumulation abstract this article explores the consequences of a devaluation in the context of a real optimizing model of a small open economy what provides for real effects of the devaluation is the existence of nominal wage stickiness during a contract period we show that if this contract period is relatively short the devaluation is bound to improve the current account on impact whereas this will deteriorate in the case of a long contract period and the more so the smaller are adjustment costs in investment in addition we study the consequences for the terms of trade and for the stocks of foreign assets and of capital

water conservation policy analysis an interregional multi output primal dual optimization approach an interregional multi output normalized restricted equilibrium model of field crop agriculture is estimated within the context of a multistage programming based system estimation procedure implicit total economic cost functions endogenize behavioral opportunity adjustment costs of fixed and allocatable land and water resources crop specific marshallian water demand elasticities are estimated for restricted and unrestricted groundwater substitution environments and decomposed by water source elasticities are inelastic but water price policy reform can be an effective water conservation policy tool when groundwater use is unrestricted when groundwater use is restricted effective conservation policy requires more dramatic water price policy reform

stagflationary effects of monetary stabilization policies a quantitative analysis of south korea this paper presents a macro model of the korean economy that focuses on short run macro economic adjustment and more in particular on the transmission channels of monetary policy between the financial and the real sector of the economy in addition to the usual link between monetary policy and aggregate demand via investment the link between monetary policy and the supply side of the economy via the financing of working capital with borrowed funds is incorporated this link can potentially reverse the short run impact of tight money on inflation and aggregate the impact on output both export prices and domestic prices show a significant sensitivity to cost of financing working capital this credit supply side link gives a stagflationary bias to restrictive credit policies the empirical relevance of this phenomenon is strongly supported by the simulation results derived with the model structurally section 2 of the paper focuses on the real sector part of the model section 3 discusses the financial sector in section 4 different monetary stabilization packages are simulated using the model presented in sections 2 and 3 and alternative policy measures are discussed the simulation runs show strong short run stagflationary effects of tight money policies

dynamic effects of a shift in savings the role of firms policies designed to increase capital accumulation through an increase in the savings rate are being currently considered in the united states suppose that fiscal measures are implemented which increase the savings rate what will the dynamic effects on output and capital accumulation be the literature provides us with two well known but partly conflicting answers the first addressed to the short and medium run emphasizes aggregate demand effects and the possible paradox of savings an increase in the savings rate will decrease aggregate demand and may well decrease both savings and investment the second addressed to the long run emphasizes that larger savings imply a higher sustainable capital stock in steady state are the two answers somehow consistent is it plausible in particular that rational firms would initially decumulate capital only to accumulate more later that rational agents would initially save less only to save more later to study these questions a model must have three components as at any point of time equilibrium is characterized by the equality of savings and investment it must have a description of savings behavior by agents and of investment behavior by firms to allow for aggregate demand effects on production it must also allow for some price and wage inflexibility and thus give a description of price and wage behavior the choice of the paper is to focus on one of the three components namely the investment behavior of firms and to keep the analysis tractable to make the other two components as simplesimplistic as possible malinvaud 9 in studying the same issue chooses a simpler description of investment and a more refined description of the wage price mechanism section 1 characterizes the investment decision of firms in partial equilibrium section 2 embeds it in a macroeconomic model sections 3 to 5 characterize the dynamic adjustment under various degrees of price and wage rigidity

devaluation long term contracts and rational expectations abstract this paper considers the effects of devaluation and expected devaluation on output prices and foreign exchange reserves in a small open economy with overlapping two period wage contracts and rational expectations a devaluation has an expansionary effect on output provided it is unanticipated by at least some contracts when it occurs expected devaluations however have no effect on prices until they take place if a devaluation is expected but fails to take place output is reduced reserves increase in response to all devaluations but the expectation of a devaluation causes a loss of reserves prior to its expected date