on the optimal management of transboundary renewable resources a comment on munro s paper in a number of bargaining situations parties involved will not be able to form strictly or juridically binding contracts hence in analysing problems of finding equilibrium contracts one has to rely on time or subgame consistency in the paper a simplified version of a model by munro is used to derive a self enforcing sharing agreement of exploiting a transboundary renewable resource the properties of such an agreement differ from those proposed by munro a propos de la gestion optimale de ressources renouvelables trans nationales un commentaire sur le memoire de gordon r munro dans nombre de situations de negociation les parties en presence ne peuvent en arriver a des contrats qui engagent strictement ou juridiquement en analysant les problemes pour en arriver a des contrats d equilibre il faut s en remettre a un engagement coherent pour un moment ou un sous jeu dans ce memoire l auteur utilise une version simplifiee d un modele de munro pour deriver un accord de partage que les parties vont honorer dans l exploitation d une ressource renouvelable trans nationale les proprietes d un tel accord sont differentes de celles auxquelles en arrive munro

estimation of linear rational expectations models in the presence of deterministic terms abstract hansen and sargent 1981b discussed instrumental variables procedures for estimating linear rational expectations models under the assumption that all variables have zero unconditional means this note points out two implications if variables instead have nonzero unconditional means first there are additional restrictions beyond those noted by hansen and sargent 1981b and second imposing these restrictions results in more efficient estimates of the parameters that are the focus of hansen and sargent 1981b explicit formulas are given for the restrictions generated by some commonly assumed deterministic terms

keynesian involuntary unemployment and sticky nominal wages this paper presents a model in which sticky nominal wages and keynesian involuntary unemployment result as a consequence of the intertemporal optimisation decisions of profit maximising monopsonistic firms and fully rational and informed workers in an uncertain environment uncertainty associated with the business cycle and its impact on product price generates disequilibrium wages and identifies the labour demand function in contractions and the supply of labour in expansions the theoretical prediction of a negative relationship between real wages and employment during contractions and a positive relationship during expansions is strongly supported by the empirical evidence presented central to keynesian macroeconomics is the concept of involuntary unemployment the existence of which once was a commonly agreed upon stylised fact however as noted by hoover i988 and mccafferty i990 among others existing models either fail to provide a satisfactory reason why wages do not adjust to clear the market or seek some sort of equilibrium explanation in which unemployment is not strictly involuntary in the sense of keynes moreover the failure of recent empirical studies to support the keynesian prediction of a countercyclical wage has led some to doubt the relevance of keynesian economics and even the meaningfulness of the notion of involuntary unemployment lucas 1978 farmer 1993 keynes i 939 cited findings of a countercyclical real wage during the great depression argued that the relationship between real wages and employment depends upon whether changes in employment are due to changes in effective demand or due to other factors and recommended that observations on real wages ought to be classified by periods of contraction and expansion an examination of us data for the period 1920 89 presented in section ii of this paper confirms the importance of keynes s argument and motivated the development of the new keynesian model of employment and wages presented in section iii the model is characterised by a market structure in which representative monopsonistic firms post nominal wage rates which they may find optimal to partially but not totally index in advance of knowing product price and of hiring labourers who may have complete knowledge relevant to their choices price forecasts are assumed to be rational while prices vary with the state of the economy the theoretical framework i incorporates all of the characteristics of keynesian involuntary unemployment while not attributing the cause of unemployment to the supply behaviours of labourers 2 provides an explanation of why wages do not adjust to clear the market that is based explicitly on the optimising behaviour of firms and implicitly on that of

uncertainty and the timing of taxes abstract this paper uses blanchard s 1985 overlapping generations model to study a current tax reduction followed by a future budget balancing tax increase at an unknown date assuming that the rate of time preference equals the interest rate the tax cut creates a trade deficit which grows before it eventually shrinks with certainty regarding the timing of future taxes the initial deficit immediately improves the former path for the trade deficit is consistent with events in the united states following the 1981 tax cut

cooperative and non cooperative harvesting in a stochastic sequential fishery abstract we examine cooperative harvesting in a sequential fishery with stochastic shocks in recruitment two fleets harvest in a stochastic interception fishery we analyze cooperative management as a non cooperative game where deviations from cooperative harvesting are deterred by the threat of harvesting at non cooperative levels for a fixed number of periods whenever the initial stock falls below a trigger level we illustrate the sequential harvesting game with an application to the northern baltic salmon fishery cooperative harvesting yields participants substantial gains in terms of expected payoffs the greatest gains accrue to the fleet harvesting the spawning stock the actions of which are not observed by the competitor an explanation for the prevalence of fish wars is provided even if a cooperative agreement is reached shocks in recruitment trigger phases of non cooperative harvesting further the cooperative solution can only be maintained when stock uncertainty is not too prevalent

prospective deficits and the asian currency crisis this paper argues that a principal cause of the 1997 asian currency crisis was large prospective deficits associated with implicit bailout guarantees to failing banking systems the expectation that these future deficits would be at least partially financed by seigniorage revenues or an inflation tax on outstanding nominal debt led to a collapse of the fixed exchange rate regimes in asia we articulate this view using a simple model whose key feature is that a speculative attack is inevitable once the present value of future government deficits rises we present empirical evidence in support of the key assumptions underlying our interpretation of the crisis

bioeconomic analysis and management this article discusses bioeconomic analysis and different management strategies in fisheries it reviews recent developments which show the need to expand the analysis to multispecies fisheries and management significant gains can be made if the interdependencies between species and or jointness in inputs for many fisheries are identified both common property resource management and individual transferable quotas itqs can be fruitful strategies in different settings the article suggests that there is scope for the development of a multiple use management approach of marine resources besides the aim of an efficient use of fish stocks equal attention should be given to other values from aquatic ecosystems like ecological services biodiversity and recreation possibilities

strategic dynamic interaction abstract the motivation for this paper is fishing legislation that divides a fishery into regions each of which is exploited by a single firm as the regions have common borders an analysis based on models with one firm and one region would lead to erroneous results an alternative motivation is the problem of a fishery with several interacting species each exploited by a single firm in this paper we assume that fish move between regions therefore the stock in one region depends not only on previous stock and catch in the region but also on the stock and catch in neighboring regions in the multiple species interpretation these movements correspond to the interactions between species we use a multisectoral differential duopoly model in order to capture the strategic interactions of the firms over time the model is solved for an example in which varying levels of dependence between regions can be compared

putting foxes in charge of the hen house the political economy of harvest quota regulations this paper considers a dynamic common agency model of natural resource harvest quota regulation in which both conservationists and harvesters vie to influence the regulator s quota allocations as well as the choice of regulator conservationists tend to benefit from the adoption of regulation since the regulator will reduce the aggregate harvest quota relative to the unregulated equilibrium harvesters however only support the adoption of regulation if the regulator places sufficient weight on their welfare because harvester s support of regulation is conditional while conservationist s support of regulation is unconditional harvester s interests tend to be over represented in the truthful markov perfect equilibrium

natural resource federalism preferences versus connectivity for patchy resources we examine the efficiency of centralized versus decentralized management of spatially connected renewable resources when users have heterogeneous preferences for conservation versus extraction resource mobility induces a spatial externality while spatial preference heterogeneity drives a wedge between users privately optimal extraction rates we first address these market failures analytically and show that the first is most efficiently handled with centralized planning while the second is best tackled with decentralized management except in special cases neither approach will be first best but which arises as second best depends on the relative strength of preference heterogeneity versus spatial mobility of the resource we illustrate the theory and test its robustness with a numerical example

cooperation in a stochastic transboundary fishery the effects of implementation uncertainty versus recruitment uncertainty this paper examines how non binding cooperative agreements on fisheries management can be sustained when the management plans in participating countries are implemented imperfectly and compares the effects of implementation uncertainty and of recruitment uncertainty on the potential for cooperation the model developed assumes two countries that share a fish stock reproduction depends on how much fish each country leaves behind after harvesting and hence on random variation in each country s achieved abandonment level a self enforcing agreement is proposed that accounts for the random variation the agreement is illustrated with a numerical example a self enforcing cooperative solution can only be sustained when uncertainty is not pronounced and when the two countries control close to equal shares of the fishery even when a cooperative agreement can be achieved frequent phases of reversion to non cooperative harvest levels are needed to support the agreement a comparison of the effects of recruitment and implementation uncertainty on implicit cooperation indicates that implementation uncertainty is more likely to hamper cooperation

the price consumption puzzle of currency pegs abstract a defining stylized fact associated with exchange rate based stabilization programs is that their initial phase is characterized by several years of continuous expansion in private consumption and a gradual appreciation of the real exchange rate this paper shows that a large class of standard optimizing models is unable to account for this empirical regularity in particular models in this class predict that a gradual appreciation of the real exchange rate must necessarily be accompanied by a declining path of consumption the paper suggests several possible solutions to this problem and develops one in detail namely the relaxation of the assumption of time separability in preferences specifically it shows that under habit formation currency pegs induce a positive comovement between consumption and the real exchange rate the paper also establishes that habit formation provides an explanation for why in failed currency pegs a contraction in aggregate demand sets in before the collapse of the program

a critical evaluation of exchange rate policy in turkey abstract this paper reviews and critically evaluates the exchange rate policy followed in turkey in the post 1980 period during which a far reaching program of liberalization has been launched we conclude that the new exchange rate policy has been essential for turkey s regaining its creditworthiness furthermore it has positively contributed to growth of output and exports and to expansion of tradables production relative to nontradables persistence of inflation and weakness of private investment in tradables overshadow the successes recorded in other areas and cast doubt over the sustainability of turkey s outward orientation we argue that the root cause of these problems has been inconsistencies between overall economic policies rather than the exchange rate policy itself we compare the period of real appreciations since late 1998 with the earlier period of real depreciations and draw policy implications

international fisheries agreements a game theoretical approach this paper surveys the application of game theory to the economic analysis of international fisheries agreements the relevance of this study comes not only from the existence of a vast literature on the topic but especially from the specific features of these agreements the emphasis of the survey is on coalition games an approach that has become prominent in the fisheries economics literature over the last decade it is shown that coalition games were first applied to international fisheries agreements in the late 1990s addressing cooperative issues under the framework of characteristic function games then progressively this cooperative approach was combined with non cooperative elements such as the stability analysis of the agreements finally partition function games which model coalition formation endogenously were introduced and became the standard approach to study the formation and stability of international fisheries agreements a key message that emerges from this literature strand is that self enforcing cooperative management of internationally shared fish stocks is generally difficult to achieve hence the international legal framework and regulations play a decisive role on ensuring cooperation over the use of these resources

managing interacting species in unassessed fisheries abstract this paper addresses the management of multispecies fisheries and suggests the use of restricted fishing policies as an interesting option for unassessed fisheries as is the case within developing countries specifically we consider a predator prey system under two potential management policies an unrestricted regime where agents can compete to harvest from both species and a second one where they are allowed to harvest only predators the performance of both policies is compared from an ecological and an economic point of view for a sufficiently large number of agents or for strong biological interaction parameters the assumed restricted fishing policy yields both higher long run stock levels and profits thus this contribution suggests that such a policy while requiring weaker monitoring governance than instruments based on outputs such as quotas or taxes would meet environmental and economic objectives finally several features of the analysis are discussed including targeting prey instead of predator and the issue of compliance

structural error correction models a system method for linear rational expectations models and an application to an exchange rate model this paper develops a system instrumental variable method to estimate the speed of adjustment coefficient in the long run equilibrium of structural error correction models for a class of linear rational expectations models this method is applied to an exchange rate model with sticky prices in which the speed of adjustment coefficient governs the half life of the real exchange rate compared to single equation methods the system method gives smaller half life estimates with sharper standard errors

fishing as a supergame abstract this paper considers how cooperative solutions to games of sharing fish resources can be supported by threat strategies with highly mobile fish stocks the number of agents compatible with a cooperative self enforcing solution is not very high for reasonable values of the discount rate but sensitive to changes in the discount rate and costs and to cost heterogeneity with migrating stocks where growth and reproduction depend on how much all agents leave behind after harvesting the likelihood of a cooperative self enforcing equilibrium is increased with a dominant player and a competitive fringe the rents and optimum stock level of the dominant player fall quickly as the share of the competitive fringe increases

individual rationality and the zonal attachment principle three stock migration models shared fish stocks migrate across borders between different countries exclusive economic zones this paper discusses the individual rationality of fish sharing agreements based on the zonal attachment of such stocks three types of migrations are considered i a common stock that grows and reproduces and is then distributed in given proportions between two countries zones at the beginning of each fishing season ii sub stocks that breed and grow independently in their separate zones but spill over between zones according to relative abundance iii a stock that grows and breeds in one country s zone but migrates into the zone of another if it exceeds a certain size it is shown that in all these cases the minor partner in a fish sharing agreement may not have an incentive to cooperate unless he gets a larger share of the cooperative profits than that corresponds to his share of the stock this is particularly likely to happen when the unit cost of fish does not depend on the stock an exception could occur if stock migration depends on the stock level the major partner could then keep the entire stock by fishing it down to a critical level

inflationary rigidities and orthodox stabilization policies lessons from latin america orthodox stabilization programs in latin american countries have been notoriously unsuccessful in combating inflation despite the imposition of stringent cuts in government deficits in most cases inflation came down only slowly and temporarily with concomitant declines in growth and employment the bolivian program one of the only latin american successes is contrasted with those of argentina brazil chile and mexico the problems of dealing with chronic inflation are compared with those of hyperinflationary countries and the influence of price and wage rigidities expectations and credibility is explored the study shows that fiscal restraint is a necessary but not sufficient condition for success and that sound management of nominal variables the exchange rate and money supply are also necessary the critical role of credibility is linked with price and wage rigidities in the chronic inflation countries whereas the unsuitability of hyperinflation is seen to increase the credibility of and thus the potential for successful stabilization programs

currency crises and contingent liabilities a contingent liability is a future spending commitment that is realized with some probability international organizations emphasize the dangers of contingent liabilities when providing advice why one answer is obvious if significant contingent liabilities are realized they commit governments to substantial fiscal costs there is a further reason by taking on a contingent liability the government can increase the probability of the underlying shock taking place this paper describes how the issuance of government guarantees and the methods by which they are financed affect the probability of crises taking place it also discusses the determinants of post crisis inflation and depreciation

testing for rational inflationary bubbles the case of argentina brazil and israel in this paper it is examined whether the existence of rational bubbles can explain the dynamics of the price level during the argentine brazilian and israeli high inflations in the first half of the 1980s based on the cagan 1956 money demand model the west 1987 specification test finds evidence of rational inflationary bubbles in the three countries when the money supply is assumed to be exogenous however if endogeneity of money is taken into account there is no evidence of rational bubbles

on the sustainability of common property resources abstract we provide a model where a common property resource is managed by two types of agents cooperators and non cooperators who adjust their extraction strategies in response to persistent differential payoffs in our model the social approval of cooperators works as a reward mechanism which as we show favors both the pervasiveness of cooperative behavior and the sustainable management of natural resources specifically we show that in the presence of such a reward mechanism a stable equilibrium can be reached with both strategies being practiced simultaneously and a decentralized and sustainable management of common property resources is possible

fiscal crises and aggregate demand can high public debt reverse the effects of fiscal policy abstract this paper shows how the power of fiscal policy to affect consumption can vary depending on the level of public debt at moderate levels of debt fiscal policy has the traditional keynesian effects current generations of consumers discount future taxes because they may not be alive when taxes are raised or there will be a larger population available to pay the taxes but when debt reaches extreme values current generations of consumers know there is a high probability that they will have to pay extra taxes a fiscal deficit can have a contractionary effect in these situations

strategic resource extraction capital accumulation and overlapping generations abstract the standard resource extraction framework assumes infinitely lived agents and yields an overfishing result for some applications a finite time horizon may be more appropriate a direct extension of the levhari mirman model to overlapping generations yields an extreme overfishing result alternatively we assume young and old specialize and respectively fish and supply capital in this model under some circumstances there may well be under utilization of natural resources however for a given production technology if there are a sufficiently large number of agents overfishing always results

instrumental variables procedures for estimating linear rational expectations models abstract this paper illustrates how to use instrumental variables procedures to estimate the parameters of a linear rational expectations model these procedures are appropriate when disturbances are serially correlated and the instrumental variables are not exogenous we compare our procedures to some alternative estimators that estimate free parameters from restrictions implied by the euler equations the procedures are applicable to a variety of linear rational expectations models several examples of which we cite

the compleat fish wars biological and dynamic interactions abstract in this article we study an example of a fishery in which there are two agents each harvesting two species of fish there are two externalities in the model the dynamic externality studied in levhari and mirman 1980 and the biological externality examined in fischer and mirman 1992 this model allows us to study the interactions between agents in a model in which the species of fish interact we find the unique closed loop nash equilibrium in the context of a differential game and we compare the resulting catch ratios to the results of the earlier papers which allow for only one externality we also study the efficiency of the solution

international management of north sea herring north sea herring is a transboundary resource shared by the eu and norway the purpose ofthis paper is to investigate how the harvestsor total allowable catch quotas tacs for thisspecies should be divided between these twojurisdictions so that both parties aresatisfied we apply a discrete timegame theoretic model in which we show that theeu should be allocated more than half of thetac even if the eu has higher harvesting costs this result is due to the distribution patternof the herring with a larger share of herringlocated in the eu zone however we find thataccording to the nash bargaining solution thecurrent sharing allocates too large a share tothe eu

cooperation in the commons with unobservable actions we model a dynamic common property resource game with unobservable actions and non linear stock dependent costs we propose a strategy profile that generates a worst perfect equilibrium in the punishment phase thereby supporting cooperation under the widest set of conditions we show under what set of parameter values for the discount rate resource growth rate harvest price and the number of resource users this strategy supports cooperation in the commons as a subgame perfect equilibrium the strategy profile that we propose which involves harsh punishment after a defection followed by forgiveness is consistent with human behavior observed in experiments and common property resource case studies

the dynamic efficiency costs of common pool resource exploitation we conduct the first empirical investigation of common pool resource users dynamic and strategic behavior at the micro level using real world data fishermen s strategies in a fully dynamic game account for latent resource dynamics and other players actions revealing the profit structure of the fishery we compare the fishermen s actual and socially optimal exploitation paths under a time specific vessel allocation policy and find a sizable dynamic externality individual fishermen respond to other users by exerting effort above the optimal level early in the season congestion is costly instantaneously but is beneficial in the long run because it partially offsets dynamic inefficiencies jel d24 q21 q22

on the interpretation of cointegration in the linear quadratic inventory model abstract the traditional formulation of the linear quadratic inventory model with unit roots predicts cointegration between inventories and sales that formulation implies that marginal production costs and the marginal benefits of inventories are both tending to and the cointegrating coefficient reflects the optimal trade off between these competing factors this paper suggests a reformulation of the problem in which marginal production costs and marginal inventory benefits are both stationary and in which the cointegrating coefficient is the same as the value that characterizes the target inventory level in the cost function

an interest rate defense of a fixed exchange rate defending a government s exchange rate commitment with active interest rate policy is not an option in first generation models of speculative attacks in those models the interest rate is the passive reflection of currency depreciation expectations in this paper we show how to adapt the first generation framework to allow for an interest rate defense it is shown that increasing domestic currency interest rate before the attack makes domestic assets more attractive according to an asset substitution effect but weakens the domestic currency by increasing the government s fiscal liabilities as a result an interest rate defense can be successful only conditional on sound fiscal policy

stabilization with exchange rate management stabilization programs in open economies typically consist of two stages in the first stage the rate of currency devaluation is reduced but the fiscal adjustment does not eliminate the fiscal deficit that causes growth of debt and loss of reserves making a future policy change necessary only later at a second stage is this followed by either an abandonment of exchange rate management or by a sufficiently large cut in the fiscal deficit we study how different second stage policy changes affect economic dynamics during the first stage these changes include tax increases budget cuts on traded and nontraded goods and increases in the growth rate of money

fixed versus flexible exchange rates which provides more fiscal discipline abstract conventional wisdom holds that fixed rates provide more fiscal discipline than do flexible rates in this paper we show that this wisdom need not hold in a standard model in which fiscal policy is endogenously determined by a maximizing fiscal authority the claim that fixed rates induce more discipline stresses that sustained adoption of lax fiscal policies must eventually lead to an exhaustion of reserves and thus to a politically costly collapse of the peg hence under fixed rates bad behavior today leads to punishment tomorrow under flexible rates bad behavior has costs as well the difference is in the intertemporal distribution of these costs flexible rates allow the effects of unsound fiscal policies to manifest themselves immediately through movements in the exchange rate hence bad behavior today leads to punishment today if fiscal authorities are impatient flexible rates by forcing the costs to be paid up front provide more fiscal discipline and higher welfare for the representative private agent the recent experience of sub saharan countries supplies evidence that matches the predictions of the model

stability and success of regional fisheries management organizations according to international law straddling fish stocks should be managed cooperatively through regional fisheries management organizations rfmos this paper analyzes the stability and success of these organizations through a game in partition function form based on the classical gordon schaefer bioeconomic model results show that the larger the number of fishing states that compete for the fish stock the higher are the relative gains from full cooperation but the lower is the likelihood of large rfmos being stable it is also shown that new entrants increase the incentives of rfmo members to leave and decrease the incentives of non members to join it moreover the success of coalition formation is positively correlated with the degree of cost asymmetry among fishing states and negatively with the overall level of efficiency

exchange rate based stabilisation durables consumption and the stylised facts in this article we show that a model featuring durable consumer goods imperfect substitution between domestic and foreign assets and weak credibility can explain the qualitative and quantitative aspects of the stylised facts associated with exchange rate based stabilisation including the tremendous increase in real interest rates following a temporary reduction in the crawl total consumption spending rises 14 26 the real exchange rate appreciates 20 37 and the current account deficit swells to 10 15 of gross domestic product despite large capital inflows the real interest rate increases from 10 to 20 100