the dynamic relationship between the federal funds rate and the treasury bill rate an empirical investigation this article examines the dynamic relationship between two key us money market interest rates the federal funds rate and the 3 month treasury bill rate using daily data over the period from 1974 99 we find a long run relationship between these two rates that is remarkably stable across monetary policy regimes of interest rate and monetary aggregate targeting employing a non linear asymmetric vector equilibrium correction model which is novel in this context we find that most of the adjustment toward the long run equilibrium occurs through the federal funds rate in turn there is strong evidence for the existence of significant asymmetries and non linearities in interest rate dynamics that have implications for the conventional view of interest rate behaviour

day of the week effects and asset returns the number of empirical studies using daily stock returns is rapidly increasing researchers generally assume that the distribution of stock returns is identical for all days of the week a convenient statistical assumption but not a necessary condition of market equilibrium nevertheless there are reasons to suspect that the distribution of returns may vary according to the day of the week the most obvious is the impact of weekends on monday s return since monday s return is calculated over three instead of one calender day the mean and variance may well be higher on monday compared with any other daily return perhaps three times as large previous research has examined the daily distribution of stock returns for a monday effect while fama 1965 does not compare daily mean returns he does report that monday s variance is about 20o greater than other daily returns with a traditional distributional assumption regarding the returns on a financial asset specifies that the expected returns are identical for all days of the week contrary to this plausible assumption this paper discovers that the expected returns on common stocks and treasury bills are not constant across days of the week the most notable evidence is for monday s returns where the mean is unusually low or even negative several explanations of the results are investigated but none proves satisfactory aside from documenting significant day of the week effects the implications of the results for tests of market efficiency are examined while market adjusted returns continue to exhibit day of the week effects these effects are no longer concentrated on monday during the last year we have had many conversations with our colleagues throughout the professions we are particularly thankful to the participants at sessions of the western and american finance associations where preliminary versions of this paper were presented special thanks are due to gene fama gailen hite jon ingersoll robert jarrow merton miller clifford smith and rex thompson the expert research assistance of frank rabinovitch and youngsup yun is gratefully acknowledged 1 the list of papers using daily stock returns is too long to name recent examples include charest 1978 dodd 1980 banz 1981 and reinganum 1981

the effect of contemporaneous reserve accounting on the market for federal funds abstract this paper evaluates the effect of the transition from lagged to contemporaneous reserve accounting for the determination of bank reserve requirements through its impact on the market for federal funds the results indicate that increased target reserve uncertainty resulting from the implementation of the contemporaneous reserve accounting system cra caused an initial increase in intraday federal funds rate variance and daily interest rate differences however subsequent to a learning period intraday variance appears to be less pronounced and daily differentials appear to be narrower than under the previously used lagged reserve accounting system lra these results are attributed to the lengthening of the accounting period from one to two weeks therefore while not costless the new system does not appear to have seriously disrupted the federal funds market

idiosyncratic variation of treasury bill yields i document a dramatic increase in the importance of two types of variation in treasury bill yields beginning in the early 1980s the first is idiosyncratic variation in individual short maturity less than three months bill yields the second is a common component in treasury bill yields that is not shared by yields on other instruments such as short maturity privately issued instruments or longer maturity treasury notes and bonds some evidence suggests the first type reflects increased market segmentation these results have important implications for the calibration and testing of no arbitrage term structure models and interpreting tests of the expectations hypothesis united states treasury bill yields play a central role in economists efforts to understand the behavior of financial markets the focus on treasury bills is driven by the belief that bill yields can be viewed as benchmarks from which yields on other debt instruments are derived for example in no arbitrage models of the default free term structure the stochastic properties of the hypothetical instantaneous interest rate determine bond prices researchers often construct and evaluate these models using short maturity bill yields as proxies for instantaneous interest rates similarly bill yields are frequently used to test the expectations hypothesis of the term structure 2 economists standard pricing models for default risky securities also view treasury yields as building blocks in such models yields on default risky securities depend at least in part on the yields of default free securities and the underlying stochastic default process therefore yields on treasury bills have been used in studies of the effects of monetary policy on the business cycle not because bills are intrinsically critical to the economy but because

a model of target changes and the term structure of interest rates abstract we investigate the effects of short term rate targeting by the federal reserve on the term structure of interest rates and make contributions at two levels using a new series of interest rate targets made available by the federal reserve bank of new york we develop a family of models that highlight the implications of discrete changes in interest rate targets for the term structure of interest rates we show that spreads between short term rates and the overnight federal reserve funds rate are mainly driven by expectations of changes in the target not by the transitory dynamics of the overnight rate around the target hence the bias in tests of the expectations hypothesis that we document can be mainly attributed to the erroneous anticipation of future changes in monetary policy our modeling assumptions and newly available data make it possible to extract a series of market expectations of the next target change which are compared with a series of realized target changes

agricultural performance and development strategy retrospect and prospect abstract the slow pace and inequitable pattern of past agricultural growth have been major factors in the continuing problems of poverty hunger and unemployment especially in the poorer regions of the third world past experience shows that agriculture has an important potential in economic development given appropriate structures and policies these historical lessons are of strategic significance for poor countries as they confront severe problems of adjustment this paper examines the main payoffs and obstacles to the pursuit of an agriculture led industrialization strategy together with proposals for appropriate policies that can support such a strategy

an empirical procedure to evaluate monetary management under exogenous changes in the money supply this article proposes an empirical procedure to evaluate central banks monetary management in a presence of exogenous changes in the money supply monetary shocks deviate the market intere

the microstructure of the euro money market abstract this paper provides an empirical examination of the microstructure of the euro money market especially the overnight market the interbank market for short term funds in the transnational currency created in january 1999 the institutional framework shaping the microstructure of the money market can be delimited as the union of 1 central banks interest setting bodies and their long term policy strategy 2 instruments for monetary policy operations and liquidity management 3 the private market financial instruments and trading mechanisms for funds and 4 the payment and settlement infrastructure for the transfer of those funds all four elements can significantly influence the intraday behaviour of money market rates to study their effects on the euro money market 5 months of intraday data for overnight deposits have been recorded from brokers in four euro area countries and the uk posting their quotes on reuters and from the italian electronic market mid the results show two hump shaped or u shaped intraday patterns of quoting frequency and volatility but flatter intraday patterns sometimes weakly single hump shaped for bid ask spreads even intraday overnight rate levels hardly differ across brokers located in different euro area countries reflecting the high integration of this market already shortly after the introduction of the euro despite some remaining heterogeneities in market structures and trading channels quoting activity rate volatility and spreads increase on ecb governing council days particularly after the 1 45 pm release time of interest rate decisions however since the amplitude of this volatility is economically small and since turnovers are not indicative of adverse selection the average degree of policy uncertainty seems to have been rather limited during our sample period ecb announcements of new m3 data related to the first pillar of its monetary policy strategy around 10am seem to be associated with very moderate increases in short term volatility tuesdays eurosystem main refinancing auctions with the open market exhibit active pre and post auction liquidity re allocation but only a very short and moderate increase in volatility after the announcement of the allotments and no signs of market power or adverse selection open market operation settlement days exhibit the highest turnovers during the business week at least for the mid without however being affected by any special risks finally it is shown that spreads and volatility tend to be very high at the end of the minimum reserve maintenance period and that the same happened during the year 2000 changeover days reflecting the high risks involved in both

the liquidity trap and u s interest rates in the 1930s most current literature assumes that a central bank loses the ability to influence interest rates through variations in reserve supply as soon as overnight rates have been driven to zero i argue that reserve supply can be directly related to longer term rates when overnight rates are zero because banks reserve demand is then defined by the role of cash as an asset free of interest rate risk i present evidence that reserve supply affected longerterm interest rates in the u s from 1934 through 1939 while overnight rates were at the zero floor even when the changes in reserve supply reflected factors unlikely to have affected expectations of future overnight rates

the impact of research led agricultural productivity growth on poverty reduction in africa asia and latin america abstract twenty percent of the world s population or 1 2 billion live on less than 1 per day 70 of these are rural and 90 are in asia and sub saharan africa research led technological change in agriculture generates sufficient productivity growth to give high rates of return in africa and asia and has a substantial impact on poverty currently reducing this number by 27 million per annum whereas productivity growth in industry and services has no impact the per capita cost of poverty reduction by means of agricultural research expenditures in africa is 144 and in asia 180 or 50 cents per day but this is covered by output growth by contrast the per capita cost for the richer countries of latin america is over 11 000

money market integration we use transaction level data and detailed modeling of the high frequency behavior of federal funds eurodollar spreads to provide evidence of strong integration of the u s markets for federal funds and eurodollars the two core components of the dollar money market our evidence of negligible federal funds eurodollar premia contrasts with previous findings of large and predictable premia which have been interpreted as evidence of segmentation between the markets for federal funds and eurodollars our results however are consistent with possible persistent segmentation within the global eurodollar market we document several patterns in the behavior of federal funds eurodollar spreads including liquidity effects from trading volume to yield spreads volatility

the fed and short term rates is it open market operations open mouth operations or interest rate smoothing abstract it is widely believed that the fed controls the federal funds rate by altering the degree of pressure in the reserve market through open market operations when it changes its target for the funds rate recently however several analysts have suggested that the fed need not conduct open market operations to change the funds rate rather they argue it is sufficient that the fed indicate its desire for the funds rate this paper notes that there is yet a third alternative the interest rate smoothing hypothesis that suggests that the fed does not move rates per se but rather smooths the transition of rates to the new equilibrium required by economic shocks this paper tests the open market and open mouth alternatives using a methodology first used by cook and hahn journal of monetary economics 1989a 331 finding no evidence that either open market operations or open mouth operations can account for the close relationship between the funds rate and the funds rate target a variety of evidence consistent with the interest rate smoothing hypothesis is considered the results suggest that many changes in the fed s funds rate target are an endogenous response to economic events and suggest that an alternative way to identify exogenous changes in policy is to identify exogenous changes in the fed s funds rate target

precautionary reserves and the interbank market large excess reserve balances are held by banks in the u s despite the ability of large banks to closely target end of day balances close to zero we show that the friction faced by small banks to participate in the fed funds market leads to all banks holding precautionary reserves the precautionary motive for reserves can explain that small banks hold relatively large amounts of excess reserves overnight while at the same time lending large amounts to large banks small banks are large net lenders despite their reluctance to lend as large of a percentage of available balances during the day as large banks we also explain an increase in the volatility of the fed funds rate late in the day

do central banks react to the stock market the case of the bundesbank abstract in this paper we ask whether the bundesbank prior to the european central bank taking responsibility for monetary policy in 1999 reacted systematically to stock price movements in contrast to the results for the us our empirical findings show a generally weak relationship between german stock returns and short term interest rates at the daily and the monthly frequency the results are extremely robust to alternative model specifications the evidence is inconsistent with the hypothesis of a systematic reaction of the bundesbank to german stock prices however we do find that as in the us the bundesbank may have reacted to the stock market crash of 1987 by loosening monetary policy

institutions and agricultural productivity in sub saharan africa agricultural productivity in 41 sub saharan africa ssa countries from 1960 to 1999 is examined by estimating a semi nonparametric fourier production frontier over the four decades the estimated rate of productivity change was 0 83 per year although the average rate from 1985 99 was a strong 1 90 per year former uk colonies exhibited significantly higher productivity gains than others while liberia and countries that had been colonies of portugal or belgium exhibited net reductions in productivity we measure a significant reduction in productivity during political conflicts and wars and a significant increase in productivity among those countries with higher levels of political rights and civil liberties

transition in sub saharan africa agriculture urbanization and income growth abstract econometric analysis of some 40 years of data has provided mixed results because of the defects of the data and because there are some relatively sudden structural economic shifts an important shift is when agricultural labor ceases to grow now happening in sub saharan africa ssa a model of the interrelationship over time of the rural mainly agricultural sector and the urban mainly manufacturing and service sector is proposed each provides a market to the other growth in both requires investment but of distinctly different types their interaction results in an s shaped curve many ssa countries are in the acceleration phase and its agriculture particularly in semi arid areas is increasingly oriented to the growing home market case studies show farmers have invested and adopted new technologies but the transition to an urbanized economy has been hindered by poor policies the current need is for appropriate investments and policies to develop the productivity of the urban sectors so that they can continue to stimulate agriculture and provide jobs for those who are leaving farming

a micro model of the federal funds market this paper demonstrates that valuable insights into the determination of federal funds rates can be gained through modeling the micro decisions of market participants fed fund demand functions are derived for different bank valuation functions and several implications are discussed specifically it is i possible to rationalize the observation that large banks are net purchasers and small banks net sellers of fed funds ii to explain the positive spread of fed funds rates over other short term money market rates and iii to link the size of this spread to the federal reserve s underlying monetary policy strategy

the food problem and the evolution of international income levels in most poor countries large fractions of land labor and other productive resources are devoted to producing food for subsistence needs we show that a model incorporating the food problem can provide new and useful insights into the evolution of international income levels in particular we find that the food problem can explain why some countries started to realize increases in per capita output more than 250 years later in history than others we also show that the food problem has important implications for growth miracles and the speed at which a country converges to its balanced growth path

the eonia spread before and during the crisis of 2007 2009 the role of liquidity and credit risk abstract this paper provides an empirical assessment of the factors affecting the spread between the euro overnight index average eonia and the main policy rate of the european central bank ecb up until the period when lehman brothers collapsed in mid september 2008 the spread was small and positive after this point the liquidity surplus that developed from the fixed rate full allotment tendering arrangement in refinancing operations drove the widening of eonia spread trading below the ecb policy rate although other factors also played a significant role this paper explains the drivers of spread across alternative non crisis crisis regimes in addition the paper examines how the eonia spread reacts to shocks imposed on a range of liquidity and credit risk factors in alternative crisis non crisis regimes the results have implications for factors that should be monitored closely across both regimes and also the implications that this may have for steering an unsecured overnight rate in crisis times

another look at yield spreads the role of liquidity liquidity plays an important role in explaining how banks determine their allocation of funds this paper examines whether this fact can explain yield spreads and the term structure of interest rates the paper models banks demand for liquidity in a manner similar to that used to study household need for liquidity namely by using a cash in advance type model the paper finds that the shadow price of the cash in advance constraint plays an important role in determining yield spreads the empirical part of the paper shows that the expectations hypothesis might be salvaged under the maintained hypothesis concerning the liquidity premium and risk premium

discipline and liquidity in the interbank market using 20 years of panel data i demonstrate that high risk banks have consistently paid more than safe banks for interbank loans and have been less likely to use these loans as a source of liquidity the economic importance of this effect was relatively small until the mid 1990s when regulatory and institutional changes began to impose more of the costs of bank failure on uninsured creditors subsequently interbank market price discipline roughly doubled and risk based rationing effects increased by a factor of six in imposing this discipline lenders seem to care most about credit risk at borrowing institutions

tests of the expectations hypothesis resolving the anomalies when the short term rate is the federal funds rate abstract the expectations hypothesis eh of the term structure plays an important role in the analysis of monetary policy where shorter term rates are assumed to be determined by the market s expectation for the overnight federal funds rate with two exceptions tests using the effective federal funds rate as the short term rate easily reject the eh these exceptions are when the eh is tested over the nonborrowed reserve targeting period and when the test is performed only using data for settlement wednesdays the last day of bank reserve maintenance period this paper argues that these exceptions are anomalous in the former case the failure to reject the eh occurs when economic analysis suggests that the market should be less able to forecast the federal funds rate in the latter case it occurs when there are sharp spikes in the funds rate that cannot improve materially the market s ability to forecast the funds rate additional analysis shows that these anomalous results are a consequence of the procedure used to test the eh

comovements in volatility in the euro money market abstract this paper assesses the sources of volatility persistence in euro area money market interest rates and the existence of linkages relating volatility dynamics the main findings of the study are as follows firstly there is evidence of stationary long memory of similar degree in all series secondly there is evidence of fractional cointegration relationships relating all series except the overnight rate the common long memory factor analysis points to a two factor volatility curve the most important factor in terms of proportion of total variance explained can be interpreted as a level factor 64 of total variance while the other as a slope factor 13 of total variance impulse response analysis and forecast error variance decomposition finally point to non significant forward transmission of liquidity shocks

the daily market for funds in europe what has changed with the emu this paper shows that the existence of deposit and lending facilities combined with an averaging provision for the reserve requirement are powerful tools to stabilize the overnight rate we reach this conclusion by comparing the behavior of this rate in germany before and after the start of the emu the analysis of the german experience allows us to isolate the effects on the overnight rate of these particular instruments of monetary policy to illustrate that this outcome is a general conclusion and not a particular result of the german market we develop a theoretical model of reserve management which is able to reproduce our empirical findings

reserve regulation and recourse as a source of risk premia in the federal funds market abstract in this paper we demonstrate that there is a pronounced and persistent daily pattern of returns in the federal funds market centered on wednesday we present evidence that explains this phenomenon as a reflection of the optimal behavior of banks operating in an environment in which there are effective reserve requirements and a penalty cost for recourse to discount borrowing in particular we report empirical evidence that shows there was a significant upward shift in the amplitude of this pattern of daily returns that resulted from 1 the increase in uncertainty associated with the change in federal reserve operating procedures during the 1979 1982 period and 2 the imposition of a surcharge on discount borrowing instituted by the federal reserve our results demonstrate that what otherwise might be regarded as anomalous interest rate behavior is consistent with the optimal response of banks to the regulatory environment within which they operate

the effects of shifts in monetary policy and reserve accounting regimes on bank reserve management behavior in the federal funds market abstract this paper looks at the effects on fed fund rates and fed fund purchasing behavior of large banks resulting from i the 1982 regime switch from non borrowed to borrowed reserve targeting by the fed and ii the 1984 switch from lagged to almost contemporaneous reserve accounting cra whether we analyse changes in the interest rate or quantity dimensions the shift in monetary policy targets appeared to have had a more profound effect on the market for bank reserves than the shift in reserve accounting regime these results therefore tend to support the contention that a shift to cra by itself will have little effect on bank reserve management behavior unless combined with its logical counterpart a total reserves target

interest rate dispersion and volatility in the market for daily funds abstract the purpose of this paper is to study the determinants of equilibrium in the market for daily funds we use the eonia panel database which includes daily information on the lending rates applied by contributing commercial banks the data clearly show an increase in both the time series volatility and the cross section dispersion of rates towards the end of the reserve maintenance period these increases are highly correlated we design a model to account for these empirical facts our theoretical model shows how the operational framework of monetary policy causes a reduction in the elasticity of the supply of funds by banks throughout the reserve maintenance period this reduction in the elasticity together with market segmentation and heterogeneity is able to generate distributions for the interest rates and quantities traded with the same properties as in the data we also investigate the effects of the changes in the eurosystem s operational framework enacted on march 2004 for interest rate behaviour

a model based assessment of the impact of revitalised r d investments on the european power sector abstract this paper presents an analysis of the effect of enhanced research and development r d efforts for a set of low carbon power technologies on the development of the european energy sector it applies a methodology using the concept of two factor learning which quantitatively links trends in technology cost to both accumulated r d investments and production volumes the impacts of the latter on the energy sector are then simulated in a consistent manner with the poles global energy model on this basis it compares the total system costs of an assumed increase in worldwide r d investments that for the eu are in line with proposals made in its european strategic energy technology plan to a baseline development it finds that an increase in research efforts at a global level will contribute to reducing the costs of currently less mature low carbon technologies thus accelerating their market entry when comparing two scenarios that both fulfil the eu s 2020 energy and climate objectives and differing only in their r d investment levels the reduced technology costs allow eu support policies for renewables and carbon values to be reduced and the cumulative discounted benefit of the accelerated research efforts is positive in the long term

tests of the expectations hypothesis resolving the campbell shiller paradox one of the more puzzling results in the expectations hypothesis eh testing literature is the campbell shiller paradox csp in an influential paper campbell and shiller 1991 found that the slope of the term structure almost always gives a forecast in the wrong direction for the short term change in the yield on the longer bond but gives a forecast in the right direction for long term changes in short rates this paper provides an econometric resolution to the csp specifically it shows that by their construction these tests can generate results consistent with the csp if the eh does not holdnwhatever the reason monte carlo experiments confirm that this explanation can account for campbell and shiller s paradoxical results for most pairings of short term and long term rates considered

is agricultural productivity in developing countries really shrinking new evidence using a modified nonparametric approach abstract nonparametric productivity analyses performed to date show that most developing countries are experiencing relatively rapid technical regress in agriculture we discuss the plausibility of these results and argue that they stem from the existence of biased technical change and the definition of technology used we reestimate the malmquist index for a group of developing countries using a different definition of technology and find that most developing countries in our sample are experiencing positive productivity growth with technical change being the main source of this growth

technological learning in energy environment economy modelling a survey abstract this paper aims at providing an overview and a critical analysis of the technological learning concept and its incorporation in energy environment economy models a special emphasis is put on surveying and discussing through the so called learning curve both studies estimating learning rates in the energy field and studies incorporating endogenous technological learning in bottom up and top down models the survey of learning rate estimations gives special attention to interpreting and explaining the sources of variability of estimated rates which is shown to be mainly inherent in r d expenditures the problem of omitted variable bias the endogeneity relationship and the role of spillovers large scale models survey show that despite some methodological and computational complexity related to the non linearity and the non convexity associated with the learning curve incorporation results of the numerous modelling experiments give several new insights with regard to the analysis of the prospects of specific technological options and their cost decrease potential bottom up models and with regard to the analysis of strategic considerations especially inherent in the innovation and energy diffusion process in particular the energy sector s endogenous responses to environment policy instruments top down models

federal funds rate prediction we examine the forecasting performance of a range of time series models of the daily us effective federal funds ff rate recently proposed in the literature we find that i most of the models and predictor variables considered produce satisfactory oneday ahead forecasts of the ff rate ii the best forecasting model is a simple univariate model where the future ff rate is forecast using the current difference between the ff rate and its target iii combining the forecasts from various models generally yields modest improvements on the best performing model these results have a natural interpretation and clear policy implications

on the persistence of the eonia spread abstract the european overnight rate eonia signals the monetary policy stance of the european central bank controllability of the eonia requires that the persistence of the spread between the eonia and the key policy rate remains sufficiently low we apply fractional integration techniques to examine its changing persistence

international productivity patterns accounting for input quality infrastructure and research in this paper we present measures of land and labor productivity for a group of ninety eight developed and developing countries using an entirely new data set with annual observations spanning the past three decades the substantial cross country and intertemporal variation in productivity in our sample is linked to both natural and economic factors we extend previous work by dealing with multiple sources of systematic measurement error in conventional agricultural inputs the mix of conventional inputs indicators of quality of agricultural inputs and the amount of publicly provided infrastructure are all significant in explaining observed cross sectional differences in productivity patterns

liquidity regulation and the implementation of monetary policy in addition to revamping existing rules for bank capital basel iii introduces a new global framework for liquidity regulation one part of this framework is the liquidity coverage ratio lcr which requires banks to hold sufficient high quality liquid assets to survive a 30 day period of market stress as monetary policy typically involves targeting the interest rate on loans of one of these assets central bank reserves it is important to understand how this regulation may impact the efficacy of central banks current operational frameworks we introduce term funding and an lcr requirement into an otherwise standard model of monetary policy implementation our model shows that if banks face the possibility of an lcr shortfall then the usual link between open market operations and the overnight interest rate changes and the short end of the yield curve becomes steeper our results suggest that central banks may want to adjust their operational frameworks as the new regulation is implemented

the role of bank relationships in the interbank market this paper empirically explores the effect of bank lending relationships in the interbank market we use data from the e mid market that represents the only transparent electronic platform in europe and usa unaffected by search costs and other fictions we show that stable relationships exist and that they played a significant role during the 2007 2008 financial crisis trading with preferred counterparts is associated with more favorable rates for both lenders and borrowers and carries larger trading volumes the results point to a peer monitoring role of relationship lending which contributes at a time of financial distress to a smooth liquidity redistribution among banks relationship lending thus plays an important positive role for financial stability

total factor productivity growth in agriculture a malmquist index analysis of 93 countries 1980 2000 in this paper we examine levels and trends in agricultural output and productivity in 93 developed and developing countries that account for a major portion of the world population and agricultural output we make use of data drawn from the food and agriculture organization of the united nations and our study covers the period 1980 2000 due to the non availability of reliable input price data the study uses data envelopment analysis dea to derive malmquist productivity indexes the study examines trends in agricultural productivity over the period issues of catch up and convergence or in some cases possible divergence in productivity in agriculture are examined within a global framework the paper also derives the shadow prices and value shares that are implicit in the dea based malmquist productivity indices and examines the plausibility of their levels and trends over the study period

the revival of the expectations hypothesis of the us term structure of interest rates abstract us interest rate data from 1987 to 1995 show a substantial predictive power of the spread for the short rate in line with the expectations hypothesis the estimation of a mccallum policy reaction model supports our conjecture that this striking result can be attributed to the adoption of the spread as an indicator for us monetary policy since the late eighties 1997 elsevier science s a

the meta production function approach to technological change in world agriculture abstract an alternative meta production function for agriculture is estimated with the cross section data for 43 countries and three years 1960 1970 and 1980 constructed and used by kawagoe hayami and ruttan and hayami and ruttan in their studies by allowing for country specific efficiency factors and using a flexible functional form the transcendental logarithmic production function strikingly different results from those of kawagoe hayami and ruttan are obtained in particular it is found that elasticity of output with respect to machinery is variable and the degree of local returns to scale is not constant and increases with the usage of machinery

the impact of r d on innovation for wind energy in denmark germany and the united kingdom this paper examines the impact of public research and development r d support on cost reducing innovation for wind turbine farms in denmark germany and the united kingdom uk first we survey the literature in this field the literature indicates that in denmark r d policy has been more successful than in germany or the uk in promoting innovation of wind turbines furthermore such studies point out that subsidy induced capacity expansions were more effective in the uk and denmark in promoting cost reducing innovation than in germany the second part of the paper describes the quantitative analysis of the impact of r d and capacity expansion on innovation this is calculated using the two factor learning curve 2flc model in which investment cost reductions are explained by cumulative capacity and the r d based knowledge stock time series data were collected for the three countries and organized as a panel data set the parameters of the 2flc model were estimated focusing on the homogeneity and heterogeneity of the parameters across countries we arrived at robust estimations of a learning by doing rate of 5 4 and a learning by searching rate of 12 6 the analysis underlines the homogeneity of the learning parameters enhancing the validity of the 2flc formulation

the micromechanics of the federal funds market implications for day of the week effects in funds rate variability the federal funds rate arguably is the most important interest rate in the u s capital market because it plays a central role in monetary policy and the term structure this paper examines the micromechanics of the funds market we show that in a continuous market with asynchronous trading regulatory constraints and accounting conventions that focus agents attention on discrete time instants have important implications for the dynamics of trading activity and realized market prices we also exhibit a model of the market that explains observed regularities in the intertemporal behavior of the funds rate

a daily view of yield spreads and short term interest rate movements daily data on short term interest rates are used to show how changes in federal reserve operating procedures have affected the term structure yield spreads were helpful in predicting short term interest rate movements during the nonborrowed reserves targeting period 1979 82 but not during the earlier federal funds targeting period since the adoption of contemporaneous reserves accounting in 1984 yield spreads have been informative about short term interest rate movements principally because of the interplay between the market determination of the overnight funds rate on reserve settlement wednesdays and the fed s apparent commitment to stabilizing the funds rate on other days copyright 1996 by ohio state university press

the over the counter theory of the fed funds market a primer we present a dynamic over the counter model of the fed funds market and use it to study the determination of the fed funds rate the volume of loans traded and the intraday evolution of the distribution of reserve balances across banks we also investigate the implications of changes in the market structure as well as the effects of central bank policy instruments such as open market operations the discount window lending rate and the interest rate on bank reserves

day of the week effects in federal funds rates further empirical findings abstract we extend the spindt and hoffmeister 1988 model of the daily operation of an institution s federal reserve account to show strong inter and intra period incentives to borrow and lend in the federal funds market at predictable points in the 10 trading day settlement period using intraday high and low prices we demonstrate changes in the federal funds rate consistent with our model s predictions we provide evidence of predictable changes in the variance of fed funds returns on a daily and intraday basis our analysis confirms that federal reserve requirements result in daily and intraday variances which are not constant

interest rate targeting and the dynamics of short term rates a feature of u s monetary policy has been active targeting of overnight fed funds rates the authors show that during a period of tight targeting 1989 96 term fed funds spreads from the target displayed pronounced volatility and persistence which increase with the maturity of the loan they show that the increase in persistence is consistent with a model of infrequent but predictable revisions of the target in the authors model the autoco variance of the spreads of term fed funds rates from the target increases with the maturity because longer term rates reflect persistent expectations of the next target change coauthors are giuseppe bertola silverio foresi and leora klapper

productivity growth in world agriculture sources and constraints during the last half century advances in crop production came from expansion in areas irrigated from more intensive application of fertilizers and crop protection chemicals and from crop varieties that were more responsive to technical inputs and management advances in animal production came from genetic improvements and advances in animal nutrition differences among developed and developing countries in output per hectare and per worker have widened if these gaps are to be narrowed agricultural research capacity in developing countries will have to be substantially strengthened

the response of term rates to fed announcements in february 4 1994 the federal reserve began the practice of announcing changes in the targeted level for the federal funds rate immediately after such decisions were made this paper investigates to what extent the policy of the announcement affected a key ingredient in the monetary transmission mechanism the term structure of nominally risk free treasury securities we find that term rates react much more in unison during announcement days than at any other time moreover the practice of circumscribing almost all changes in the federal funds rate target to federal open market committee fomc meeting dates regiments the formation of market expectations in the overnight rate and the price discovery process of term rates thus facilitating the fed s goal of controlling long term rates

trends in rainfall and economic growth in africa a neglected cause of the african growth tragedy abstract we examine the role of rainfall trends in poor growth performance of sub saharan african nations relative to other developing countries using a new cross country panel climatic data set in an empirical economic growth framework our results show that rainfall has been a significant determinant of poor economic growth for african nations but not for other countries depending on the benchmark measure of potential rainfall we estimate that the direct impact under the scenario of no decline in rainfall would have resulted in a reduction of between around 15 and 40 of today s gap in african gdp per capita relative to the rest of the developing world

the intercountry agricultural production function and productivity differences among countries abstract the sources of differences in labor productivity in agriculture between developed countries dc s and less developed countries ldc s are identified by estimating an aggregate agricultural production function based on cross county data for 1960 1970 and 1980 the production function was found to be stable over the entire period agriculture in the dc s was characterized by increasing returns and in the ldc s by constant returns to scale the results imply that unfavorable man land ratios do not represent an immediate barrier to rapid agricultural development in the low income ldc s but they may create a serious agricultural adjustment problem as those countries advance into the middle income range

day to day monetary policy and the volatility of the federal funds rate we propose a model of the interbank money market with an explicit role for central bank intervention and periodic reserve requirements and study the interaction of profit maximizing banks with a central bank targeting interest rates at high frequency the model yields predictions on biweekly patterns of the federal funds rate s volatility and on its response to changes in target rates and in intervention procedures such as those implemented by the fed in 1994 theoretical results are consistent with empirical patterns of interest rate volatility in the u s market for federal funds

cross country disparity in agricultural productivity quantifying the role of modern seed adoption inequality of agricultural labour productivity across the developing world has increased substantially over the past 40 years this article asks to what extent did the diffusion of green revolution seed varieties contribute to increasing agricultural labour productivity disparity across the developing countries we find that 22 per cent of cross country variation in agricultural labour productivity can be attributed to the diffusion of high yielding seed varieties across countries and that the impact of such diffusion differed significantly across regions we discuss the implications of these findings for policy directed at increasing agricultural labour productivity in the developing world

endogenous technological change and the policy mix in renewable power generation abstract this paper introduces the renewable power generation module which complements large scale macro econometric input output models by introducing technological change endogenously into the model so far technological change in renewable power generation technologies is either set exogenously autonomous energy improving technological change or price induced in economic models introducing endogenous technological change is necessary to adequately analyze not only the direct effects but also the indirect effects on important macro economic indicators such as growth employment welfare and trade as well as their feedback to the electricity sector the development of pv module and wind turbine prices is modeled using learning curves at the global scale i e depending on global capacity installed of each of these technologies national capacity additions in turn depend on global prices national policies and economic development while demand pull policies enhance capacity installations technology push policies do not seem to have a significant direct influence the empirical results confirm the overshooting of pv installations in germany which can be slowed down by introducing degression of feed in tariffs over time

overbidding in fixed rate tenders an empirical assessment of alternative explanations abstract this paper investigates various theories explaining banks overbidding in the fixed rate tenders of the european central bank ecb using auction data from both the bundesbank and the ecb we show that none of the theories can on its own explain the observed overbidding this implies that the proposed new rules by the ecb aimed at neutralizing interest rate expectations would not eliminate overbidding if the rationing rule in the fixed rate tenders remains unchanged

day to day monetary policy and the volatility of the federal funds interest rate we propose a model of the interbank money market with an explicit role for central bank intervention and periodic reserve requirements and study the interaction of profit maximizing banks with a central bank targeting interest rates at high frequency the model yields predictions on biweekly patterns of the federal funds rate s volatility and on its response to changes in target rates and in intervention procedures such as those implemented by the fed in 1994 theoretical results are consistent with empirical patterns of interest rate volatility in the u s market for federal funds

explaining the failures of the term spread models of the rational expectations hypothesis of the term structure contrary to the predictions of the rational expectations hypothesis of the term structure of interest rates empirical evidence suggests that the term spread between long and short rates fails to forecast future movements of long term rates although its forecasts of future short term rates are in the correct direction in this paper the authors show that this puzzling behavior of the term spread alone can be explained by a time varying term premium that is correlated with the term spread once this is accounted for neither expression of the expectations hypothesis is against the predictions of the theory copyright 1997 by ohio state university press

monetary policy implementation and the federal funds rate this paper investigates how the implementation of monetary policy affects the dynamics and the volatility of the federal funds rate since the early 1980s the most important changes in the fed s conduct of monetary policy refer to the role of the federal funds rate target and the reserve requirement system we show that the improved communication and transparency regarding the federal funds rate target has significantly increased the fed s influence on the federal funds rate since 1994 by contrast the declining role of required reserves in the u s has contributed to higher federal funds rate volatility our results suggest that the planned introduction of remunerated reserves will further enhance the controllability of the federal funds rate

monetary policy predictability in the euro area an international comparison we evaluate the ability of market participants to anticipate monetary policy decisions in 14 countries first by looking at both the magnitude and volatility of changes in the money market rates we show that the days of policy meetings are special days for financial markets second we find that the predictability of federal reserve fed bank of england and european central bank ecb is fully comparable finally an econometric analysis of the ability of market participants to incorporate in the current short term interest rates the expected policy changes shows that in the euro area and in other countries policy decisions are anticipated well in advance

plant breeding and poverty can transgenic seeds replicate the green revolution as a source of gains for the poor 1 abstract improved farm technology helps all main groups of the poor small farmers farmworkers other low wage labour when it raises labour value productivity but raises land and or water value productivity faster and cuts staples prices but raises smallholders total factor productivity faster from 1965 the green revolution walked these two tightropes largely by luck though targeting bigger piles of rice and wheat it cut poverty through consumption nutrition smallholder income employment risk reduction and ecological sustainability yet large areas were left out and from 1985 progress slowed in the new environment for research and agriculture how can transgenics revive and spread poverty reduction what has been the evidence so far what determines whether new varieties have traits conducive to poverty reduction who owns the research or what crop science is

the term structure of very short term rates new evidence for the expectations hypothesis abstract empirical researchers have frequently rejected the expectations hypothesis the expectations hypothesis however has seldom if ever been tested at the extreme short end of the term structure where maturities are measured in days or weeks using overnight weekly and monthly repo rates i find that term rates are almost unbiased estimates of the average overnight rate this evidence provides new support for the expectations hypothesis

agricultural productivity in developing countries abstract this paper examines changes in agricultural productivity in 18 developing countries over the period 1961 1985 we use a nonparametric output based malmquist index and a parametric variable coefficients cobb douglas production function to examine whether our estimates confirm results from other studies that have indicated declining agricultural productivity in ldcs the results confirm previous findings indicating that at least half of these countries have experienced productivity declines in agriculture

the impact of return on collateral in a channel system we empirically investigate the relationship between the return on collateral and monetary policy implementation in the channel system recent developments in monetary theory suggest that the return on government assets which measures the opportunity cost of holding collateral should have negative impacts on the interest rate spread and the interbank market rate the central bank should set a higher spread when the return on collateral is below a cutoff but implements a lower spread when the return on collateral is higher than the cutoff the interbank market rate tends to lie above the policy target rate when the return on collateral is low and vice versa we use data from eurozone area and six industrialized countries to test these theoretical implications we propose two econometric models one is more structural and closely related to the monetary model to test the negative relationships and the other is based on the threshold autoregression model to detect the potential cutoffs our findings provide conditional support for the negative impact of return on collateral jel e40 e52 e58

endogenous term premia and anomalies in the term structure of interest rates explaining the predictability smile abstract numerous studies have documented a predictability smile in the post war term structure of interest rates spreads between long rates and short rates predict subsequent movements in short rates provided the long horizon is less than three months or greater than two years but not for intermediate maturities proposed explanations of the smile involve interest rate smoothing by the fed time varying risk premia peso problems and measurement error we show that despite their highly restrictive nature some parameterizations of the cox ingersoll ross cir and chen scott cs models of the term structure can account for the predictability smile cir and cs parameterizations which are consistent with the smile regularity are inconsistent with other features of the data however

monetary policy implementation and overnight rate persistence overnight money market rates are the predominant operational target of monetary policy as a consequence central banks have redesigned the implementation of monetary policy to keep the deviations of the overnight rate from the key policy rate small and short lived this paper uses fractional integration techniques to explore how the operational framework of four major central banks afiects the persistence of overnight rates our results suggest that a well communicated and transparent interest rate target of the central bank is a particularly important condition for a low degree of overnight rate persistence

forward looking behavior in ecb liquidity auctions evidence from the pre crisis period abstract using data from the pre crisis period we investigate banks joint bidding behavior in the ecb s main refinancing operations mro and longer term refinancing operations ltro we test whether banks bid at lower rates in mros before the ltro and at higher rates after the ltro compared to other operations we motivate this by findings from the auction literature suggesting that agents bidding behavior is forward looking and takes sequences of future auctions into account we offer two findings first we find that in general banks bid in the mro before the ltro at lower rates as compared to other mros moreover mro participants that also bid in the following ltro bid at even lower rates compared to peers not bidding in the ltro these findings support the hypothesis that banks view obtaining liquidity from the two operations as a substitute second we find that banks generally bid more aggressively in the mro after the ltro banks that participated also in the ltro preceding the mro bid at substantially higher rates these findings reflect that short banks with potentially large net liquidity needs in the mro after the ltro bid more aggressively although size plays a considerable role for bidding behavior the conclusions are valid for banks of different sizes

financial integration of east asian economies evidence from real interest parity in this article we investigate the financial linkages between the east asian economies with japan and the united states we test for long run real interest rate parity rip using an array of panel data techniques including recent techniques developed by breuer et al 2002 and carrion i silvestre et al 2005 this study offers two important results first the failure to account for structural breaks in the industrialized countries and asian emerging economies is likely to provide evidence of nonstationary series that are stationary second we found strong evidence that the parity condition holds in all the asian countries the failure of earlier studies to confirm mean reversion of real interest rate differential rid may reflect the choice of estimation testing procedure rather than any inherent deficiency in the rip

dynamics of energy technologies and global change technological choices largely determine the long term characteristics of industrial society including impacts on the natural environment however the treatment of technology in existing models that are used to project economic and environmental futures remains highly stylized based on work over two decades at iiasa we present a useful typology for technology analysis and discuss methods that can be used to analyze the impact of technological changes on the global environment especially global warming our focus is energy technologies the main source of many atmospheric environmental problems we show that much improved treatment of technology is possible with a combination of historical analysis and new modeling techniques in the historical record we identify characteristic l such network e ects yield high barriers to entry even for superior competitors these simple observations allow three improvements to modeling of technological change and its consequences for global environmental change one is that the replacement of long lived infrastructures over time has also replaced the fuels that power the economy to yield progressively more energy per unit of carbon pollution from coal to oil to gas such replacement has d they also include endogenous generation of s we show that doing so can yield projections with lessened environmental impacts without necessarily incurring negative e ect on the economy arriving on that path by the year 2100 depends on intervening actions such as incentives to promote greater diversity in technology and lower barriers to entry for new infrastructures that could accelerate historical trends of decarbonization 1999 elsevier science ltd all rights reserved

the term structure of commercial paper rates this paper tests the expectations hypothesis in the market for commercial paper our main dataset which is new to the literature consists of daily indexes constructed from the actual market yields for nearly all commercial paper issued by u s corporations between january 1998 and august 2003 we show that the term premia built into commercial paper yields rise dramatically at year end causing the expectations hypothesis to be rejected however once we control for these predictable year end eects we nd the reverse that commercial paper yields largely conform with the expectations hypothesis