interpreting economic time series this paper explores some of the implications for econometric practice of the principle that people s observed behavior will change when their constraints change in dynamic contexts a proper definition of people s constraints includes among them laws of motion that describe the evolution of the taxes they must pay and the prices of the goods that they buy and sell changes in agents perceptions of these laws of motion or constraints will in general produce changes in the schedules that describe the choices they make as a function of the information that they possess until very recently received dynamic econometric practice ignored this principle the practice of dynamic econometrics should be changed so that it is consistent with the principle that people s rules of choice are influenced by their constraints this is a substantial undertaking and involves major adjustments in the ways that we formulate estimate and simulate econometric models

testing an alternative habit persistence model marshall long ago noted the phenomenon of past consumption being highly correlated with current consumption if habit was indeed a major determinant of current consumption behavior then the neoclassical theory of utility maximization should take it into account a rigorous incorporation of habit formation into consumer theory began with gorman 12 pollak 21 22 23 laid out the theoretical conditions that needed to be satisfied in order for habit persistence to be consistent with the utility maximizing model of consumer behavior competent empirical work in this area was done initially by houthakker and taylor 14 with subsequent studies by manser 16 phlips 18 19 pollak and wales 24 anderson and blundell 2 and blanciforti and green 8 these papers have focused on examining the impact of measured past consumption on current consumption blundell 9 provides a comprehensive review of this literature

oil vulnerability index of oil importing countries abstract this paper assesses the relative oil vulnerability of 26 net oil importing countries for the year 2004 on the basis of various indicators the ratio of value of oil imports to gross domestic product gdp oil consumption per unit of gdp gdp per capita and oil share in total energy supply ratio of domestic reserves to oil consumption exposure to geopolitical oil market concentration risks as measured by net oil import dependence diversification of supply sources political risk in oil supplying countries and market liquidity the approach using the principal component technique has been adopted to combine these individual indicators into a composite index of oil vulnerability such an index captures the relative sensitivity of various economies towards developments of the international oil market with a higher index indicating higher vulnerability the results show that there are considerable differences in the values of individual indicators of oil vulnerability and overall oil vulnerability index among the countries both inter and intraregional

seigniorage operating rules and the high inflation trap there may be both a high and a low inflation equilibrium when the government finances the deficit through seigniorage under rational expectations the high inflation equilibrium is stable and the low inflation equilibrium unstable under adaptive expectations or lagged adjustment of money balances with rational expectations the low inflation equilibrium may be stable adding bond financing dual equilibria remain if the government fixes the real interest rate but a unique equilibrium is attained when the government sets a nominal anchor for the economy the existence of dual equilibria is thus a result of the government s operating rules

escape dynamics in learning models this article illustrates and characterizes how adaptive learning can lead to recurrent large fluctuations learning models have typically focused on the convergence of beliefs towards an equilibrium however in stochastic environments there may be rare but recurrent episodes where shocks cause beliefs to escape from the equilibrium generating large movements in observed outcomes i characterize the escape dynamics by drawing on the theory of large deviations developing new results which make this theory directly applicable in a class of learning models the likelihood frequency and most likely direction of escapes are all characterized by a deterministic control problem i illustrate my results with two simple examples

the optimality of tariff quotas under uncertainty abstract a tariff quota is a schedule of tariffs in which the tariff rate steps upward as imports exceed some critical quantity or value this has desirable properties in the face of uncertainty about domestic demand and supply and about foreign supply we show that a specific ad valorem tariff quota is the policy maximizing domestic expected surplus subject to constraints on average imports import expenditure and on the average amount by which imports import expenditure exceed some critical value

good luck or good policy an expectational theory of macro volatility switches abstract in an otherwise unique equilibrium model agents are segmented into a few informational islands according to the signal they receive about others expectations even if agents perfectly observe fundamentals rational exuberance equilibria rex can arise as they put weight on expectational signals to refine their forecasts constant gain adaptive learning can trigger jumps between the equilibrium where only fundamentals are weighted and a rex this determines regime switching in macro volatility despite unchanged monetary policy and time invariant distribution of exogenous shocks in this context a tight inflation targeting policy can lower expectational complementarity preventing rational exuberance although its effect is non monotone

behavioral learning equilibria we propose behavioral learning equilibria where boundedly rational agents learn to use a simple univariate linear forecasting rule with correctly specified unconditional mean and first order autocorrelation in the long run agents learn the best univariate linear forecasting rule without fully recognizing the more complex structure of the economy an important feature of behavioral learning equilibria is simplicity and parsimony which makes coordination of individual expectations on such an aggregate outcome more likely in a first application an asset pricing model driven by ar 1 ar 1 dividends a unique behavioral learning equilibrium exists characterized by high persistence and excess volatility and it is stable under learning in a second application the new keynesian phillips curve multiple equilibria coexist learning exhibits path dependence and inflation may switch between low and high persistence regimes

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

assessing the energy vulnerability case of industrialised countries the emergence of new big consumer countries on the energy markets and the perspective of oil and gas depletion at the end of the current century raise the concerns about fair distribution of the remaining resources for the common and sustainable wellbeing of the mankind high volatility of energy prices discourages the investment and delays the energy technology transition voluntary measures are needed mainly in industrialised countries in order to develop alternative and sustainable energy sources to enable technology transfer towards emerging and developing countries and to avoid struggle for energy procurement in this paper a composite index of energy demand supply weaknesses is defined as a proxy of energy vulnerability the proposed index is based on several indicators such as energy intensity oil and gas import dependency co2 content of primary energy supply electricity supply weaknesses and non diversity in transport fuels the assessment of this composite index for selected industrialised countries is discussed as well as the sensitivity to various factors

a semi nonparametric approach to the demand for uk monetary assets we estimate an asymptotically ideal model of the demand for uk personal sector monetary assets we use data that are consistent with utility maximizing behaviour and find that uk monetary assets are generally substitutes in use the estimated elasticities of substitution during the 1980s and the early 1990s indicate that a relatively broad monetary aggregate should be used in economic studies the results also suggest that any policy based on interest or user cost elasticities of substitution between financial assets should be based on the morishima elasticities as the allen uzawa calculation can give misleading results

disinflations in a model of imperfectly anchored expectations abstract we study disinflations under imperfect credibility of the central bank we propose a framework to model imperfectly credible announcements and use it to study the distribution of the output cost for a given disinflation imperfect credibility is modeled as the extent to which agents rely on adaptive learning to form expectations lower credibility increases the mean variance and skewness of the distribution of the sacrifice ratio when credibility is low disinflations become very costly for adverse realizations of the shocks but an opportunistic disinflation a disinflation implemented after a period of below trend inflation can significantly lower the sacrifice ratio with simulated data we reinterpret the reduced form evidence in sacrifice ratio regressions coefficient estimates from these regressions can be misleading for policymakers considering the cost of disinflation

quota induced cycles we present a new framework to compare the dynamic effect of tariffs and quotas in the presence of oligopoly suppose that the domestic and the foreign firm play a quantity setting game over time in a perfectly stationary economy a markov perfect equilibrium has the foreign firm exporting at the constant rate under a tariff in contrast under the quota the rate of exports changes monotonically over the course of each year causing seasonal fluctuations in domestic production quota induced cycles can make dynamic market segmentation possible and raise profits for both the firms above what they earn under the equal import tariff

seigniorage and the case for national money in countries with high rates of inflation there is typically movement away from the use of the local currency the paper analyzes the costs and benefits of using a local currency with emphasis on the seigniorage foregone by using a foreign money even if it should be desirable for a country to fix its exchange rate it still loses seigniorage if it does not use its own money the case for using a foreign money then turns largely on the superior discipline imposed on domestic policymakers by removing their control over the money supply alternative methods of imposing discipline are discussed estimates of the amount of seigniorage raised by different governments are presented seigniorage amounts in some cases to about 10 percent of government revenue estimates are also presented of both the annual flow and one time stock costs of giving up use of domestic currencies and instead using the dollar the flow cost is typically about 1 percent of gnp and the stock cost is around 10 percent of gnp

habit formation and demand for sugar sweetened beverages using scanner data we estimated demand for nine nonalcoholic beverages under habit formation we found strong evidence for habit formation although demand for sugar sweetened beverages by low income households is less elastic to own price changes compared with high income households there is evidence that high income households consider beverages to be more substitutable than low income households do a half cent per ounce tax on store purchased sugar sweetened beverages will result in a moderate reduction in consumption of sugar sweetened beverages for both income strata because of habit formation long run national tax revenue from a sugar sweetened beverage tax is about 15 to 20 lower than short run revenue

empirical modelling of the aggregation error in the representative consumer model this paper examines different approaches to modelling the aggregation error associated with the representative consumer model each approach is based on an analytical framework intended for modelling aggregate time series data on quantities and prices with potential additional measures of income distribution simple functions that track aggregation error over time are found to perform better than more complex and theoretically sophisticated models an explanation is given based on typical time series characteristics of economic data

voluntary export restraints and rationing u k leather footwear imports from eastern europe following the imposition of a quantitative import restriction someone somewhere must be quantity rationed concentrating on demand we develop methods to test and allow for the presence of rationing in the estimation of demand equations and in the calculation of the welfare effects of quantitative restrictions using a ces model we analyse the voluntary export restraints on u k imports of two types of leather footwear from comecon countries the results suggest that even if prices did not rise to clear the market u k consumers could have lost up to 60 million in 1986 from these restrictions

vers and expectations extensions and evidence this paper analyses the effects of an expected future voluntary export restraint on the level of firms current exports to a market the traditional result that current exports increase is shown to depend on the degree of collusion in the exporting industry and the anticipated restrictiveness of the ver the former relationship is tested by reference to the effect of ec import surveillance on its imports surveillance is argued to indicate an increased probability of a ver in the future and it is found that while competitive industries respond to it by increasing exports to the ec less competitive ones curtail exports this constitutes one of the few empirical tests of the strategic part of strategic trade policy

learning large deviations and recurrent currency crises this article studies a version of obstfeld s journal of international economics 43 1997 61 77 escape clause model the model is calibrated to produce three rational expectations equilibria two of these equilibria are e stable and one is unstable dynamics are introduced by assuming that agents must learn about the government s decision rule it is assumed they do this using a stochastic approximation algorithm it turns out that as a certain parameter describing the sensitivity of beliefs to new information gets small the algorithm converges to a small noise diffusion process the dynamics of exchange rate changes are then characterized using large deviation techniques from freidlin and wentzell random perturbations of dynamical systems second edition berlin springer verlag 1998 these methods describe the sense in which the limiting distribution of exchange rate changes is approximated by a two state markov switching process where the two states correspond to the two e stable equilibria the model is calibrated to the exchange rate histories of argentina brazil and mexico currency crises in these countries resemble the predicted escape routes of the model a key feature of these escape routes is that expectations of a devaluation erupt suddenly without large contemporaneous shocks this is consistent with evidence showing that crises are often poorly anticipated by financial markets

learning and price volatility in duopoly models of resource depletion the aim of this paper is to provide a theoretical model that can account for price fluctuations in depletable resource markets we do so by introducing learning into a hotelling style duopoly model of optimal resource depletion before the depletable resource becomes scarce the self confirming equilibrium of the model mirrors noncooperative rational expectations equilibrium in that supply is high and price is low although learning does induce occasional upward price spikes that are followed by a long period of falling price once the depletable resource becomes scarce the dynamics of the market change significantly with the self confirming equilibrium mirroring the cooperative rather than noncooperative rational expectations equilibrium supply is low and price is high price spikes still occur but against a background of increasing prices when scarcity is sufficient then the market is permanently in a self confirming equilibrium that is equivalent to cooperative rational expectations equilibrium

sleeping quotas pre emptive quota bidding and monopoly power abstract we rationalize the puzzling existence of binding quotas that are not fully utilized our model has its roots in bhagwati 1965 in r baldwin et al eds trade growth and the balance of payments essays in honor of g haberler mit press new york on tariffs quotas equivalence and is related to the io literature on preemption we study the conditions that lead a monopolist facing a quota restricted market to buy the quota licenses itself and the conditions under which they may remain unused the divisibility of the quota is crucial for the monopolist to pre emptively buy the quota furthermore we study the implications of use it orlose it clauses commonly imposed on auctioned quotas

self confirming equilibrium and the lucas critique we examine the role of off path superstitions in macro economics and show how a false belief about off path play is the key element underlying both the lucas critique and the game theoretic concept of self confirming equilibrium however the impact of false beliefs in these two cases is different in the lucas case a policy maker s incorrect beliefs about off path play can lead to the adoption of mistaken policy innovation however the consequences of such an innovation provide evidence that the belief that motivated them was wrong in contrast play may never escape an undesirable self confirming equilibrium as the action implied by the mistaken belief does not generate data that contradicts it escape from the self confirming equilibrium requires that players do a sufficient amount of experimentation with off path actions

what explains the great moderation in the u s a structural analysis this paper investigates what has caused output and inflation volatility to fall in the u s using a small scale structural model using bayesian techniques and rolling samples there are instabilities in the posterior of the parameters describing the private sector the policy rule and the variance of the shocks results are robust to the specification of the policy rule changes in the parameters describing the private sector are the largest but those of the policy rule and the covariance matrix of the shocks explain the changes most jel e52 e47 c53

the conquest of south american inflation we infer determinants of latin american hyperinflations and stabilizations by using the method of maximum likelihood to estimate a hidden markov model that assigns roles both to fundamentals in the form of government deficits that are financed by money creation and to destabilizing expectations dynamics that can occasionally divorce inflation from fundamentals levels and conditional volatilities of monetized deficits drove most hyperinflations and stabilizations with a notable exception in peru where a cosmetic reform of the type emphasized by marcet and nicolini occurred

price premium for high efficiency refrigerators and calculation of price elasticities for close substitutes a methodology using hedonic pricing and demand systems this article uses the hedonic pricing method to estimate the price premium paid for the highest energy efficiency label a in the refrigerators market of the basque autonomous community spain the estimated figure is 8 9 of the final price or about 60 euro which represents one third of the energy savings that a consumer gets during the lifetime of a refrigerator with the highest energy efficiency label this figure is then combined with the linear version of the almost ideal demand system la aids to obtain own and cross price elasticities of demand the information presented here is useful for policy design and analysis the results indicate that the demand for refrigerators with the highest energy efficiency label is highly sensitive to price variations

simple tests of distributional effects on macroeconomic equations the presence of distributional effects in macroeconomic equations is shown to coincide with nonlinearity in micro behavioral relationships parameters estimated with aggregate data as in representative agent models contain distributional biases that are not measurable using aggregate data alone tests for distributional effects and other measures of the extent of aggregation problems are derived using distributional data observed over time significant distributional effects are noted for a model of annual aggregate u s commodity expenditure data a static model that accommodates individual heterogeneity is found to be statistically equivalent to a simply dynamic model that accommodates first order autocorrelation

the relative inefficiency of quotas the cheese case the nonequivalence of tariffs and quotas under a wide variety of circumstances is well established in economic theory this study considers heterogeneity as a source of nonequivalence and demonstrates its practical importance where restriction is inevitable the bias of economists in favor of price instruments is not thoroughly grounded this study should help provide a foundation the point of departure from the equivalence model is differentiation of products

fiscal policymaking and the central bank institutional constraint una vez mas new latin american evidence evidence on the degree to which central bank independence can constrain government budget deficits remains surprisingly scarce this paper finds empirical support for the importance of the central institutional constraint for a 14 country sample of latin american countries over 1990 2012 these results suggest that greater central bank autonomy has indeed helped reign in fiscal excesses in a region that has been plagued by inflationary deficit expansion for much of the post war period the ability to potentially discipline government policy adds to an independent central bank s inherent role in adding to the checks and balances essential to a well functioning democracy

learning hypothesis testing and rational expectations equilibrium abstract foster and young 2003 provide a model of learning by hypothesis testing that spends almost all of the time approximating nash equilibria of a repeated game here i extend this learning model to a macroeconomic setting where agents decisions are informed by hypotheses they hold regarding the economy they periodically test these hypotheses against observed data and replace them if they fail under certain conditions agents who learn in this way spend a large fraction of the time approximating rational expectations equilibria

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

diversity and ignorance in electricity supply investment addressing the solution rather than the problem the need for diversity has been cited as a rationale for important recent investment decisions in the uk electricity supply sector it is invoked as the principal argument for continuing major government intervention yet there exists no formal analytical basis for the concept why is diversity good what is meant by diversification what is it that must be diversified what trade off should be struck between diversity and other measures of performance the resulting ambiguity causes confusion and is vulnerable to special pleading despite this this paper argues that diversification offers a superior alternative to probabilistic approaches towards uncertainty and ignorance in electricity supply investments and proposes a formal analytical approach a quantitative index of diversity is borrowed from information theory and used to derive a value for the government s implicit willingness to pay for diversity in the uk electricity supply mix this is then applied in a pilot exercise to the problem of optimizing the diversity and financial performance of the supply portfolio although provisional the results are relevant to the government s forthcoming nuclear review particularly in assessing the relative levels of support for nuclear power and renewable energy

learning adaptive expectations and technology shocks this study explores the macroeconomic implications of adaptive expectations in a standard growth model we show that the self confirming equilibrium under adaptive expectations is the same as the steady state rational expectations equilibrium for all admissible parameter values but that dynamics around the steady state are substantially different between the two equilibria the differences are driven mainly by the dampened wealth effect and the strengthened intertemporal substitution effect not by escapes emphasised by williams 2003 consequently adaptive expectations can be an important source of frictions that amplify and propagate technology shocks and seem promising for generating plausible labour market dynamics

fishing quota markets abstract in 1986 new zealand responded to the open access problem by establishing the world s largest individual transferable quota itq system using a 15 year panel dataset from new zealand that covers 33 species and more than 150 markets for fishing quotas we assess trends in market activity price dispersion and the fundamentals determining quota prices we find that market activity is sufficiently high in the economically important markets and that price dispersion has decreased we also find evidence of economically rational behavior through the relationship between quota lease and sale prices and fishing output and input prices ecological variability and market interest rates controlling for these factors our results show a greater increase in quota prices for fish stocks that faced significant reductions consistent with increased profitability due to rationalization overall this suggests that these markets are operating reasonably well implying that itqs can be effective instruments for efficient fisheries management

foreign investment quotas and rent extraction under uncertainty abstract this study examines the effects of quantitative restrictions on foreign firms entry into a domestic industry foreign firms investment policy and the equilibrium value of their entry right are studied under various rationing and rent extracting schemes when foreign firms are left free to compete for the scarcity rents induced by a quota their policy exhibits a suboptimal rent run entry occurs at the optimal pace only until a threshold level of investment is reached the last group of firms enters early and dumps output at below marginal cost

quota licenses for imported capital equipment could bureaucrats ever do better than the market abstract despite valid criticisms many developing countries have issued non transferable import licenses to a limited number of final good producers so as to restrict imports of an input such as capital equipment this paper demonstrates that for a given import quota such licensing restrictions can actually increase domestic production of both the input and the final product but at the cost of reduced quota rents under pure competition domestic welfare falls relative to the use of marketable quota licenses but if foreigners would get the quota rents or if external economies cause decreasing costs then bureaucratic allocation can dominate

adaptive behavior and economic theory the relationship between psychological and economic views of behavior once a subject of heavy dispute is now understood in a very similar way by practitioners of both these disciplines and of our sister social sciences in general terms we view or model an individual as a collection of decision rules rules that dictate the action to be taken in given situations and a set of preferences used to evaluate the outcomes arising from particular situation action combinations these decision rules are continuously under review and revision new decision rules are tried and tested against experience and rules that produce desirable outcomes supplant those that do not i use the term adaptive to refer to this trial anderror process through which our modes of behavior are determined if one is interested in modeling particular decisions in any very explicit way it is obviously necessary to think about rather narrow aspects of an individual s entire set of decision rules his or her personality experimental psychology has traditionally focused on the adaptive process by which decision rules are replaced by others in this tradition the influence of the subject s or as an economist says the agent s preferences this essay uses a series of examples to illustrate the use of rationality and adaptation in economic theory it is argued that these hypotheses are complementary and that stability theories based on adaptive behavior may help to narrow the class of empirically interesting equilibria in certain economic models an experiment is proposed to test this idea

risk aversion and optimal trade restrictions if the representative consumer of a country is risk averse then the choice of trade controls must take account of their effects on the fluctuations of domestic real income if the world price of the importable is uncertain and risk aversion is high then the optimal policy for achieving a ceiling on expected imports involves a reduction in imports and a rise in the domestic price as the world price falls moreover a quota is superior to a tariff in achieving the ceiling under domestic uncertainty a tariff is superior to a quota but it could be optimal to reduce the domestic price as imports increase economists have long recognized the equivalence of price and quantity controls under certainty the comparison of these control modes and the characterization of the optimal form of control under uncertainty has been undertaken by two groups of authors weitzman 1974 1978 considered a planning authority which faces uncertainty about the costs and benefits of producing a good he showed that the ranking of price and quantity controls depends on the curvature of the cost and benefit functions and that an optimal policy can be considered as a mixture of price and quantity controls his work was developed by laffont 1977 ireland 1977 malcomson 1978 and yohe 1978 in the context of international trade the comparison of tariffs and quotas under uncertainty has been undertaken by fishelson and flatters 1975 pelcovits 1976 dasgupta and stiglitz 1977 young 1979 1980a b and helpman and razin 1980 recently young and anderson 1980 showed that the policy maximizing expected consumer s surplus given a constraint on expected imports expected import expenditure is a specific tariff an ad valorem tariff in contrast to weitzman s planning model the price instrument is superior to the quantity instrument whatever the curvature of the benefits function 2 the conclusion of young and anderson appears to provide a strong argument against using quantity instruments to restrict trade however the expected surplus criterion is a valid welfare measure only if the marginal utility of income is constant in this paper we characterize the optimal form of trade restriction if the representative consumer of the importing country exhibits risk aversion toward income fluctuations the optimal policy can have surprising properties properties which with high risk aversion are better approximated by a quota rather than a tariff hence the second best justification for using quantity controls to restrict trade turns out to depend on

errata aggregation distribution and dynamics in the linear and quadratic expenditure systems using canadian data 1965 86 the author confirms and extends thomas m stoker s 1986 results on the rule of distributional effects in demand systems the confirmation consists of evidence from the linear expenditure system model showing that distributional effects are statistically significant and can displace ar 1 dynamics in the disturbances the extension is made to the quadratic expenditure system model and an argument is advanced that standard habit formation dynamics may reflect omitted distributional effects the evidence supports this conjecture this suggests that the author may have been drawing the wrong conclusions from expenditure studies rather than inferring dynamic behavior he should have been concluding that these models are misspecified copyright 1992 by mit press

bubble weak and strong hyperinflation theory and empirical evidence the monthly continuous inflation rate that maximizes the inflation tax revenue varies widely from 18 3 to 143 according to semi elasticity estimates for the german hyperinflation made by several authors cagan 1956 barro 1970 frenkel 1977 sargent 1977 goodfriend 1982 burmeister and wall 1987 christiano 1987 casella 1989 taylor 1991 engsted 1993 imrohoroglu 1993 michael et al 1994 those estimates lead one to conclude that during hyperinflation the german government could have obtained more tax revenue with lower inflation rates

forecasting with the almost ideal demand system evidence from some alternative dynamic specifications the almost ideal demand system is used as a representation of long run demands in discrete time and continuous time error correction models to produce forecasts of budget shares beyond the sample period the estimated models are subjected to a battery of tests and an analysis of the forecasts indicates that continuous time adjustment mechanisms based around fully modified estimates of the long run preference parameters provide a remarkably accurate method of forecasting budget shares

quotas as options valuation and equilibrium implications abstract this paper presents formulae for the values of quota licenses in stochastic environments that are based on observable parameters and examines the impact of parameter changes on domestic equilibrium we show that the option pricing methodology currently used widely in the finance literature may be applied to the valuation of licenses in a potentially wide range of market environments

long term energy services security what is it and how can it be measured and valued abstract the paper reviews some recent approaches towards measuring the extent of long term energy security and security externality valuation it starts out to discuss the contextual connotations of notions of energy security in medium to long term time frames and reviews some indicators that have been proposed to quantify it special attention is paid to two of these approaches which the authors helped to develop i e diversity based indices and the supply demand index the paper takes issue with conventional welfare economic approaches that neglect i the scope on the demand side for raising security and ii negative feedback mechanisms of socio political impacts of international rent transfers in fossil fuels exporting countries the concept of energy services security is proposed with a demand side focus this enables application of an integrated approach to gauge the resilience of a society to meet the needs of its population for energy services over longer timescales ahead from various interrelated perspectives propositions are made on the attribution of security externalities to the use of fossil fuels policies and suggestions for further improvements of measures for energy services security

auctions for initial sale of annual catch entitlement we use a laboratory experiment calibrated to a representative new zealand fishery to assess three sealed bid multi unit demand auction mechanisms under consideration for allocating quota for species being introduced into the quota management system these auctions allocate the k units to the k highest bids but prices are determined according to discriminative kth price and k 1st price rules in our experiment the auctions are equally efficient but revenue is highest in the discriminative auction and lowest in the k 1st price auction results are robust to industry subjects and subjects are responsive to the across unit bidding incentives present in multi unit demand auctions

recurrent hyperinflations and learning we use a model of boundedly rational learning to account for the observations of recurrent hyperinflations in the 1980 s in a standard monetary model we replace the assumption of full rational expectations by a formal definition of quasi rational learning the model under learning matches some crucial stylized facts observed during the recurrent hyperinflations experienced by several countries in the 1980 s remarkably well we argue that despite being a small departure from rational expectations quasi rational learning does not preclude falsifiability of the model it does not violate reasonable rationality requirements and it can be used for policy evaluation

has u s monetary policy changed evidence from drifting coefficients and real time data despite the large amount of empirical research on monetary policy rules there is surprisingly little consensus on the nature or even the existence of changes in the conduct of u s monetary policy three issues appear central to this disagreement 1 the specific type of changes in the policy coefficients 2 the treatment of heteroskedasticity and 3 the real time nature of the data used this paper addresses these issues in the context of forwardlooking taylor rules with drifting coefficients the estimation is based on real time data and accounts for the presence of heteroskedasticity in the policy shock the findings suggest important but gradual changes in the rule coefficients not adequately captured by the usual split sample estimation in contrast to orphanides 2002 2003 i find that the fed s response to the real time forecast of inflation was weak in the second half of the 1970s perhaps not satisfying taylor s principle as suggested by clarida gali and gertler 2000 however the response to inflation was strong before 1973 and gradually regained strength from the early 1980s onward moreover as in orphanides 2003 the fed s response to real activity fell substantially and lastingly during the 1970s

testing restrictions in a flexible dynamic demand system an application to consumers expenditure in canada traditionally restrictions on systems of demand equations have been tested using static models whilst being estimated with time series data this paper develops a vector time series model of expenditure shares in the context of a singular dynamic demand system the model allows for non symmetric and non homogeneous short run behaviour the homogeneity and symmetry restrictions are only examined in the long run structure results based on canadian time series data are presented and reject the current practise of static modelling while restrictions suggested by economic theory are not rejected when imposed on the long run structure

indeterminacy of equilibria in a hyperinflationary world experimental evidence the authors design and study an olg experimental economy where the government finances a fixed real deficit through seigniorage the economy has continua of nonstationary rational expectations equilibria and two stationary rational expectations equilibria the authors do not observe nonstationary rational expectations paths observed paths tend to converge close to or somewhat below the low inflation stationary state the adaptive learning hypothesis is consistent with the data in selecting the low inflation stationary state rational expectations equilibrium as a long run stationary equilibrium nevertheless simple adaptive learning models do not capture the market uncertainty or the biases observed in the data copyright 1993 by the econometric society

indicators for energy security the concept of energy security is widely used yet there is no consensus on its precise interpretation in this research we have provided an overview of available indicators for long term security of supply sos we distinguished four dimensions of energy security that relate to the availability accessibility affordability and acceptability of energy and classified indicators for energy security according to this taxonomy there is no one ideal indicator as the notion of energy security is highly context dependent rather applying multiple indicators leads to a broader understanding incorporating these indicators in model based scenario analysis showed accelerated depletion of currently known fossil resources due to increasing global demand coupled with increasing spatial discrepancy between consumption and production international trade in energy carriers is projected to have increased by 142 in 2050 compared to 2008 oil production is projected to become increasingly concentrated in a few countries up to 2030 after which production from other regions diversifies the market under stringent climate policies this diversification may not occur due to reduced demand for oil possible benefits of climate policy include increased fuel diversity and slower depletion of fossil resources

dynamic translog and linear logit models a factor demand analysis of interfuel substitution in us industrial energy demand abstract we compare and contrast two popular dynamic flexible functional forms for cost functions the translog and the logit j bus econ stat 8 1990 347 353 using data on us industrial energy demand from 1960 to 1992 which has been analysed by previous studies energy econ 11 1989 89 94 appl econ 21 1989 931 945 j bus econ stat 13 1995 459 465 we show the crucial role played by different dynamic formulations of the translog in this analysis of factor demands with respect to rates of dynamic adjustment and substitution possibilities we conclude that the poor performance of the dynamic translog relative to the dynamic logit cannot be explained solely by dynamic model mis specification or the inclusion of price unresponsive non energy fuel use data our most robust empirical result is that coal and oil are substitutes

vulnerability of the economy to the potential disturbances of energy supply a logic based model with application to the case of china the disturbances of energy supply that may result from both external and domestic events create a significant threat for national economy due to potential impacts on the productivity employment and overall economic growth building scenarios of the economy s vulnerability to these disturbances is delicate because of the significant number of interrelated factors that should be taken into consideration in this paper a logic based model lbm is developed which allows for defining exploring and assessing the determinants and the indicators of the economy s vulnerability related to the energy supply disturbances within a coherent scenarios assessment framework the proposed model is illustrated with the case of china after developing the general framework three particular scenarios are investigated based on the case study the performance and limitations of the model are analyzed and its ability to evaluate national energy policies is discussed finally some recommendations for further improvements are made

quotas as options quota licenses are options their price is given by expected discounted future value which hangs on the possibility that the quota may bind a number of auxiliary administrative details of quota systems are also analyzed in this context the presence of use it or lose it requirements and of restrictions on rate of usage of the annual quota can be seen as attempts to offset the implied protection on below limit imports they are shown to be inefficient recognition of the option valuation of quota licenses is rich with suggestions for future work on evaluation of quotas and comparisons with alternative schemes for protection

policy appraisal and the structure of protection in a low income developing country problems of measurement and evaluation in burundi the article provides estimates of the structure of nominal and effective tariffs and the tariff equivalents of a set of quantitative import restrictions for burundi a low income data deficient developing country it carefully indicates the assumptions and limitations of the analysis the overall conclusion of the article is that not much significance can be attached to the estimates in a cardinal sense nevertheless recommendations about altering the structure of relative incentives can be justified where these are directed at increasing transparency and uniformity

long run growth uncertainty observed macroeconomic forecasts display a positive correlation between expectations of long run growth of endogenous variables e g output and cyclical activity existing business cycle models appear inconsistent with the evidence this paper presents a model of the business cycle in which households have imperfect knowledge of long run growth rate of endogenous variables and continually learn about these growth rates the model features comovement and mutual influence between households growth expectations and market outcomes it can replicate the evidence on growth forecasts and suggests that optimism and pessimism about long run growth rates is a crucial ingredient in understanding business cycle fluctuations

speculative hyperinflations and currency substitution abstract we propose a rational expectations framework for understanding speculative hyperinflations that end in response to orthodox stabilization programs motivated by a strong degree of hysteresis in the stock of real balances after the end of hyperinflations we provide a cash and credit model in which the money demand exhibits persistence because individuals can establish long lasting credit relationships we use the model to show that if hysteresis in real balances is possible then a fiscal monetary reform that successfully stops a speculative hyperinflation may fail to prevent it we argue that speculative hyperinflationary equilibria are consistent with some key stylized facts observed in extreme hyperinflations

estimating foreign trade functions a comment and a correction in this note a more flexible restricted error covariance matrix is applied than winters 1984 uses in order to estimate import demand functions we show that the alternative specification performs better in the sense of yielding a considerably larger value of the log likelihood function moreover some slight errors in winters tables 2 and 3 are corrected

interrelated factor demands for manufacturing a dynamic translog cost function approach abstract in this paper we report the results of estimating a joint model for labour capital and energy using the transcendental logarithmic cost function of christensen jorgenson and lau 1973 this allows us to determine both the own price and cross elasticities of substitution between labour capital and energy we combine a model of factor shares with a dynamic adjustment process for each factor we also impose on the cross equation restrictions necessary to provide additivity homogeneity and symmetry since the covariance matrix in systems of share relationships is singular we follow the suggestions of anderson and blundell 1982 and employ a mullivariate error corrrection model the results suggest that additivity symmetry and homogeneity restrictions do hold and that there are short run increasing returns to scale

oil and the macroeconomy when prices go up and down an extension of hamilton s results in an important paper hamilton 1983 demonstrated a strong correlation between oil price changes and gross national product growth in u s data however his study pertained to a period in which all the large oil price movements were upward and thus it left unanswered the question whether the correlation persists in periods of price decline moreover the price variable he used was somewhat distorted by price controls in the 1970s this note investigates whether hamilton s results continue to hold when the sample is extended to include the recent oil market collapse and the oil price variable is corrected for the effects of price controls particular attention is given to the possibility of asymmetric responses to oil price increases and decreases as suggested in the structural employment literature loungani 1986 davis 1987 hamilton 1988 like hamilton i based my investigation on the gnp equation in sims s 1 980b six variable quarterly vector autoregressive model

estimating the welfare effects of voluntary export restraints and tariffs an application to nonleather footwear in the uk 1986 estimating the welfare effects of voluntary export restraints and tariffs an application to nonleather footwear in the uk applied economics vol 18 no 10 pp 1065 1083