indirect currency substitution a structural approach abstract previous empirical tests of mckinnon s indirect currency substitution ics hypothesis based on macro reduced form models yield ambiguous results because evidence cannot discriminate ics from competing non monetary models this note suggests a structural model based on the money demand function preliminary evidence supports mckinnon s hypothesis for the federal republic of germany switzerland canada and the netherlands but not for the u s

energy consumption and economic growth nexus in tanzania an ardl bounds testing approach abstract in this paper we examine the intertemporal causal relationship between energy consumption and economic growth in tanzania during the period of 1971 2006 unlike the majority of the previous studies we employ the newly developed autoregressive distributed lag ardl bounds testing approach by pesaran et al 2001 bounds testing approaches to the analysis of level relationships journal of applied econometrics 16 289 326 to examine this linkage we also use two proxies of energy consumption namely total energy consumption per capita and electricity consumption per capita the results of the bounds test show that there is a stable long run relationship between each of the proxies of energy consumption and economic growth the results of the causality test on the other hand show that there is a unidirectional causal flow from total energy consumption to economic growth and a prima facie causal flow from electricity consumption to economic growth overall the study finds that energy consumption spurs economic growth in tanzania

on measuring the nearness of near moneys revisited abstract in this paper we re examine the theoretical foundations and empirical estimation of models which incorporate a ces utility function to study the nearness of money substitutes we show that previous studies using these models have been subject to a number of theoretical and empirical flaws the result of these flaws has been to overestimate the degree of substitutability between money and near money assets we show that when these errors are corrected estimates of substitution elasticities are several times smaller than even those of the most recent studies and therefore are more in line with estimates from more traditional demand for money studies

modelling money demand in open economies over the modern floating rate period the role of open economy factors in influencing domestic money demand in major industrial countries over the modern floating rate period is examined the theoretial model for the empirical analysis is derived from a general two country portfolio balance framework that determines the demand for domestic and foreign monetary and non monetary assets in each country the ecm estimates indicate that capital mobility plays an important role in the money demand function in all seven counteries considered currency substitution in contrast is not an important phenomenon

currency preferences and the australian dollar abstract we investigate currency substitution and currency complementarity in the case of the australian dollar data spanning 1984 2003 contain evidence of the australian dollar s substitution for the deutschmark and complementarity with the yen and the us dollar consistent with the theory that international variables will in general affect the demand for domestic money atemporally nonseparable preferences also give rise to the possibility of third currency effects our regressions find some evidence of these for example a rise in the us federal funds rate has been associated with rises in the value of the australian dollar against the mark and yen controlling for changes in other interest rates and in money supplies and real outputs

exploring the effects of energy consumption on output per worker a study of albania bulgaria hungary and romania in this article we explore the long run cointegration between output capital and energy consumption in per worker terms for albania bulgaria hungary and romania we use the augmented solow 1956 model and the ardl bounds procedure pesaran et al 2001 to examine the short run and long run effects of energy and capital on output in per worker terms we also conduct causality test using the toda and yamamoto 1995 non causality procedure our results show the existence of long run cointegration between output per worker and energy per worker for all the four countries we find that energy per worker have a dynamic short run positive effect in albania 0 37 bulgaria 0 25 hungary 0 36 and romania 0 68 and a long run positive effect in bulgaria 0 32 and romania 0 63 which duly indicate that energy consumption has a momentous long run effect in these two countries the causality results indicate a unidirectional causation from output per worker to energy per worker for all the four countries and from capital per worker to energy per worker for albania and romania consequently a balance between effective energy consumption and sound energy conservation policies are likely to support economic growth in the four countries

energy consumption and gdp in developing countries a cointegrated panel analysis in this paper we re investigate the co movement and the causality relationship between energy consumption and gdp in 18 developing countries using data for the period 1975 to 2001 recently developed tests for the panel unit root heterogeneous panel cointegration and panel based error correction models are employed the empirical results provide clear support of a long run cointegration relationship after allowing for the heterogeneous country effect the long run relationship is estimated using a full modified ols the evidence shows that long run and short run causalities run from energy consumption to gdp but not vice versa this result indicates that energy conservation may harm economic growth in developing countries regardless of being transitory or permanent

is the energy led growth hypothesis valid new evidence from a sample of 85 countries abstract the energy growth literature contains a large number of discussions on the causal relationship between energy consumption and economic growth the central debate focuses on whether energy consumption contributes or not to economic growth since it has direct implications for the formulation of strategic policies nevertheless current studies cannot provide a conclusive suggestion due to mixed causality results this inconclusive evidence is potentially attributed to model specifications and the stage of economic development of the countries under investigation hence this study attempts to empirically re investigate the validity of the energy led growth hypothesis using a different model specification and different stages of economic development for 85 selected countries around the globe overall although the causality results are mixed among countries we do find a systematic pattern in particular granger causality models with three and four variables are more likely to support the hypothesis compared to their counterparts that contain only two variables in addition both developed and developing countries are more likely to support the energy led growth hypothesis compared to the less developed or low income countries therefore causality results are very sensitive to the choice of the model specification along with the stages of economic development finally energy conservation policies should only focus on low income countries as these policies may not retard the process of economic growth

currency substitution and western european monetary unification the recent history of european monetary affairs may be interpreted as a slow movement towards the establishment of a european currency union characterized by fixed exchange rates and perhaps eventually a common european currency until very recently the desirability of european monetary union was analysed in terms of the traditional optimum currency area framework in that analysis the incentive for currency union comes from the potential improvements in efficiency in resource allocation from the use of a single money in a trade area recently however the question of the independence of monetary policy under flexible exchange rates has spawned a growing literature on currency substitution which includes implications for currency 2 union the earlier work suggested that a major benefit of flexible rates would be the liberation of domestic monetary policy from external balance concerns so that policy could be aimed singularly at internal balance 3 the currency substitution cs literature has demonstrated that if the currencies of two countries are close substitutes to money demanders then the central banks of these countries cannot follow independent monetary policies even under flexible exchange rates 4 the degree of currency substitution is an important empirical question and the analysis that follows should prove informative in determining the incentive for european monetary union is the european monetary system ems goal of reducing exchange rate fluctuations necessarily indicative of a european sensitivity to disturbances with a substantial part of the problem coming from substitution between monies girton and roper 1980 p 157 or rather a result of the traditional drive towards integration as envisioned by optimum currency area theory the following sections will suggest an answer

estimating short and long run relationships a guide for the applied economist many applied economists face problems in selecting an appropriate technique to estimate short and long run relationships with the time series methods this article reviews three alternative approaches viz general to specific vector autoregressions and the vector error correction models as in other methodological controversies definite answers are difficult it is suggested that if these techniques are seen as tools to summarize data as in smith 2000 often there maybe only minor differences in their estimates therefore a computationally attractive technique is likely to be popular

the transactions demand for money in a two currency economy abstract in this paper the model of the transactions demand for money of baumol 1952 is extended to an economy where transactions are conducted in two currencies the currency substitution hypothesis that the domestic demand for domestic money depends on the expected rate of depreciation as well as the domestic rate of interest and level of income is derived from the model in addition several new insights into the implications of currency substitution are provided

the causality relationship between energy consumption and gdp in g 11 countries revisited abstract this paper explores whether energy conservation policies can be implemented in countries with the same level of development that is is restraining energy consumption without compromising economic growth feasible in all industrialized countries a new granger non causality testing procedure developed by toda and yamamoto 1995 journal of econometrics 66 225 250 is applied to re investigate the relationship if any between energy consumption and income in 11 major industrialized countries the results clearly do not support the view that energy consumption and income are neutral with respect to each other except in the case of the united kingdom germany and sweden where a neutral relationship is found bi directional causality in the united states and uni directional running from energy consumption to gdp in canada belgium the netherlands and switzerland are found this indicates that energy conservation may hinder economic growth in the latter five countries further the causality relationship appears to be uni directional but reversed for france italy and japan which implies that in these three countries energy conservation may be viable without being detrimental to economic growth

a cross country panel analysis of currency substitution and trade attention that has been directed toward the effect of trade on foreigner s holdings of domestic currency comes exclusiely from time series eidence here we extend a model of currency substitution that incorporates a trade motie for foreigners to hold domestic currency it uses time series and cross sectional information for a panel of 17 industrialized countries testing two way fixed effects models against pooled and random effects alternaties the cross sectional information is significant reealing that pooling of data could result in misleading inferences since country specific effects regional group effects and distance are all important determinants of

energy consumption real income and temporal causality results from a multi country study based on cointegration and error correction modelling techniques abstract unlike previous studies on the causal relationship between energy consumption and economic growth this paper illustrates how the finding of cointegration i e long term equilibrium relationship between these variables may be used in testing granger causality based on the most recent johansen s multivariate cointegration tests preceded by various unit root or non stationarity tests we test for cointegration between total energy consumption and real income of six asian economies india pakistan malaysia singapore indonesia and the philippines non rejection of cointegration between variables rules out granger non causality and imples at least one way of granger causality either unidirectional or bidirectionial secondly by using a dynamic vector error correction model we then analyse the direction of granger causation and hence the within sample granger exogeneity or endogeneity of each of the variables thirdly the relative strength of the causality is gauged through the dynamic variance decomposition technique by decomposing the total impact of an unanticipated shock to each of the variables beyond the sample period into proportions attributable to shocks in the other variables including its own in the bivariate system results based on these tools of methodology indicate that while all pair wise relationships shared common univariate integrational properties only relationships for three countries india pakistan and indonesia were cointegrated for these countries temporal causality results were mixed with unidirectional causality from energy to income for india exactly the reverse for indonesia and mutual causality for pakistan the vdcs were not inconsistent with these results and provided us with an additional insight as to the relatively more dominant direction of causation in pakistan simple bivariate vector autoregressive models for the three non cointegrated systems did not indicate any direction of causality significantly in either direction

inflation and dollar accounts in peru s banking system 1978 1984 abstract since 1978 peru has permitted dollar denominated deposits in its banking system over this period peru s inflation rate increased and the exchange rate was flexibly adjusted peru therefore had two units of account in its monetary system a transaction unit and a purchasing power unit any economy that has a purchasing power unit particularly within the banking system may have a stronger inflation feedback mechanism that is a given inflationary shock may produce more inflationary pressure the peruvian experience appears to support this view

energy consumption and gdp causality relationship in g 7 countries and emerging markets abstract the causality relationship between energy consumption and income is a well studied topic in energy economics this paper studies the time series properties of energy consumption and gdp and reexamines the causality relationship between the two series in the top 10 emerging markets excluding china due to lack of data and g 7 countries we discover bi directional causality in argentina causality running from gdp to energy consumption in italy and korea and from energy consumption to gdp in turkey france germany and japan hence energy conservation may harm economic growth in the last four countries

money demand in open economies a currency substitution model for venezuela abstract this paper investigates the extent to which domestic money balances in venezuela are influenced by foreign exchange considerations to this end individuals are assumed to choose the levels of foreign and domestic money that minimize the borrowing costs associated with a given level of monetary services the solution to this optimization problem yields a closed form demand function for domestic money that allows for foreign exchange considerations this specification is estimated and the results point to an elasticity of currency substitution in excess of one conditioned on these estimates the paper estimates the risk premium for the period 1981 82 prior to the collapse of the exchange rate system in 1983

variation in the real exchange rate as a source of currency substitution abstract this paper presents a shopping cost money service model in which it is shown that the real exchange rate influences the desired ratio of domestic to foreign currency bank deposits empirically it is found that if the real exchange rate value of the canadian dollar falls then us dollar deposits of canadians rise relative to canadian m2 this relationship is found to be cointegrated dynamic adjustment analyzed using an error correction model indicates a cyclical adjustment the results provide evidence that variation in the real exchange rate is a source of currency substitution and reinforces the argument that demand side factors influence the money stock jel e41

energy consumption prices and economic growth in three ssa countries a comparative study in this paper we examine the causal relationship between energy consumption and economic growth in three sub saharan african countries namely south africa kenya and congo drc we incorporate prices as an intermittent variable in a bivariate setting between energy consumption and economic growth thereby creating a simple trivariate framework using the ardl bounds testing procedure we find that the causality between energy consumption and economic growth varies significantly across the countries under study the results show that for south africa and kenya there is a unidirectional causal flow from energy consumption to economic growth however for congo drc it is economic growth that drives energy consumption these findings have important policy implications insofar as energy conservation policies are concerned in the case of congo drc for example the implementation of energy conservation policies may not significantly affect economic growth because the country s economy is not entirely energy dependent however for south africa and kenya there is a need for more energy supply augmentations in order to cope with the long run energy demand in the short run however the two countries should explore more efficient and cost effective sources of energy in order to address the energy dependency problem

electricity consumption employment and real income in australia evidence from multivariate granger causality tests this paper examines the relationship between electricity consumption employment and real income in australia within a cointegration and causality framework we find that electricity consumption employment and real income are cointegrated and that in the long run employment and real income granger cause electricity consumption while in the short run there is weak unidirectional granger causality running from income to electricity consumption and from income to employment

international currency substitution and the income velocity of money abstract this paper presents new empirical evidence on the degree to which international currency substitution destabilizes domestic money demand it also provides an explanation of some apparent discrepancies among previous empirical studies of currency substitution this explanation hinges on the distinction between the elasticity of currency substitution and the cross elasticity of money demand a large small value of one elasticity does not imply a large small value of the other a large cross elasticity is required for currency substitution to destabilize domestic money demand the empirical evidence presented here is consistent with the view that these cross elasticities are typically small

academic freedom private sector focus and the process of innovation we develop a model that clarifies the respective advantages and disadvantages of academic and private sector research rather than relying on lack of appropriability or spillovers to generate a rationale for academic research we emphasize control rights considerations and argue that the fundamental tradeoff between academia and the private sector is one of creative control versus focus by serving as a precommitment mechanism that allows scientists to freely pursue their own interests academia can be indispensable for early stage research at the same time the private sector s ability to direct scientists toward higher payoff activities makes it more attractive for later stage research

causal relationship between energy consumption and gdp revisited the case of korea 1970 1999 abstract causal relationship between energy consumption and economic growth is investigated applying a multivariate model of capital labor energy and gdp usual btu energy aggregate is substituted with a divisia aggregate in an attempt to mitigate aggregation bias to test for granger causality in the presence of cointegration among the variables we employ a vector error correction model rather than a vector autoregressive model empirical results for korea over the period 1970 1999 suggest a long run bidirectional causal relationship between energy and gdp and short run unidirectional causality running from energy to gdp the source of causation in the long run is found to be the error correction terms in both directions

currency substitution and the demand for money some evidence for canada recently the possibility that foreign and domestic currencies are substitutes has received considerable attention see 1 2 3 10 19 21 currency substitution has important implications for the working of flexible exchange rates if the degree of currency substitution is high small changes in the money supply would induce large changes in the exchange rate furthermore currency substitution would transmit the effect of monetary disturbances from one country to another indeed significant currency substitution would seriously undermine the ability of flexible exchange rates to provide monetary independence this paper examines the empirical importance of currency substitution in the framework of the demand function for money if currency substitution is important the expected change in the exchange rate should be a significant determinant of the demand for home currency in section 2 we undertake such a test for the canadian demand for money during the recent flexible exchange rate period there is considerable evidence that the forward exchange rate is a good measure of the expected exchange rate our own tests confirm these results for canadian data since 1970

energy and economic growth in the usa a multivariate approach abstract this paper examines the causal relationship between gdp and energy use for the period 1947 90 in the usa the relationship between energy use and economic growth has been examined by both biophysical and neoclassical economists in particular several studies have tested for the presence of a causal relationship in the granger sense between energy use and economic growth however these tests do not allow a direct test of the relative explanatory powers of the neoclassical and biophysical models a multivariate adaptation of the test vector autoregression var does allow such a test a var of gdp energy use capital stock and employment is estimated and granger tests for causal relationships between the variables are carried out although there is no evidence that gross energy use granger causes gdp a measure of final energy use adjusted for changing fuel composition does granger cause gdp

the effects of foreign exchange risk and return on the demand for domestic balances abstract this paper provides an empirical evidence regarding the effects of foreign exchange risk and return on the demand for domestic balances unlike earlier studies which examine only one effect and thus may have been subjected to a misspecification problem this paper includes both foreign exchange risk and return as explanatory variables in the money demand equation the results lend limited support to the hypothesis that foreign exchange risk negatively affects money demand and strongly indicate that foreign exchange return has a negative effect on the demand for domestic balances thus currency substitution seems to be relevant not just in developed economies but in developing economies subject to foreign exchange controls as well

effects of energy consumption on per worker output a study of kenya and south africa the paper investigates the long run cointegration relationship and energy elasticities for kenya and south africa over the periods 1978 2009 and 1971 2009 respectively using the ardl procedure developed by pesaran et al 2001 with recomputed critical bounds from narayan 2005 and the solow 1956 framework extended by rao 2010 we also conduct the toda and yamamoto 1995 test for granger non causality the regression results show that short run and long run energy elasticities are 0 50 and 1 71 respectively for kenya and 0 17 and 0 34 respectively for south africa the causality results indicate a unidirectional granger causality running from capital per worker and energy per capita to output per worker for both countries moreover in kenya we detect a strong unidirectional causality a on output from joint consideration of capital stock and energy and b on capital stock from joint consideration of energy and output in south africa the joint causations are neutral hence while energy and capital stock spurs growth in both countries kenya has a greater potential to harness growth and capital productivity via joint consideration of energy with capital and output respectively

the relationship between energy and gnp further results this paper reexamines the casuality between gnp and energy consumption by using updated us data for the period 1947 1979 as a secondary contribution we investigate the causal relationship between energy consumption and employment applying sims technique we find no causal relationship between gnp and energy consumption we find further that there is a slight unidirectional flow running from employment to energy consumption economic interpretations of the empirical results are also presented

specification tests of the money demand function in an open economy this paper addresses empirically the issues of selecting the appropriate opportunity cost and scale variables of the money demand function in the presence of alternative nonnested hypotheses as part of the process of model specification the role of currency substitution in the demand for money function in an open economy is examined the tests are carried out with quarterly data from the open economy of greece over the floating exchange rate period 1975 82

nonfundamental uncertainty and exchange rates this paper shows that there can be equilibria in which exchange rates display randomness unrelated to fundamentals this is demonstrated in the context of a two currency one good model with three agent types and cash in advance constraints a crucial feature is that the type i agents for i 1 2 must satisfy a cash in advance constraint by holding currency i while type 3 agents can satisfy it by holding either currency it is shown that real allocations vary across the multiple equilibria if markets for hedging exchange risk do not exist and that the randomness is innocuous if complete markets exist

instability of the u s money demand function this paper surveys the two major episodes of instability of the u s money demand function known respectively as the mystery of missing money and the great velocity decline it also assesses the recent literature on open economy money demand models and their usefulness in explaining the puzzling behavior of money demand manifested shortly after the transition to floating exchange rates copyright 1991 by blackwell publishers ltd

an extension of currency substitution into the near monies framework a case for canada this paper attempts to estimate the nearness of near monies in canada including foreign monetary assets i e us dollars the results enable us to make a statement about how substitutable us dollars are in the canadian private asset portfolio this brought the event of currency substitution into the near money framework and we found us dollars are far from good substitutes for canadian narrowly defined money our analysis further provides a reconciliation of results obtained by miles 1978 bordo and choudhri 1982 husted 1984 and ghosh 1989

the canadian us dollar exchange rate a test of alternative models for the seventies abstract three basic models of bilateral exchange rate determination are evaluated on the basis of the canadian experience in the 1970s we examine wealth effects and incorporate consistent expectations in the traditional models based on reduced form equations empirical results reject a simple monetary approach and the stickly price asset market model but concur with a version of the stock flow model of exchange rate determination

international currency substitution and seigniorage in a simple model of money i introduction currency substitution describes the change in the holdings of domestic and foreign real balances in response to fluctuations in the relative prices of these currencies so far the empirical evidence on the strength of currency substitution has been mixed miles 1978 finds evidence in favor of strong currency substitution between the canadian dollar and the u s dollar bordo and choudhri 1982 criticize miles on the ground that miles has a misspecified model and their estimates of a canadian money demand function indicate little currency substitution in a recent paper rogers 1992 finds that dollarization in a high inflation economy such as mexico s is quite strong and statistically significant imrohoroglu 1994 on the other hand estimates the extent of currency substitution between the canadian dollar and the u s dollar using a gmm approach and finds that the elasticity of currency substitution in canada is quite low between 0 29 and 0 43 depending on the instruments used furthermore the estimate of the share of u s dollar denominated deposits in producing canadian liquidity services is on the order of 1 percent to 3 percent the policy implications of currency substitution have been extensively analyzed most of these studies concentrate on the impact of currency substitution on the volatility of exchange rates and the autonomy of domestic monetary policy under a flexible exchange rate regime 1 recently researchers have started to explore whether currency substitution alters the results in the optimal inflation tax literature for example vegh 1989 shows that it may be optimal to resort to the inflation tax under currency substitution since it reduces the distortion introduced by an exogenously given positive foreign interest rate in his model a positive foreign interest rate creates a distortion because it acts as an indirect consumption tax kimbrough 1991 analyzes a small open economy under currency substitution where domestic agents are required to use domestic real balances to purchase the domestic nontraded good foreign real balances to purchase the imported good and either domestic or foreign real balances to purchase the exportable good he finds that it is optimal to follow the friedman rule of a zero nominal interest rate in this setup since money serves as an intermediate good guidotti and vegh 1993 however argue that kimbrough s 1991 result only applies under very restrictive assumptions on the transactions technology and that in general the optimal inflation rate is positive under currency substitution aizenman 1992 considers a multi country money in the utility function model in a common currency area where there are collection costs associated with income taxation he shows that in the absence of a cartel agreement on how to share the seigniorage revenue the optimal inflation rate for individual countries will exceed the optimal inflation rate under a cooperative solution canzoneri and diba 1992 study the role of currency substitution in a two country money in the utility function model under a flexible exchange rate regime where there are collection costs of lump sum taxes they show that the outcome of a noncooperative seigniorage maximization or welfare maximization game is characterized by the friedman rule the cooperative outcome on the other hand includes the inflation tax as part of an optimal tax package since lump sum taxes are costly to collect the theoretical literature summarized above suggests that currency substitution may have important economic implications most of the attention has been on the role of the elasticity of currency substitution the share of foreign real balances in the residents domestic portfolio has largely been ignored laney radcliffe and willett 1984 and joines 1985 emphasize the distinction between the elasticity of substitution and the cross elasticity of money demand and argue that a high cross elasticity is necessary for currency substitution to have a major destabilizing impact on domestic money demand

currency substitution and speculative attacks on a currency board system abstract a currency board arrangement cba is supposed to be robust against attacks currency substitution complicates life with controversial implications for floating versus fixed exchange rate regimes after reporting evidence of currency substitution in hong kong a monetary model incorporating currency substitution is used to estimate the shadow exchange rate and the probability of speculative attack on the hong kong dollar a decomposition analysis of a markov switching model indicates that the no attack regime was the most durable one this implies that hong kong s quasi cba was relatively robust against both speculative attacks and currency substitution

disaggregated industrial energy consumption and gdp the case of shanghai 1952 1999 abstract this paper investigates the causal relationship between various kinds of industrial energy consumption and gdp in shanghai for the period 1952 1999 using a modified version of the granger 1969 causality test proposed by toda and yamamoto j econ 66 1995 225 the empirical evidence from disaggregated energy series seems to suggest that there was a uni directional granger causality running from coal coke electricity and total energy consumption to real gdp but no granger causality running in any direction between oil consumption and real gdp

a multivariate cointegration analysis of the role of energy in the us macroeconomy abstract this paper extends my previous analysis of the causal relationship of gdp and energy use in the usa in the post war period a majority of the relevant variables are integrated justifying a cointegration analysis the results show that cointegration does occur and that energy input cannot be excluded from the cointegration space the results are plausible in terms of macroeconomic dynamics the results are similar to my previous granger causality results and contradict claims in the literature based on bivariate models that there is no cointegration between energy and output

causal relationship between energy consumption and gdp growth revisited a dynamic panel data approach abstract this paper uses the panel data of energy consumption and gdp for 82 countries from 1972 to 2002 based on the income levels defined by the world bank the data are divided into four categories low income group lower middle income group upper middle income group and high income group we employ the gmm sys approach for the estimation of the panel var model in each of the four groups afterwards the causal relationship between energy consumption and economic growth is tested and ascertained we discover a in the low income group there exists no causal relationship between energy consumption and economic growth b in the middle income groups lower and upper middle income groups economic growth leads energy consumption positively c in the high income group countries economic growth leads energy consumption negatively after further in depth analysis of energy related data the results indicate that in the high income group there is a great environmental improvement as a result of more efficient energy use and reduction in the release of co2 however in the upper middle income group countries after the energy crisis the energy efficiency declines and the release of co2 rises since there is no evidence indicating that energy consumption leads economic growth in any of the four income groups a stronger energy conservation policy should be pursued in all countries

convertibility risk and dollarization in mexico a vectorautoregressive analysis abstract using a general equilibrium model of dollarization in mexico i find a negative and significant relationship between the expected rate of peso depreciation and the dollarization ratio this result seemingly anomalous compared to previous studies of currency substitution is attributed to the convertibility risk associated with holding mexdollars several alternative explanations are either rejected or found to be of secondary importance the results imply that traditional methodologies used to test currency substitution and inferences drawn about the phenomenon should be revised in cases similar to mexico

currency substitution under finance constraints the perfect foresight continuous time couterpart of lucas and stokey s cash in advance model is generalized to the case of two currencies the money demand function for eac currency has as arguments the endowments of goods associated with each denomination various monetary shocks are investigated including permanent and temporary changes in levels and growth rates it is shown that substitution can be an important factor in explaining the possible negative transmission of inflation the amount of volatility of exchange rates and the degree tp which exchange rate movements approximate a random walk

energy and economic growth grounding our understanding in physical reality this article attempts to summarise the complex wide ranging and unresolved debate within the economics literature on the possibility of decoupling economic growth from energy use it explores the difference between neo classical and ecological economic worldviews and highlights how the ecological economic approach attempts to ground its analysis within the physical limits implied by the laws of thermodynamics once these laws are accounted for the possibility of decoupling economic growth from energy use seems more limited than neo classical economics implies analysis of empirical evidence also demonstrates that observed improvements in gdp energy use ratios in the usa are better explained by shifts towards higher quality fuels than by improvements in the energy efficiency of technologies this implies a need to focus on decarbonising energy supply furthermore where energy efficiency improvements are attempted they must be considered within the context of a possible rebound effect which implies that net economy wide energy savings from energy efficiency improvements may not be as large as the energy saved directly from the efficiency improvement itself both decarbonising energy supply and improving energy efficiency require the rapid development and deployment of new and existing low carbon technologies this review therefore concludes by briefly outlining areas of economic thought that have emerged as a result of engagement between economists and experts from other disciplines they include ecological evolutionary and institutional economics all of which can make policy relevant contributions to achieving a transition to a low carbon economy

energy consumption economic growth and prices a reassessment using panel vecm for developed and developing countries this paper reinvestigates the energy consumption gdp growth nexus in a panel error correction model using data on 20 net energy importers and exporters from 1971 to 2002 among the energy exporters there was bidirectional causality between economic growth and energy consumption in the developed countries in both the short and long run while in the developing countries energy consumption stimulates growth only in the short run the former result is also found for energy importers and the latter result exists only for the developed countries within this category in addition compared to the developing countries the developed countries elasticity response in terms of economic growth from an increase in energy consumption is larger although its income elasticity is lower and less than unitary lastly the implications for energy policy calling for a more holistic approach are discussed c 2006 elsevier ltd all rights reserved

a panel study of nuclear energy consumption and economic growth abstract this study examines the relationship between nuclear energy consumption and economic growth for sixteen countries within a multivariate panel framework over the period 1980 2005 pedroni s 1999 2004 heterogeneous panel cointegration test reveals there is a long run equilibrium relationship between real gdp nuclear energy consumption real gross fixed capital formation and the labor force with the respective coefficients positive and statistically significant the results of the panel vector error correction model finds bidirectional causality between nuclear energy consumption and economic growth in the short run while unidirectional causality from nuclear energy consumption to economic growth in the long run thus the results provide support for the feedback hypothesis associated with the relationship between nuclear energy consumption and economic growth

the role of money supply shocks in the short run demand for money abstract previous money demand models are either inconsistent with contemporaneous adjustment of the price level to expected changes in the nominal money supply or imply implausible interest rate fluctuations in response to innovations in nominal money we propose a shock absorber money demand model in which money supply shocks affect the synchronization of asset transactions and so engender a temporary increase or decrease in desired money holdings expected changes do not engender such fluctuations in real money inventories in simultaneous estimates for eight industrial countries the shock absorber model proved empirically superior

the behavior of money stock under interest rate control some evidence for canada a widely held view of interest rate control is that under this policy the demand for m1 determines the behavior of the stock of m1 an alternative view is that under interest rate control the supply function of m1 is the residual quantity determined by the banking system given the levels of bank credit and nontransaction deposits chosen by the nonbank public the authors find evidence in favor of the alternative view for the canadian case 1970 84 copyright 1987 by ohio state university press

the impact of international factors on u s inflation an empirical test of the currency substitution hypothesis a common argument for flexible exchange rates is that they insulate the domestic economy from external monetary shocks consequently the domestic rate of inflation and income growth are related directly to the behavior of the domestic money supply the insular properties of a flexible exchange rate system have been challenged over the past few years by proponents of the theory of currency substitution advocates of currency substitution argue that the domestic demand for money is a function of the relative opportunity costs between domestic and foreign holdings of monetary assets failing to recognize these international influences yields a domestic money demand function that appears to be highly unstable consequently depending on the particular set of international forces affecting the domestic demand for money a given rate of domestic money growth can lead to a variety of rates of domestic inflation

renewable energy consumption and economic growth evidence from a panel of oecd countries abstract this study examines the relationship between renewable energy consumption and economic growth for a panel of twenty oecd countries over the period 1985 2005 within a multivariate framework given the relatively short span of the time series data a panel cointegration and error correction model is employed to infer the causal relationship the heterogeneous panel cointegration test reveals a long run equilibrium relationship between real gdp renewable energy consumption real gross fixed capital formation and the labor force with the respective coefficients positive and statistically significant the granger causality results indicate bidirectional causality between renewable energy consumption and economic growth in both the short and long run

gmm estimates of currency substitution between the canadian dollar and the u s dollar this paper investigates the empirical strength of currency substitution between the canadian dollar and the u s dollar euler equations implied by a small open economy money in the utility function model are estimated and tested by hansen s generalized method of moments procedure the major empirical finding is that both the elasticity of currency substitution and the share of u s currency in the production of canadian liquidity services are economically small even though the combined domestic and u s real balances appear to provide statistically significant economizing on transactions costs copyright 1994 by ohio state university press

currency substitution under nonexpected utility some empirical evidence this paper derives and tests the restrictions implied by an optimizing model of currency substitution under nonexpected utility using quarterly data for israel from 1978 to 1988 we find that the elasticity of intertemporal substitution is less than one the elasticity of currency substitution is greater than one relative risk aversion is about seven and the elasticity of currency substitution is greater than the intratemporal elasticity of substitution between consumption and liquidity services in most cases the evidence supports the hypothesis of nonexpected utility as well as the inclusion of liquidity services in the representative agent s objective function the methodology of this paper can be applied to other interesting cases of currency substitution copyright 1993 by ohio state university press

currency substitution capital mobility and money demand abstract this paper re examines the currency substitution cs issue by specifying a general portfolio balance pb model where domestic residents demand for foreign money is distinguished from their demands for foreign non monetary assets the latter possibility which reflects international capital mobility as opposed to cs per se is already a key feature in the open economy macro literature the inclusion of foreign money leaves the usual asset demand functions unchanged in the pb model that ignores cs at least as far as the appropriate rate of return arguments and their signs are concerned although this suggests that cs is of limited importance in macro modelling it implication for the estimation of money demand functions is pursued an initial attempt is made to empirically isolate the separate efects of high capital mobility and currency substitution for canada germany the united kingdom and the united states the results while not conclusive due to high multicollinearity problems bring into question the empirical as well as the theoretical relevance of currency substitution

currency substitution in mexico the dollarization problem the term dollarization will be interpreted in this paper as the degree to which real and financial transactions are performed in dollars relative to those realized in domestic currency an obvious choice for measuring the degree of dollarization in the economy is the proportion of dollars to domestic currency circulating at any point in time this concept of dollarization is closely related to the literature on currency substitution which explains the conditions under which foreign money balances will be held and adapted to expected changes in relative risks and returns among the various currencies the general idea of several representative recent papers see 6 9 12 is that monetary policy will be ineffective in a country where foreign currencies are regarded as good substitutes for domestic currency an implication of this hypothesis is that the elasticity of substitution between domestic and foreign currencies is likely to increase in periods when the exchange rate is floating hence if the issue of currency substitution is empirically relevant one of the stronger arguments for floating exchange rates greater national monetary independence is seriously weakened

competitive interest payments on bank deposits and the long run demand for money reply this paper tests two assumptions made in previous demand for money studies the first assumption concerns the role assigned to the interest rate in the demand for money function common practice identifies the rate of interest with the opportunity cost of holding money in section i this formulation is shown to blur an important distinction between the price of money and the price of money substitutes and to implicitly assume that the relevant price variable is the difference between these two distinct prices a second assumption is that the current ban on interest payments on demand deposits is fully effective in section ii i operationally define these price variables and estimate perfectly competitive interest payments on commercial bank deposits this is done by crudely measuring commercial bank marginal costs and assuming that all excess profit is passed on to depositors in indirect ways section iii presents estimates of a more complete longrun demand for money relationship which explicitly includes an own price and a cross price as separate influences and assumes that the prohibition of the payment of interest on deposits is totally ineffective although no firm conclusion is reached concerning the proper functional specification of the demand function the results significantly improve upon previous demand for money estimates which assumed that the interest payment prohibition is totally effective in section iv the results are summarized and implications of the analysis for monetary theory are presented my competitive demand for money formulation leads to a reinterpretation of the existing evidence on what is generally referred to as the interest elasticity of demand for money this estimate is shown to be significantly biased downward it also implies that the demand for and supply of money are more interdependent than is usually assumed

the effect of energy on output per worker in the balkan peninsula a country specific study of 12 nations in the energy community in this paper we explore the long run co integration relationship between output per worker capital per worker and energy per worker for 12 countries in the balkan peninsula albania austria bulgaria cyprus greece hungary italy macedonia romania slovakia slovenia and turkey which are part of the energy community in line with the current developments in energy economics 62 we add to the literature by reviewing the elasticity coefficients for the 12 countries using the augmented solow 63 framework and the ardl bounds procedure 57 the causality nexus is explored using the toda and yamamoto 1995 procedure the results show that output capital and energy in per worker terms are co integrated we note that all countries have positive and statistically significant long run energy elasticity coefficients except for macedonia we note that energy is statistically significant in the short run for all other countries the causality results support the conservation hypothesis for 7 countries albania bulgaria cyprus hungary italy romania and turkey the growth hypothesis for 2 countries austria and macedonia and the feedback hypothesis for 3 countries greece slovakia and slovenia respectively

structural break unit root and the causality between energy consumption and gdp in turkey abstract this paper tries to investigate a series of unit root and causality tests to detect causality between the gdp and energy consumption in turkey employing hsiao s version of granger causality method for the 1950 2000 period the conventional unit root tests indicate the series are i 1 whereas the endogenous break unit root tests proposed by zivot and andrews zivot e and andrews d w k 1992 further evidence on the great crash the oil price shock and the unit root hypothesis journal of business and economics statistics 10 251 270 and perron perron p 1997 further evidence on breaking trend functions in macroeconomic variables journal of econometrics 80 355 385 reveal that the series are trend stationary with a structural break therefore it is inappropriate to take the first difference of the data to achieve stationarity the main conclusion of this study is that there is no evidence of causality between energy consumption and gdp in turkey based on the detrended data

the relationship between energy consumption energy prices and economic growth time series evidence from asian developing countries this paper estimates the causal relationships between energy consumption and income for india indonesia the philippines and thailand using cointegration and error correction modelling techniques the results indicate that in the short run unidirectional granger causality runs from energy to income for india and indonesia while bidirectional granger causality runs from energy to income for thailand and the philippines in the case of thailand and the philippines energy income and prices are mutually causal the study results do not support the view that energy and income are neutral with respect to each other with the exception of indonesia and india where neutrality is observed in the short run c 2000 elsevier science b v all rights reserved jel classifications c22 q43 q48

the relationship between disaggregate energy consumption and industrial production in the united states an ardl approach abstract we re examine the relationship between disaggregate energy consumption and industrial output as well as employment in the united states using the autoregressive distributed lag ardl approach developed by pesaran and pesaran pesaran m h pesaran b 1997 working with microfit 4 0 camfit data ltd cambridge and pesaran shin and smith pesaran m h shin y smith r j 2001 bounds testing approaches to the analysis of level relationships journal of applied econometrics 16 289 326 in particular we focus attention on the following energy consumption variables coal fossil fuels conventional hydroelectric power solar energy wind energy natural gas wood and waste the sample period covers 2001 1 2005 6 our results imply that real output and employment are long run forcing variables for nearly all measures of disaggregate energy consumption

currency substitution and the precautionary demand for money abstract although the implications of currency substitution have received considerable attention recently the microeconomic foundations of this phenomenon seem largely to have been taken for granted the present paper considers the precautionary motive for holding cash balances as one possible motivation for the currency substitution hypothesis a three asset model is presented in which transaction costs are explicit and an agent is faced with uncertain cash requirements in two different currencies the role played by the expected rate of depreciation in the optimal portfolio allocation is found to conform with prior beliefs

energy use and output growth in canada a multivariate cointegration analysis using a neo classical one sector aggregate production technology where capital labor and energy are treated as separate inputs this paper develops a vector error correction vec model to test for the existence and direction of causality between output growth and energy use in canada using the johansen cointegration technique the empirical findings indicate that the long run movements of output labor capital and energy use in canada are related by two cointegrating vectors then using a vec specification the short run dynamics of the variables indicate that granger causality is running in both directions between output growth and energy use hence an important policy implication of the analysis is that energy can be considered as a limiting factor to output growth in canada

portfolio theory and currency substitution one of the major reasons friedman 1953 and johnson 1972 advocated flexible exchange rates was to eliminate supply side monetary substitutability which can incapacitate domestic monetary policy however contributors to the currency substitution literature including miles 1978 girton and roper 1981 and mckinnon 1982 have argued that when economic agents hold both domestic and foreign monies variations in foreign interest rates or expected future exchange rates can make domestic money demand functions unstable as economic agents shift resources in response to changes in prospective relative returns as a result they and others have claimed that flexible exchange rates may not secure domestic monetary autonomy l the major purpose of this paper is to demonstrate the conditions under which foreign and domestic monies are substitutes in demand when economic agents have motives to hold both and to contrast the determinants of currency substitutability with those of the more general concept of asset substitutability importantly it is demonstrated that the usual portfolio theoretic justification for including opportunity cost variables such as foreign interest rates foreign inflation rates or expected

the saving and investment nexus for china evidence from cointegration tests the saving and investment nexus as postulated by feldstein and horioka fh 1980 is revisited the saving investment correlation for china is estimated over the periods 1952 1998 and 1952 1994 the latter culminating in a period of fixed exchange rate regime amongst the key results it is found that saving and investment are correlated for china for both the period of the fixed exchange rate and the entire sample period with high saving investment correlation the results suggest that the chinese economy is in conformity with the fh hypothesis this is a valid outcome for in china capital mobility was fairly restricted over the 1952 1994 period as indicated by the relatively low foreign direct investment