real exchange rate dynamics with nominal parities structural change and overshooting abstract the relationship between structural changes that require a modification of the steady state level of the real exchange rate is examined in terms of a model of staggered prices and real wealth effects although wealth effects are necessary for overshooting it is shown that their actual values are of no particular relevance in fact overshooting is shown to be more likely the smaller is the real wealth effect in the demand for tradables a key and counterintuitive result is that overshooting is more likely the higher is the frequency of price changes

what went wrong with the recent reforms in the southern cone this paper describes and interprets the outcome of the reform packages in chile argentina and uruguay during 1974 83 it is shown that all three countries experienced initial success with the rescue operation from the severe macroeconomic disequilibrium at the inception of the reforms the paper then discusses the areas in which the reforms were successful and why the countries experienced boom bust cycles resulting in large increases in external indebtedness and internal financial crises the paper attributes the failure of the reforms to a combination of policy inconsistencies implementation difficulties and market frictions jointly these factors generated a sustained appreciation of the real exchange rate and a large spread between the cost of dollar denominated and peso denominated loans in turn the appreciation and interest rate difference created protracted opportunities for arbitrage that distracted firms from the business of production

multiperiod sales production decisions under uncertainty abstract this paper studies the behavior of an expected profit maximizing multiperiod firm under uncertainty in output and demand the firm s problem is to determine in each period the level of sales and inventory and the expected output for the coming period the optimal policy is derived in an explicit closed form and is proved to be myopic it is shown that the observed phenomenon of downward price inflexibility can be explained and further specified by using the results of our model

exchange rate based stabilization imperfect competition and supply side effects abstract this paper studies exchange rate based stabilization programs in the context of a dynamic general equilibrium model for a small open economy that incorporates imperfect competition a backward looking wage setting and an endogenous labor supply in contrast to previous results the analysis shows that a permanent disinflation leads to a sustained expansion in the domestic sector and a slow inflation convergence this study also shows that a temporary stabilization replicates a boom recession cycle these results suggest that a backward looking wage setting and an endogenous labor supply are the key ingredients for reproducing the stylized facts of exchange rate based stabilization

temporary stabilization a stochastic analysis abstract this paper develops a stochastic model of exchange rate based inflation stabilization in which agents have expectations of devaluation driven by a mixed diffusion jump process in a richer stochastic environment where a brownian motion drives the rate of devaluation and a poisson process determines the probability of devaluation we examine consumption and wealth equilibrium dynamics when a stabilization plan is implemented and contingent claims markets are unavailable we also assess the effects of exogenous shocks on consumption and welfare finally we use the proposed model to carry out a simulation experiment of the equilibrium dynamics

assessing the relative efficiency of agricultural production units in the blackland prairie texas the way in which data envelopment analysis dea can be used to assess the relative technical efficiency of agricultural production units is illustrated two variants of the existing dea additive model introduced each eliminating earlier difficults encountered inapplication and theory these new models are demonstrated through application to agricultural data obtained from the blackland prairie texas

real exchange rate and openness in emerging economies argentina in the long run argentina s economic policies since the beginning of the century give an interesting background to the study of real exchange rate rer management in emerging countries in this article four types of rer overvaluation are identified in the 1920s argentina provides a short example of overvaluation in a context of a fixed exchange rate policy moreover the estimations show that import substitution regimes can lead to a misalignment of rer argentina illustrates also the difficult management of rer in a volatile environment the results allow in addition to better understand the failure of the trade liberalization attempts of the country and remind that successfully integrating the world economy asks for an appropriate rer policy

the extent of resource use inefficiencies in cotton production in pakistan s punjab an application of data envelopment analysis abstract this paper attempts to identify sources of resource use inefficiency for cotton production in pakistan s punjab the use of a non parametric method data envelopment analysis dea is developed to study the relative technical and allocative efficiencies of individual farms which use similar inputs produce the same product and operate under comparable circumstances in the cotton wheat system of pakistan there are a considerable number of farms that are both technically and allocatively inefficient the use of dea shows that the technique provides a clear identification of both the extent and the sources of technical and allocative inefficiencies in cotton production however both the interpretation of the farm level results generated and the projection of these results to a higher level require care given the technical nature of the agricultural production processes

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

exchange rate based stabilizations a literature review the exchange rate based stabilizations erbss that have been undertaken in chronic inflation countries have generated a controversial body of literature regarding the effects of disinflation programs especially those on real consumption and output this survey provides an extensive overview of the literature on erbs the paper covers various empirical studies that have attempted to document the macroeconomic regularities associated with erbs discussing both their strengths and their weaknesses it analyzes diverse theoretical models that have been put forward to replicate the business cycles associated with erbs and sheds light on which models perform better using real data the results suggest that durables incorporated weak credibility and sticky price model proves to be most compatible with the empirical regularities observed in the course of erbs

exchange rate based inflation stabilization the initial real effects of credible plans abstract this paper studies the initial effects of exchange rate based stabilization programs within a dynamic general equilibrium model of a small open economy in which inflation acts as a tax on intermediate transactions and capital accumulation is subject to convex adjustment costs and gestation lags the model replicates the typical pattern of slow inflation convergence sustained real exchange rate appreciation trade balance deterioration and expansion in domestic spending followed by a deflationary slowdown without resorting to sticky prices imperfect credibility or adaptive expectations calibrated versions of the model are compared with the initial effects of the argentine convertibility plan of april 1991

global and local scale characteristics in convex and nonconvex nonparametric technologies a first empirical exploration the purpose of this contribution is to empirically implement and supplement the proposals made by podinovski 2004b to explore the nature of both global and local returns to scale in nonconvex nonparametric technologies in particular we both propose a simplified method to compute the global returns to scale and employ some secondary data sets to investigate the frequency of the special case of global sub constant returns to scale furthermore when determining global returns to scale using both convex and nonconvex technologies we verify how often the resulting information is concordant or conflicting finally besides comparing the fdh and dea evolution of ray average productivity for some typical individual observations we introduce in the literature two original methods for the determination of local returns to scale in nonconvex technologies

the role of expectations in stabilization policy abstract this paper develops and tests a theory of the process by which private agents in an economy form expectations about government policy agents form and update their beliefs about the true state of government policy in a bayesian fashion the credibility of a policy is defined to be the subjective probability that the government is pursuing a reform policy rule the credibility of a reform of monetary or exchange rate policies is a function of the parameters of both monetary and fiscal policies the theory is applied to the chilean and argentine exchange reforms of the late 1970 s

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

price smoothing and inventory this paper explains the phenomenon of price rigidity or price smoothing as the outcome of the optimal inventory policy of a multi period profit maximizing firm under demand and output uncertainties price smoothing may be manifested in two forms first price changes may be moderated with respect to those implied by the demand function and second the firm may choose to restrict price fluctuations by establishing upper and or lower bounds on prices we show that the extent of the asymmetry in price smoothing depends on the relationship between the inventory holding cost and the backlog penalty cost our model accommodates a wide range

the interrelationship between price and output decisions and investment decisions microfoundations and aggregate implications abstract this paper develops a model of firm behavior in which both price and output decisions and investment decisions are made the model permits an analysis of the dynamics of inventory and capital accumulation on price and output behavior there are two main results 1 short run price and output levels will differ from long run levels as desired stocks of inventory and capital diverge from actual levels 2 the size of the elasticities of price and output to changes in demand and cost variables depends on the speed with which gaps between desired and actual stocks are closed through investment

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

stabilization dynamics and backward looking contracts abstract exchange rate based stabilizations often result in an initial output expansion one explanation for this phenomenon has been that in the presence of inflation inertia a reduction in the nominal interest rate causes the domestic real interest rate to fall thus increasing aggregate demand this paper reexamines this issue in the context of an intertemporal optimizing model in contrast to previous results the analysis shows that if the intertemporal elasticity of substitution is smaller than the elasticity of substitution between traded and home goods a permanent reduction in the rate of devaluation leads to a fall in aggregate demand

the censored newsvendor and the optimal acquisition of information this paper investigates the effect of demand censoring on the optimal policy in newsvendor inventory models with general parametric demand distributions and unknown parameter values we show that the newsvendor problem withobservable lost sales reduces to a sequence of single period problems while the newsvendor problem withunobservable lost sales requires a dynamic analysis using a bayesian markov decision process approach we show that the optimalin ventory level in the presence of censored demand ishigher than would be determined using a bayesian myopic policy we explore the economic rationality for this observation and illustrate it with numerical examples

on the censored newsvendor and the optimal acquisition of information we have read ding et al 2002 referred to hereafter as dpb with great interest dpb con ains two main results theorem a claims that the myopic inventory level is a lower bound on the optimal inventory level and theo rem b attempts to quantify the marginal expected value of information however there are mistakes in the proof of theorem a the result itself is correct a proof is given in lu et al 2004 furthermore one of the erroneous expressions in dpb s proof leads to an error in the marginal expected value of information in theorem b we now provide more details the equation numbers unless specified otherwise refer to the appendix of dpb available at the operations research home page http or pubs informs org the main error in the proof of theorem a is the follow ing if a x and b x are two functions of the variable jc then the derivative of a x b x with respect to x is d r x m da x db x a x b x b x a x dpb s mistake in essence is to omit the second term more specifically a key step in proving theorem a is inequality 35

credibility and the dynamics of disinflation in open economies a note on the southern cone experiments abstract when people lack confidence in the ability of politicians to carry out a newly announced disinflationary policy disinflation becomes more difficult to achieve numerous writers have emphasized the importance of policy consistency for establishing credibility this essay suggests in addition that policies with a quicker disinflationary impact become more credible sooner and thus have a better chance of succeeding with that proposition in mind the objective is to examine and compare the initial impacts of alternative disinflationary strategies in an open economy with capital mobility using evidence from the southern cone experience with preannounced exchange rates for illustrative purposes

what drives consumption booms consumption booms have been common in both industrial and developing countries and several explanations have been offered for their occurrence these include economy wide wealth effects associated with favorable movements in the terms of trade or euphoric expectations triggered by macroeconomic reforms ricardian effects associated with fiscal stabilization lending booms following financial liberalization and a variety of distortions in inter temporal relative prices using a large cross country sample of booms this article assesses how widely applicable these explanations are the key finding is that wealth effects linked to favorable movements in the terms of trade and anticipated improvements in macroeconomic performance seem to have been more important empirically than explanations relying primarily on fiscal phenomena or distortions in inter temporal relative prices

crawling peg inflation hedges and exchange rate dynamics this paper stresses the effects of currency substitution and speculation on inflation hedges on the relative price of home goods in the two sector general equilibrium portfolio balance model examining the overshooting hypothesis of exchange rates in association with the overshooting phenomenon of price of inflation hedges it has shown that exchange rate undershooting is plausible with the significant overshooting of the price of inflation hedges when domestic residents hold only domestic money and inflation hedges however the impact of currency substitution is strong enough to lead to exchange rate overshooting if the domestic residents have access to foreign currency

stabilization and recession in a transitional economy the case of poland abstract this paper analyzes the polish experiences in 1990 of the stabilization shock therapy implemented simultaneously with the set of system transforming reforms the orthodox exchange rate based stabilization program brought about a substantial reduction in inflation and the establishment of market clearing prices but the economy fell into unexpectedly deep recession our findings suggest that the recession which has been common to all postsocialist countries was mainly caused by a system specific output decline related to the dismantling of a centrally planned system and the transition to market economy

political cycles and exchange rate based stabilization fixed exchange rates implemented to increase credibility and attract foreign investment or as an alternative approach to stabilization in high inflation economies have been shown to be successful in expanding economic activity and correcting inflation in the short term but often lead to undesirable outcomes in the medium to long term although there is a wealth of literature documenting the boom bust cycles associated with the adoption of a nominal anchor no adequate explanation has been proffered as to governments repeatedly choosing policies that are self defeating the authors address this question with a political economy explanation based on the notion of a self interested government for which short term stabilization is attractive in the face of incentives posed by the electoral cycle if the election coincides with the boom phase of an exchange rate based stabilization incumbent governments increase the likelihood of gaining reelection and the bust phase will develop if at all only after the contest the authors thus suggest a modified version of the traditional political business cycle from the standpoint of a self interested office seeking government exchange rate based stabilizations can make good political sense empirical results based on an analysis of eighteen latin american countries from 1970 to 1999 support the insights of the argument movements towards a more fixed exchange rate are greater than three times more likely in a preelection period than in other stages of the electoral cycle

the capital inflows problem revisited a stylized model of southern cone disinflation in the late 1970s countries in latin america s southern cone initiated attempts to lower domestic inflation rates through the progressive reduction of a preannounced rate of exchange rate devaluation the stabilization programs gave rise to massive capital inflows real exchange rate appreciation and current account deficits this paper develops a stylized intertemporal framework in which the effects of a credible preannounced disinflation scheme can be studied it is shown that even when agents have perfect foresight and markets clear continuously the capital inflows phenomenon and the associated real appreciation may result while unanticipated permanent inflation changes are neutral in the paper anticipated inflation is neutral only in exceptional circumstances a preannounced disinflation operates by altering the path of an expenditure based real domestic interest rate that depends on expected changes in the prices of liquidity services and nontradable consumption goods

uncertainty expectations of devaluation and the real exchange rate abstract this essay is concerned with the extent to which expectations of depreciation and the degree of uncertainty with respect to the future exchange rate policy may modify the pricing behavior of the domestic firm it turns out that the optimal price under uncertainty will be larger than in the certain case if the price loss due to under estimation of demand is larger than the marginal cost of holding inventories the model was tested with data for argentina for the period before the collapse of the exchange rate system in march 1981

disinflation and fiscal reform a neoclassical perspective abstract many latin american countries engaged in disinflation programs based on both exchange rate management and fiscal reforms in most of the cases part of the fiscal reform was not implemented and the program had to be abandoned the aftermath of these programs is not encouraging in this paper we show that if the reform process is uncertain and inflation has welfare costs the optimal exchange rate policy indeed implies the initiation of a disinflation program at the announcement of the fiscal reform even if it implies the possibility of a balance of payments crisis finally we show that it is optimal to engage in a sequence of stabilization programs until one of them is successful

money supply variability in a macro model of monopolistic competition the effects of changes in money supply variability are examined for a macro model of monopolistic competition increases in money supply variability raise demand uncertainty causing individual firms to produce more for inventory in addition expected profits decrease inducing a number of firms to leave the economy aggregate income then falls in spite of an increase in firm level production the result on aggregate income is standard but the results on inventories and the number of firms in the economy distinguish this monopolistic macro model empirically from conventional macro models when changes in money supply variability occur

an optimal middleman firm price adjustment policy the short run inventory based pricing policy this paper examines the optimum pricing policies of middleman firms who carry an inventory of goods bought for resale each period the firm in the theoretical model is required to post a price before it observes its realized demand in disequilibrium situations the firm s profit maximizing pricing policy is shown to be a short run inventory based pricing policy which requires the firm to post a price below the long run equilibrium price upon observing its actual beginning inventory level above its optimum level and to post a price above the long run equilibrium price upon observing its actual inventory level below its optimum level the final section suggests that the use of such policies by middleman firms will lead to market price adjustments which are both consistent with the law of supply and demand and which are based on explicit maximizing behavor

exchange rate based stabilization in latin america abstract this paper examines the use of the exchange rate as a nominal anchor for achieving price stability in latin america it will explore the impact of exchange rate anchoring on the real sector by analyzing five stabilization programs the paper will identify conditions that make exchange rate based stabilization successful and those that lead to its failure it will also demonstrate that while the income effect can be instrumental in describing consumption booms associated with exchange rate based stabilizations the popular view based on the credibility hypothesis fails to explain key events associated with such programs

a further contribution towards explaining why disinflation through currency pegging may cause a boom abstract we revisit the question of why exchange rate based erb disinflation is often expansionary we use an analytical dge model in discrete time with staggered wages if the policy is unanticipated and if the currency is pegged at the level it would have reached under unchanged policies then a boom occurs for preannounced erb disinflation our model also predicts a boom the explanation for both is that when wages are staggered wage setters have to be forward looking anticipating lower future inflation they reduce wages before the change in the exchange rate causing a favourable supply side effect on output

on gradual disinflation the real exchange rate and the current account abstract we study the effects of a credible gradual exchange rate based disinflation program in a two sector economy after an initial exchange rate depreciation the reductions in the rate of devaluation reduce the monetary wedge generated by the cash in advance constraint leading to a gradual increase in absorption that yields progressive real exchange rate appreciations and current account deficits an initial boom in economic activity is not followed by a later contraction as labour supply expands during the whole length of the program many of the model s predictions are in accordance with the stylized facts on disinflation in chronic inflation countries in particular those of the mexican program of 1988 1992

learning consumer tastes through dynamic assortments how should a firm modify its product assortment over time when learning about consumer tastes in this paper we study dynamic assortment decisions in a horizontally differentiated product category for which consumers diverse tastes can be represented as locations on a hotelling line we presume that the firm knows all possible consumer locations comprising a finite set but does not know their probability distribution we model this problem as a discrete time dynamic program each period the firm chooses an assortment and sets prices to maximize the total expected profit over a finite horizon given its subjective beliefs over consumer tastes the consumers then choose a product from the assortment that maximizes their own utility the firm observes sales which provide censored information on consumer tastes and it updates beliefs in a bayesian fashion there is a recurring trade off between the immediate profits from sales in the current period exploitation and the informational gains to be exploited in all future periods exploration we show that one can partially order assortments based on their information content and that in any given period the optimal assortment cannot be less informative than the myopically optimal assortment this result is akin to the well known stock more result in censored newsvendor problems with the newsvendor learning about demand through sales when lost sales are not observable we demonstrate that it can be optimal for the firm to alternate between exploration and exploitation and even offer assortments that lead to losses in the current period in order to gain information on consumer tastes we also develop a bayesian conjugate model that reduces the state space of the dynamic program and study value of learning using this conjugate model

exchange rate based stabilizations under real frictions the role of endogenous labor supply abstract this paper studies exchange rate based stabilization programs in the context of a model of a small open economy where labor supply is endogenous agents derive utility from both consumption and leisure in environments where consumption is subject to a cash in advance constraint a cut in the rate of devaluation lowers the nominal interest rate and hence alters the optimal mix of consumption and leisure the paper shows that in the presence of adjustment costs of investment a perfectly credible cut in the devaluation rate causes simultaneously a consumption and output boom a cumulative current deficit a sustained real appreciation of the domestic currency and an increase in labor supply over time it is also shown that an imperfectly credible stabilization program in this environment would have effects similar to the perfectly credible program but generate richer dynamics such as an initial boom in output followed by a recession which begins prior to the end of the program the model has clear welfare implications in that permanent reductions in inflation are unambiguously welfare enhancing

external shocks financial reforms and stabilization attempts in uruguay during 1974 1983 abstract this paper interprets and evaluates uruguay s reforms emphasizing the outcome of financial reforms and attempts to bring down inflation it is shown that domestic interest rate deregulation and the removal of prohibition towards holding dollar denominated assets led to a rise in the ratio of financial assets in gdp and to a shift towards dollar denominated assets causes of the persistent and large spread between peso and dollar interest rates adjusted for the preannounced rate of devaluation tablita are examined the discussion of the stabilization program during 1979 1982 and its aftermath in 1983 shows that setting the tablita at less than the difference between internal and external inflation led to severe imbalances because of remaining redundant protection and price stickness the real exchange rate appreciated sharply for a prolonged period and the trade balance widened until the stabilization episode ended with capital flight when doubts set in about the sustainability of the tablita

stalking information bayesian inventory management with unobserved lost sales retailers are frequently uncertain about the underlying demand distribution of a new product when taking the empirical bayesian approach of scarf 1959 they simultaneously stock the product over time and learn about the distribution assuming that unmet demand is lost and unobserved this learning must be based on observing sales rather than demand which differs from sales in the event of a stockout using the framework and results of braden and freimer 1991 the cumulative learning about the underlying demand distribution is captured by two parameters a scale parameter that reflects the predicted size of the underlying market and a shape parameter that indicates both the size of the market and the precision with which the underlying distribution is known an important simplification result of scarf 1960 and azoury 1985 which allows the scale parameter to be removed from the optimization is shown to extend to this setting we present examples that reveal two interesting phenomena 1 a retailer may hope that compared to stocking out realized demand will be strictly less than the stock level even though stocking out would signal a stochastically larger demand distribution and 2 it can be optimal to drop a product after a period of successful sales we also present specific conditions under which the following results hold 1 investment in excess stocks to enhance learning will occur in every dynamic problem and 2 a product is never dropped after a period of poor sales the model is extended to multiple independent markets whose distributions depend proportionately on a single unknown parameter we argue that smaller markets should be given better service as an effective means of acquiring information

obstacles to disinflation what is the role of fiscal expectations persistently high expected inflation often makes it difficult for policy makers to recover from inflationary episodes without substantial output losses using survey data from eleven disinflation episodes we can assess whether the more or less sluggish decline of inflation rates towards lower target levels is related to backward looking pricing behavior or to imperfect credibility of the stabilization efforts we find that expectations of future inflation play a much more important role than past inflation in shaping the inflation process second we find that an improvement in various measures of fiscal balances significantly reduces inflation expectations this evidence suggests that when attempting to stabilize inflation priority should be given to building fiscal credibility oya celasun r gaston gelos and alessandro prati

modern hyper and high inflations since 1947 hyperinflations by cagan s definition in market economies have been rare much more common have been longer inflationary processes with inflation rates above 100 percent per annum based on a sample of 133 countries and using the 100 percent threshold as the basis for a definition of very high inflation episodes this paper examines the main characteristics of such inflations among other things we find that i close to 20 percent of countries have experienced inflation above 100 percent per annum ii higher inflation tends to be more unstable iii in high inflation countries the relationship between the fiscal balance and seigniorage is strong both in the short and long run iv inflation inertia decreases as average inflation rises v high inflation is associated with poor macroeconomic performance and vi stabilizations from high inflation that rely on the exchange rate as the nominal anchor are expansionary

target buffer stocks the behaviour of a buffer stock holding firm facing stationary demand shocks is considered from the viewpoint of recent evidence on inventories and price setting attention is focussed on the responses of price and supply to changes in autonomous demand and compared with those of a nondurable producer the results conflict with recent theoretical work in providing support for a keynesian interpretation of inventory series

disinflation programs under policy uncertainty abstract this paper uses a model with endogenous labor supply to study exchange rate based inflation stabilization programs under uncertainty regarding the duration of the program the paper finds that the output and consumption dynamics induced by these programs are extremely sensitive to whether the programs are perceived to have a chance of continuing permanently or whether they are expected to end in finite time it is shown that the business cycle dynamics for output that are typically associated with these programs arise only when the policy is expected to collapse in finite time furthermore for the purposes of rationalizing the stylized facts the uncertain duration channel appears to induce a fundamental tension between the consumption dynamics and the current account dynamics these results raise doubts regarding the explanatory power of the uncertain duration channel in particular and the credibility channel in general

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

domestic savings public savings and expenditures on consumer durable goods in argentina abstract this paper shows that when aspects related to public savings and consumer durables are explicitly measured there is a considerable reduction in the recent cycle of savings in argentina both public savings and investment are responsible for sharp changes in domestic savings between decades while a great deal of the cycle in private savings is explained by decisions on consumer durables an examination of the saving investment correlation implicit in an econometric error correction model shows a drop over time in both the short run correlation and the speed of correction of any difference between both aggregates however a gap between savings and investment in argentina is not a long term phenomenon as it is implied in the data and considering recent observations finally an econometric analysis of expenditures on durables suggests that both an intertemporal optimization response by economic agents to new economic conditions as well as elements of exaggerated optimism and pessimism might explain the sharp cycle in the consumer durables spending that is behind the corresponding cycle in private savings