government debt government spending and private sector behavior comment in a recent issue of this review 1983 roger kormendi relied upon the work of martin bailey 1962 1971 and robert barro 1974 to develop an alternative approach to modeling private sector consumptionsaving behavior based on rational evaluation of the consequences of government fiscal policy p 995 briefly this approach involves determining to what extent government spending substitutes for private consumption and to what extent government debt is net wealth and thereby also affects private consumption this consolidated approach to examining private sector consumption is not only novel but appears at a time when there is widespread interest as well as controversy over the effects of government fiscal policy it therefore seems only appropriate to examine further the results obtained by kormendi not to criticize them but rather to explore their robustness this comment specifically explores the sensitivity of kormendi s results to alternative time periods of estimation to the differentiation between federal debt and state and local government debt and to the measurement of government debt particularly par vs market value

do governors get what they want an alternative examination of the line item veto this paper reconsiders the impact of the governor s line item veto on the state budget process the governor s ability to obtain his or her most desired budget measures item veto effectiveness rather than a smaller expenditure budget the percentage difference between the final state budget and the governor s original budget request over fiscal years 1983 1989 is examined the empirical results indicate that under certain political situations the line item veto authority enhances the governor s ability to obtain his or her desired budget

are future taxes discounted in this paper i examine empirically the question of whether or not the public recognizes the future taxes implied by current deficitfinanced expenditures as discussed by barro 1 it seems that such recognition does not occur but that by a new hypothesis presented here the aggregate economy behaves much as if it did this alternative hypothesis relies on the widely accepted efficient markets and permanent income hypotheses and it requires considerably less sophistication and information on the part of the average economic agent than does barro s hypothesis

the pricing of durable exhaustible resources partial or total durability characterizes a large class of exhaustible resources hotelling s r percent rule will apply to a durable resource produced in a competitive market but will not apply if the resource is produced in a monopolistic market however the r percent rule does not mean that price is steadily rising it is shown that in general the competitive market price will fall initially as the stock in circulation increases and later will rise as the stock decreases and eventually depreciates toward zero after production ceases accounting for durability may thus help explain the u shaped long term price profiles observed for many resources 11 references 3 figures

sustainability of current account deficits in india an intertemporal perspective this study examines the sustainability of current account deficits cads and the validity of intertemporal budget constraint ibc in india the long run model is estimated on annual data for the period 1950 1951 to 2009 2010 the optimal single equation and maximum likelihood ml system estimates of the model provide a consistent support for the long run relationship between imports and exports the olsgh estimates provide no support and that ml system estimates a consistent support for cointegration in both the models estimated with one and two structural breaks in level the new cointegration breakdown tests generally suggest that the cointegration prevails from 1951 to 2010 the evidence supporting the cointegration between imports and exports overwhelms the evidence providing a mixed or no support for cointegration the estimates of slope parameter above zero and the dominant support for cointegration between imports and exports vindicate the validity of ibc and the sustainability of cads the shor

euler equation tests of ricardian equivalence abstract tests of ricardian equivalence based on the euler condition can be written in several mathematically equivalent ways this paper shows that these alternative solutions may give rise to different empirical results when liquidity constraints are ignored this may be due to misspecification since a crucial assumption of the model is violated or due to the different parameter restrictions imposed by the different solutions the evidence suggests that misspecification is the most likely explanation previous evidence based on restricted specifications should be interpreted with caution

guidelines for exploiting natural resource wealth the principles of how best to manage the various components of national wealth are outlined where the permanent income hypothesis the hotelling rule and the hartwick rule play a prominent role as far as managing natural resource wealth is concerned a case is made to use an intergenerational sovereign wealth fund to smooth consumption across generations a liquidity fund for the precautionary buffers to deal with commodity price volatility and an investment fund to park part of the windfall until the country is ready to absorb extra spending on domestic investment capital scarcity implies that a positive part of the windfall should be spent on domestic investment the conclusions highlight the political economy problems that will have to be tackled with these normative proposals for managing wealth the author 2014 published by oxford university press

agendas strategic voting and signaling with incomplete information the literature on agendas with sincere and strategic voting represents an important contribution to our understanding of committees of institutions and of the opportunities to manipulate outcomes by the manipulation of institutions that literature though imposes an assumption that may be unrealistic in many situations namely that everyone knows the preferences of everyone else in this essay we apply bayesian equilibrium analysis to show that the properties of agendas that others derive by assuming complete information do not hold necessarily under incomplete information first a condorcet winner need not be selected even if nearly everyone on the committee most prefers it second the two step theorem that any outcome reachable in n voting stages via some amendment agenda is reachable in two stages under sophisticated voting need not hold third nonbinding votes such as straw polls can critically affect final outcomes

the tree cutting problem in a stochastic environment the case of age dependent growth abstract harvest policies are derived for growing biological assets e g forests livestock subject to stochastic age dependent growth and price uncertainty the task posed is analyzed as a continuous time optimal stopping problem for diffusion processes both single and ongoing rotation problems are considered qualitative comparative static and numerical results are provided

government debt government spending and private sector behavior revisited comment perhaps no issue has generated as much controversy among economists in the past decade as the proposition that an increase in the government deficit induces an equal offsetting increase in private saving the truth of this so called ricardian equivalence proposition is central to whether budget deficits reduce capital accumulation to the feasibility of expansionary tax reductions and to the effects of social security on private saving and aggregate capital accumulation although the basic idea that the future tax liabilities associated with government deficits and debt induce individuals to increase their saving has been around since the time of david ricardo and was treated explicitly by don patinkin 1965 martin bailey 1971 and levis kochin 1974 the current debate was launched by robert barro 1974 the voluminous theoretical literature of recent years has shown that complete ricardian equivalence would be expected to prevail only under very special conditions see douglas bernheim 1987 for an especially useful survey and analysis but the theoretical restrictiveness of the assumptions required for complete ricardian equivalence does not constitute a practical refutation defenders of ricardian equivalence can argue that the theory is only an approximation and can claim that although the stringent conditions required for complete ricardian equivalence do not hold the economy s behavior in practice is close to the predictions of ricardian equivalence there are two key empirical questions the first is whether a higher level of taxes with government spending constant induces individuals to reduce their spending on consumption as traditional theory holds or has no effect on consumer spending as the ricardian equivalence proposition predicts the second deals with the effect of government outlays on goods and services although the absence of a negative effect on consumer spending of such government outlays is clearly contrary to the ricardian equivalence proposition the existence of a moderate negative effect of government outlays on consumer spending is not in itself evidence in favor of the ricardian equivalence proposition that individuals increase their saving to finance anticipated debt service as feldstein 1982 explained consumers may correctly believe that a rise in current government spending is a good indicator of a higher level of future government spending once a program is launched or budgets increased the process is unlikely to be reversed an increase in current government spending is therefore a good indication that future taxes will have to be higher to finance a higher level of future government spending individuals may rationally reduce their own spending when government outlays increase without a concurrent increase in taxes because they anticipate higher future taxes to finance higher future government spending even if they give little or no weight to the debt service implications of the current deficit the strongest direct evidence in favor of ricardian equivalence is roger kormendi s 1983 article in the american economic review he presents consumption regression equations that relate an estimate of consumption to net national product wealth martin feldstein is professor of economics at harvard university and president of the national bureau of economic research douglas elmendorf is assistant professor of economics at harvard university we are grateful to greg mankiw and lawrence summers for comments on an earlier draft the research reported here is part of the nber study of the government budget and the private economy ikormendi defines consumption as the sum of current expenditures on services and nondurables plus 10

replicating ricardian equivalence tests with simulated series this paper replicates standard consumption function tests of ricardian equivalence using series generated from a model which nests ricardian equivalence within a non ricardian alternative due to finite horizons and or distortionary taxation the author shows that the estimates of the effects of taxation on consumption are not robust and that standard tests may have weaknesses which can lead to conflicting results whether ricardian equivalence holds or not the simulations also show that no clear conclusions about ricardian equivalence can be drawn from observing a low correlation between the current account and government budget deficits copyright 1997 by american economic association

line item veto where is thy sting roponents of giving the president the authority to use a line item veto argue that the institutional change is needed to limit special interest legislation and restrain spending opponents respond that it would grant too much added power to the president thereby upsetting the delicate balance wisely crafted by the founding fathers this article focuses on the presumption evidently shared by both sides in the debate that adoption of item veto authority will have significant consequences in terms of budget outcomes and the distribution of power 1 curiously there presently exists little empirical support for the presumption that item veto authority is important most studies comparing states with various types of veto authority have failed to detect significant effects associated with item veto additional tests of our own are consistent with these results after reviewing the empirical evidence we reconsider the alleged effects of item veto authority by seating the popular depiction in an explicit model of the budgetary process formal modeling exposes logical inconsistencies contained in popular veto discourse further the model makes clear that the predicted consequences of item veto commonly projected as ubiquitous in fact arise only in select settings

exogenous tax changes and interest rates testing for ricardian equivalence using an efficient markets model this article tests the ricardian theory i e barro 1974 using mishkin s 1981 1982 efficient markets model of interest rates employing romer and romer s 2010 measure exogenous tax changes i am able to test whether the u s bond market reacts in a keynesian or ricardian manner to exogenous tax policy changes this helps avoid the endogeneity problems associated with measuring the interest rate effects of deficits and provides a cleaner test of the pure ricardian thought experiment i find a significant negative relationship between tax changes and interest rates which is inconsistent with the ricardian model and support the keynesian crowding out framework

favoritism and reverse discrimination abstract we analyze the inefficiency that may arise in the form of reverse discrimination in the presence of favoritism or nepotism favoritism is typically associated with inefficient transfers to the core support of the incumbent government but inefficiency that is opposite in nature may also arise through the electoral process in a political environment where favoritism is pervasive we show that if the policy maker is sufficiently office seeking a socially efficient action may never be taken if it yields benefits to his core support due to reputational concerns hence the core support of the incumbent may fare worse than other groups we also consider the implications of policies such as anti nepotism laws or term limits in the presence of favoritism

oligopoly equilibria in nonrenewable resource markets abstract most nash cournot oligopoly models of nonrenewable resources apply open loop equilibrium concepts and are based on physical resource depletion this paper studies feedback equilibria and economic depletion assuming affine quadratic functional forms the existence uniqueness and explicit solutions for the equilibria are derived for duopoly and n player oligopoly with multiple resource stocks for the cases of nonquadratic criteria we develop a numeric solution scheme for the nash feedback equilibrium this scheme is an application of a discrete time discrete state controlled markov chain approximation method originally developed for solving deterministic and stochastic dynamic optimization problems in our nash cournot equilibrium the degree of concentration in supply declines over time whereas the previous models with physical depletion and open loop equilibrium concepts predict that a nash cournot resource market will develop in the direction of monopoly supply

testing ricardian equivalence a reconsideration empirical evidence on the determinants of private consumption in 52 countries over the period 1979 88 indicates that in contrast to the ricardian equivalence proposition a significant relationship exists between consumption and the variable the ratio of tax revenue to changes in government debt which measures the extent of substituting debt for tax financing the results obtained from estimating euler equations for the representative individual s stochastic dynamic optimization problem are favourable to the proposition that the choice between current taxation and debt issuance to finance a given government expenditure stream is relevant to the determination of the level of aggregate demand

is ricardian equivalence a good approximation ricardian equivalence may be a good approximation even if all households have finite horizons many households have short horizons and an appreciable fraction of wage income is received by liquidity constrained households the approximation is likely to be better the more imperfect annuity markets are

optimal investments using empirical dynamic programming with application to natural resources a number of problems arise when dynamic programming is applied to investment problems attempts have been made to circumvent these problems by using continuous time models where the state process is generated by a stochastic differential equation in this article the authors assume that the state process is described by a discrete markov time series model with empirically determined transition probabilities standard computer algorithms can then be used to obtain optimal policies they apply their methods to two examples in natural resources one of which has previously been analyzed by m j brennan and e s schwartz 1985 using continuous time models the authors show that the optimal policies depend critically on the specification of the state process and to a certain extent on the discretization level used in the markov approximation copyright 1989 by the university of chicago

executive veto and informational strategy a structure induced equilibrium analysis this paper explores the strategic value of incomplete preference revelation for an executive with veto authority within a budgetary process the analysis indicates which forms of veto power can be augmented by the strategic manipulation of information on preferences the lesson of the analysis is that the failure to consider the strategic value of incomplete preference revelation is a methodological shortcoming of standard structure induced equilibrium analysis since without such consideration equilibrium outcomes are subject to misspecification the true power bestowed upon individual political actors by alternative institutions is misunderstood and the informational gamesmanship that is so much a part of the political process is left unexplained

a theory of credibility this paper presents models in which one agent must decide whether to trust another whose motives are uncertain reliability can only be communicated through actions in this context it pays for people to build a reputation based on reliable behaviour someone becomes credible by consistently providing accurate and valuable information or by performing useful services the theory provides a justification for long term arrangements without binding contracts it also describes those situations where it pays an agent to cash in on his reputation many decisions depend on trusting someone consumers must decide whether to believe advertisements banks need to judge the reliability of loan applicants and employers must decide how much responsibility to delegate to their employees this paper attempts to model situations that arise when someone is uncertain about whether to trust the people he deals with in this context reputations for reliability are valuable an agent becomes credible by consistently providing accurate valuable information or by always acting responsibly i analyse a series of simple abstract models of information transmission in the basic model there are two agents the sender s and the receiver r who are to play the game a known finite number of times at each stage both players learn the value of a parameter measuring the importance of that period s play of the game that is the value of making a correct decision and s obtains payoff relevant information s then sends a signal to r who makes a decision that affects the welfare of both players after both players learn the consequences of r s decision the process repeats at each stage r must decide what action to take in order to do that he must assess the credibility of s the difficulty arises because r is uncertain about s s preferences when play begins i model this by assuming that with positive probability s has identical preferences to r s is a friend and with positive probability s has completely opposed preferences to r s is an enemy this uncertainty creates a trade off for enemy senders at each stage providing honest information enhances s s reputation but only at the expense of foregoing an opportunity for immediate gain by duping r the possibility that s is a friend lends credibility to what he says but this credibility may also be exploited by an enemy s the principal equilibrium has the following form in the basic model where s has no control over the importance of a given play s typically conveys accurate information for the first several periods r raises the probability he places on s being friendly after receiving accurate information if he believes that an enemy would have lied to him with positive probability the more important the information the more likely an enemy will attempt to deceive r an enemy will eventually take advantage of r by misleading him when this happens the sender loses all opportunities for deception in the future i

the cut off grade and the theory of extraction the cutoff grade problem arises when technological infeasibility or high cost prevents an extractive firm from exploiting a heterogeneous deposit in strict sequence the optimal cutoff grade varies directly with anticipated changes in present value price a stochastic price path induces a higher lower initial cutoff grade if the marginal profit function is concave convex the optimal response to an unanticipated price change depends on the difference between the rates of change in price along the new and original price paths and whether or not the firm can increase extractive capacity including the life of the mine

ricardian equivalence expansionary fiscal contraction and the stock market a vecm approach the effect of government taxation on future consumption has been explained in three ways the keynesian approach the ricardian equivalence proposition and the german view of expansionary fiscal contraction efc this paper reports empirical evidence on the validity of these explanations by examining the impact of a shock in government taxation upon private consumption once the effect of the stock market is removed a vector error correction model is estimated for the usa japan germany france the uk italy and canada for 1950 1997 and the impulse response functions of a shock in taxation and in expenditure are examined the responses to an increase in government taxation appear to lend support to the efc while the responses to an increase in government expenditure upon consumption suggest that the reaction of private consumption is more in line with the traditional keynesian approach

how to eat a cake of unknown size a reconsideration abstract the paper revisits the issue of the optimal depletion of an exhaustible resource stock of uncertain size by recasting it in terms of the hazard function in addition to re establishing some of the existing results it obtains a complete qualitative characterization of the optimal depletion program for a fairly large array of continuous probability distributions that are likely to describe the initial stock distribution it turns out that an important feature of the optimal program is the eventual monotonicity of the optimal extraction cum consumption rate so characteristic of the certainty scenario additional results regarding the duration of the optimal planning horizon and comparison with the situation of perfect certainty provide further insight into the nature of the optimal depletion program for the iso elastic utility function

jointly produced exhaustible resources abstract natural resources are often produced jointly from composite ores which in turn are extracted from fixed reserve endowments in this paper market behavior is examined for such resources and it is shown how the price of each resource will depend on its demand and the demands and storage costs for the other resources present in the ore the measurement of resource scarcity is discussed and the effects of uncertainty over future resource demands are examined it is shown that the competitive market will still extract produce and store at socially optimal rates if firms are risk neutral and the average cost of storage is constant policy implications are noted particularly with reference to government stockpiling programs

assessing ricardian equivalence this paper reviews the literature on ricardian equivalence this hypothesis may be interpreted as a generalisation to the short and the long run of the theories which put no weight on the real effects of public policies on aggregate demand we argue that ricardian equivalence relies on both permanent income hypothesis and the fulfilment of the intertemporal government budget constraint the theoretical literature emphasises several reasons for departures from this hypothesis however the empirical literature is inconclusive when ricardian equivalence is tested in a life cycle framework the hypothesis is usually rejected while when the empirical analysis is based on optimising models it is usually accepted

the ricardian approach to budget deficits persistent budget deficits have increased economists interest in theories and evidence about fiscal policy this paper develops the ricardian approach and contrasts it with standard models the discussion considers from major theoretical objections to ricardian equivalence finite lifetimes imperfect capital markets uncertainty about future taxes and incomes and the distorting effects of taxation the paper then considers empirical evidence on interest rates consumption and saving and current account deficits the conclusion is that the ricardian approach is a useful first order approximation and that this approach will probably become the benchmark model for assessing fiscal policy this abstract was borrowed from another version of this item

consumption wealth and finite horizons tests of ricardian equivalence i introduction a continuing debate in macroeconomics concerns the ability of fiscal policy to affect aggregate demand in other words if the government reduces taxes and finances a given level of government spending by issuing new bonds does it generate an increase in aggregate demand the answer to this question depends on the degree to which consumers treat government debt as net wealth under the textbook model the tax cut would raise current disposable income and cause consumers to increase spending while this spending increase may be offset to some extent by the effects of higher interest rates the net effect would be an increase in aggregate demand in contrast under ricardian equivalence interest in which was rekindled by barro s 1974 seminal paper permanent income consumers who are connected to future generations by operative inter generational transfers would not consider the current tax cut and increase in disposable income as permanent they would recognize that the government s intertemporal budget constraint implies that for a given level of government spending a tax cut now implies a tax increase in the future under certain conditions one of which is the assumption of infinite planning horizons see sweeney 1988 for a discussion of the potential importance of this and other conditions imposed in barro s model the present value of the future tax increase implied by the current tax cut would exactly equal the present value of the concomitant increase in government debt as a result consumers will save their increased disposable income to cover their future taxes and the tax cut will not affect aggregate demand put differently consumers would not treat government bonds as net wealth although many empirical tests of the ricardian proposition have appeared in the literature see seater 1993 and the literature cited therein most have used somewhat ad hoc estimating equations that do not properly nest the ricardian hypothesis with a reasonable alternative hypothesis it was not until blanchard s 1985 elegant representation of the behavior of consumers with finite planning horizons that a clear path for empirical work was delineated blanchard s paper spawned a series of empirical papers designed to test ricardian equivalence within the framework of his model which does nest both the ricardian hypothesis and a non ricardian alternative in a widely cited paper evans 1988 was the first to derive the empirical implications of blanchard s model the model reduces the test of ricardian equivalence to a test of whether wealth affects current consumption after accounting for the effect of consumption in the previous period if it does then the model implies that consumers have finite planning horizons and treat government bonds as net wealth although evans s results cannot reject ricardian equivalence they do not resolve the controversy about the ricardian hypothesis other equally well grounded empirical studies e g graham and himarios 1991 and references therein find results that favor the finite horizon interpretation in the first part of the paper we re estimate evans s 1988 model using a better approximation of the market value of wealth contrary to evans s conclusions we find that ricardian equivalence should be rejected in favor of a non ricardian alternative hypothesis in which consumers have finite planning horizons 1 our results differ from evans s primarily because our wealth measure takes account of available information on the market value of corporate equity held by households our series is markedly more volatile than evans s as a result of the decidedly larger movements in the market relative to the book value of corporate assets in the second part of the paper we test whether the long run properties of the data are consistent with our regression results in contrast to earlier work by gali 1990 we find that they are

divided government fiscal institutions and budget deficits evidence from the states does partisan control of american state government have systematic effects on state spending and taxing levels does divided control affect the government s ability to make hard decisions do institutional rules like legal deficit carryover restrictions matter using a formal model of fiscal policy to guide empirical analysis of data covering the american states from 1968 to 1987 we conclude that 1 aggregate state budget totals are driven by different factors under democrats and republicans the net result being that democrats target spending and taxes to higher shares of state level personal income 2 divided government is less able to react to revenue shocks that lead to budget deficits particularly where different parties control each chamber of the legislature and 3 unified party governments with restricted ability to carry deficits into the next fiscal year outside the south have sharper reactions to negative revenue shocks than those without restrictions

futures markets price stabilization and efficient exploitation of exhaustible resources markets for natural resource futures contracts and cash forward contracts experience a rapid growth according to theory this should result in more efficient resource depletion implying that price formation is more consistent with hotelling s rule the rationale of this stabilization effect is briefly discussed next we analyze the impact of expanding futures markets on the behaviour of individual resource owners trading on the cash market using a simple pulse extraction model we demonstrate that the expected time of depletion can shift to the present or the future and that utility of exploitation can go up or down as market prices are stabilized

budget balance through revenue or spending adjustments abstract the paper provides a historical perspective on the issue of whether budget deficits are typically eliminated by increased taxes or by reduced spending by examining u s budget data from 1792 1988 i conclude that about 50 65 of all deficits due to tax cuts and about 65 70 of all deficits due to higher government spending have been eliminated by subsequent spending cuts while the remainder was eliminated by subsequent tax increases in contrast to previous studies the empirical analysis uses error correction models in a way that the intertemporal budget constraint is imposed in the estimation stage

how long to eat a cake of unknown size optimal time horizon under uncertainty this paper is concerned with the determination of the optimal time horizon for the cake eating problem under uncertainty it is shown that if the uncertain exhaust ible resource stock is a discrete random variable admitting at most a finite number of values the optimal planning horizon is infinite finite according as the marginal utility of extraction cum consumption is infinite a finite positive value as the latter ap proaches zero thereby extending the scope of the similar result under perfect certainty

why do oil prices jump or fall this paper discusses theories that can explain the zig zags of oil prices in general and in particular the recent jump more precisely the following explanations are discussed homo oeconomicus pure profit maximization if demand is dynamic and convex price reaction function price increases and respectively declines depend on capacity utilization cartelization contingent on output or revenues of which the latter can lead to backward bending supply segments and multiple equilibria statistical descriptions mean reversion homo politicus i e arguments for price hikes that are rational public choice despite the long run economic loss finally two approaches are presented that emphasize demand uncertainty one extending the above mentioned dynamic demand framework and the other considers a dynamic game of non competitive suppliers with lumpy investments summing up a demand shock seems to be the most suitable explanation of today s high prices indeed a shock given that international energy agency iea and department of energy doe were promising just a couple of years ago that we are going to have lots of oil at low prices while others and in particular politics have surprisingly little or no explanatory power

the optimal production of an exhaustible resource when price is exogenous and stochastic this paper examines the optimal production of a resource such as oil when its price is determined exogenously e g by a cartel such as opec and is subject to stochastic fluctuations away from an expected growth path we first examine the dependence of production on extraction cost and show that the conventional exponential decline curve is indeed optimal if marginal cost is constant with respect to the rate of extraction but is a hyperbolic function of the reserve level we next show that uncertainty about future price affects the optimal production rate in two ways first if marginal cost is a convex concave function of the rate of production stochastic fluctuations in price raise lower average cost over time so that there is an incentive to speed up slow down production second the option value of the reserve i e the ability to withhold production indefinitely and never incur the cost of extraction provides an incentive to slow down the rate of production

budgetary deficits and ricardian equivalence the case of india 1950 1986 abstract in this paper we analyze the validity of the ricardian equivalence re theorem for a less developed country ldc i e india for the period 1950 1986 the re theorem states that it is inconsequential whether a government deficit is financed by debt issue or by tax increases since under certain conditions the effect of government consumption on aggregate demand is orthogonal to the mode of financing fiscal deficits because rational economic agents consider today s deficit financing as tomorrow s tax liabilities the use of multicointegration analysis and estimation of the rational expectations model both invalidate the re hypothesis in india there are significant crowding out effects on private consumption but such effects on private investment are insignificant because they are expected to be already included in the effect of interest rates

debt neutrality theory and evidence from developing countries this paper reviews the ricardian barro hypothesis and tests the basic postulate of the model for a sample of developing countries including mexico and venezuela two specifications are utilized the first is based on the simple consumption model associated with the work of kormendi 1983 the alternative is based on a model developed by haque and montiel 1987 the outcome of the two stage least square estimation technique rejected the hypothesis in mexico trinidad and tobago and venezuela all countries which underwent adjustment programmes however these results were reversed when the alternative model was utilized due to liquidity constraint and possibly the yaari blanchard effect the contradictory outcome alludes to the sensitivity of the results to the model specified

deregulation as a switch of regime price effects using a modified hotelling rule abstract concern over rising energy prices has led to support for government intervention to regulate the price of domestic non renewable energy resources however us policy makers appear to be looking more towards competition rather than regulation to decide who will provide energy resources and how these will be priced this paper models possible dynamic price effects occasioned by the removal of a regulatory constraint the analysis focuses on a government decision to eliminate binding price ceilings on a non renewable energy substitute when the incumbent resource is monopolistically controlled using deregulation of natural gas as an illustration under certain conditions it is shown that one will get continuity of marginal revenue and a fall in the world price following decontrol the expiration of a patent or a decision to grant mineral rights on federal land in general however the model suggests that both marginal revenue and prices will be discontinuous and that the discontinuity is likely to result in a fall in price

presidential pork executive veto power and distributive politics mitigated to the extent that the president prefers spending in some districts over others the model also generates new insights and predictions about fiscal policy under the separation of powers including the effects of divided government electoral rules and term limitations for the executive

the line item veto and public sector budgets evidence from the states abstract the paper examines the claim that gubernatorial line item veto power reduces state spending analysis of a rich set of state budget data indicates that long run budgets are not altered by an item veto and that in the short run the item veto s potency is contingent upon the political setting in certain circumstances governors with political incentives to use an item veto alter spending and revenues in a statistically significant and quantitatively important fashion these results suggest that state budgets have not been importantly altered as a result of the existence of the line item veto and shed doubt on the use of the line item veto to reduce federal government spending

budget deficits rhetoric and reality w v t hatever the real or imagined ills of the economy the news media most politicians and a fair proportion of the economics profession are quick to point to the culprit the budget deficit no matter that few appear to know or care precisely what deficit they are talking about or how it is measured no matter that few bother to explain in terms of a relevant model just how government deficits may be expected to impact the economy no matter that few offer any empirical data to sustain their judgments so budget deficits cause inflation budget deficits raise interest rates budget deficits bring on the trade deficits budget deficits crowd out investment budget deficits are an irresponsible mortgage on the future and budget deficits caused the october 1987 stock market crash and now threaten further financial cataclysms is there truth in any of these assertions or does it all depend budget deficits do matter and their effects contrary to barro s ricardian equivalence theorem can be substantial as most economists have recognized for at least half a century budget deficits can however be too small as well as too large to know which you have to measure them right and you have to analyze their role in the world in which we live pure walrasian and rational expectation market clearing models may prove more useful for academic advancement than for promotion of economic health i need not repeat many of the objections to the equivalence theorem raised by bernheim and gramlich and addressed by barro in this symposium however there is

the effects of budget deficit on national saving in the oecd abstract in this paper we estimate a structural var using a panel of oecd countries which includes national saving and budget deficit both as the ratio to gdp to test the ricardian equivalence hypothesis in this framework we separate saving and deficit movements into two types of shocks associated with structural parameters of these economies our results suggest that ricardian equivalence did not work in our sample of oecd countries since private saving compensated only a small fraction budget deficit this supports the interpretation that the large budget deficits have been a very important factor behind the significant increase in real interest rates in the eighties and early nineties

government deficits and aggregate demand abstract the evidence presented in this paper indicates that changes in government spending transfers and taxes can have substantial effects on aggregate demand the estimates also indicate that the promise of future social security benefits significantly reduces private saving each the basic implications of the so called ricardian equivalence theorem is contradicted by the data the results are consistent with the more general view of the effects of fiscal actions and fiscal expectations that is described in the paper

models of resource markets and the explanation of resource price behaviour abstract much of the recent theoretical work in resource economics has been aimed at relaxing the stringent simplifying assumptions of the basic hotelling model in an attempt to better explain observed resource price behaviour this paper surveys the characteristics of exhaustible resource markets that are likely to be important for the development of successful positive models in particular we discuss exploration and its relationship to production and market price the effects of various forms of uncertainty on price behaviour and for some resources the treatment of durability finally we address the question of whether producer behaviour can properly be viewed as that of dynamic optimization this paper should be seen as an attempt to stimulate discussion over research directions and priorities in resource economics

executive veto and spending limitation positive political economy with implications for institutional choice the consequences of institutional change in the budgetary process are not generally determinate independent of the preferences of political actors nonetheless this study shows for a general class of preference configurations that the legislative branch cannot be made better off by a spending limitation unless the executive is empowered with a line item veto in the absence of executive item veto authority there is no incentive for the legislature to constrain spending

grade selection under uncertainty least cost last and other anomalies abstract grade selection rules for heterogeneous resource deposits with increasing marginal extraction costs are derived it is shown that contrary to the conventional wisdom it can be optimal to extract the least cost deposits last there are a number of rules that are compatible with dynamic profit maximization under certainty nevertheless none explains empirical regularities in actual extraction patterns when uncertainty about future price is introduced however the theoretical model conforms closely not only to observed grade selection patterns but also to observed mineral industry price paths

a technique for estimating the discount rate in pindyck s stochastic model of nonrenewable resource extraction abstract the purpose underpinning this paper is to develop an empirically verifiable model of the economic behavior of a single competitive firm operating to exploit a single deposit of oil using pindyck s methodology this model is derived using a continuous time framework and stochastic optimal control the main contribution of the research lies in making the connection between dynamic economic modeling and statistical methods that arise naturally from stochastic optimization

consumers are not ricardian evidence from nineteen countries i introduction in conventional macroeconomic analysis government debt affects the economy because households view it as net wealth the larger the government debt is the wealthier households feel and the more they consume in principle however households need not view government debt as net wealth david ricardo pointed out that they might conceivably treat the future taxes servicing the government debt as exactly offsetting it 1 robert barro 1974 has shown that maximizing households will actually do so if they accurately anticipate future taxes if they face perfect capital markets and if they have effectively infinite horizons ricardian equivalence is said to hold if households do treat future servicing taxes as an exact offset to the government debt many empirical papers on consumption have investigated whether ricardian equivalence is consistent with observation kochin 1974 barro 1978 tanner 1979 seater 1982 kormendi 1983 aschauer 1985 seater and mariano 1985 kormendi and meguire 1986 1990 leiderman and razin 1988 evans 1988 and evans and hasan 1993 have reported evidence consistent with ricardian equivalence by contrast blinder and deaton 1985 feldstein 1978 1982 boskin and kotlikoff 1985 modigliani and sterling 1986 1990 and feldstein and elmendorf 1990 have reported evidence inconsistent with ricardian equivalence unfortunately most of these studies do not estimate regression equations that derive from well specified theoretical models nesting both ricardian equivalence and an alternative theory in which budget deficits and current taxes are not equivalent consequently their results are often hard to interpret moreover these studies consider the data for only one country typically the united states as a result the tests that are performed may not have much power to distinguish an economy for which ricardian equivalence would be a good approximation from one for which it would be a bad approximation olivier blanchard 1985 has provided one of the few models in the literature that tractably nests ricardian equivalence and an alternative in which households view government debt as net wealth depending upon whether a crucial parameter is zero or positive households have infinite horizons internalize all future generations and exhibit ricardian behavior or have finite horizons are at least somewhat disconnected from future generations and exhibit non ricardian behavior that strengthens as the parameter becomes larger the model has testable implications that this paper examines using annual data for nineteen countries when the data for the countries are pooled the tests have sufficient power not only to reject ricardian equivalence in favor of blanchard s alternative but also to yield a precise estimate of the deviation from ricardian equivalence this estimated deviation is approximately what one would expect if capital and insurance markets were perfect and households did not have altruistic bequest motives the deviation is however also economically unimportant for many purposes the rest of the paper is organized as follows section ii lays out blanchard s model and derives the testable implications of ricardian equivalence section iii tests these implications section iv summarizes the findings of the paper and interprets them ii empirical implications of ricardian equivalence in the stochastic variant of blanchard s model formulated in this section the economy is inhabited by a constant population of households that have finite horizons and face perfect capital and insurance markets 2 each household has a finite horizon because it has a probability p of dying each period and being replaced by another household from which it is entirely disconnected with the population normalized to unity the number of households born 0 1 2 periods earlier is always p p 1 p p 1 p sup

government debt government spending and private sector behavior a current period tax reduction financed by issuing government debt shifts the timing of tax collection from the current period to the future if the future taxes implied by government debt are not fully perceived and discounted by the private sector there will be a net wealth effect that increases private sector consumption thus reducing capital accumulation and growth if on the other hand the implied future taxes are perceived and discounted by the private sector the current period tax reduction will be used to increase private saving to pay for the future taxes and government debt will be absorbed without any real effects on the economy the effects of government spending financed by current period taxation also depend upon private sector perceptions 2 if the benefits of government spending are ignored private sector consumption will decrease in accordance with the reduction in permanent disposable income to the extent that government spending is on consumption type goods that are perceived as substitutes for privately provided consumption goods there will be a relatively greater reduction in private sector consumption to the extent that government spending is on investment type goods yielding future goods and services that are perceived as substitutes for future privately provided consumption goods there will be a relatively smaller reduction in private sector consumption the standard approach to modeling private sector consumption saving behavior involves a rather asymmetric set of assumptions as to how the private sector perceives the various elements of government fiscal policy 3 current period taxes are assumed to be fully perceived but current period government spending is implicitly assumed to be completely ignored by the private sector in considering permanent personal disposable income the private sector is assumed to be forward looking in its assessment of income and taxation the stock of government debt is nevertheless included as part of the stock of private wealth the implicit assumption associate professor of economics graduate school of business university of chicago 1101 east 58th street chicago il 60637 i thank eugene fama levis kochin michael mussa paul evans and an anonymous referee for helpful comments i am particularly grateful to daniel benjamin for contributing many hours of discussion and laura lahaye who was a research assistant and valuable adviser on earlier drafts the theoretical debate on the burden of the debt has been long standing gerald o driscoll 1977 documents ricardo s nineteenth century position robert barro 1974 reopened the debate by introducing the fundamental issue of intergenerational transfers also discussed in merton miller and charles upton 1974 the empirical side of the debate was initiated by levis kochin s 1974 attempt to test for the effects of deficits on consumption and by martin feldstein s 1974 attempt to test for the effects of social security wealth on consumption other empirical contributions include jess yawitz and laurence meyer 1976 myself 1978 and j earnest tanner 1978 1979 with respect to the effects of government deficits and debt and barro 1978 michael darby 1979 and dean leimer and selig lesnoy 1982 with respect to social security wealth see also interesting recent papers by john seater 1982 who generates detailed tests of the effects of deficits and debt on consumption charles plosser 1982 who explores the effects of government spending and debt shocks on interest rates and feldstein 1982 who attempts tests similar to some in this paper see fn 29 2martin bailey s 1962 1971 development of the effects of government spending on private consumption and aggregate economic activity is the seminal contribution paul david and john scadding 1974 extend bailey s ideas and provide some supporting empirical evidence more recently willem buiter 1977 and myself 1978 developed models based on bailey s earlier work barro 1981 has an interesting paper on related issues see also david aschauer 1982 3the standard approach incorporates fiscal policy through the concept of personal disposable income and by including the stock of government debt as part of personal wealth see for example the empirical specification of albert ando and franco modigliani 1963 which has been the basis of most empirical consumption studies since and feldstein 1974 for one of the more influential papers based on the ando modigliani specification

on the economic determinants of oil production theoretical analysis and empirical evidence for small exporting countries abstract in this paper decisions regarding production in oil exporting countries are studied by means of theoretical analysis and empirical investigation in particular we aim at describing the relationship between oil production levels and changes in the world oil demand and prices intertemporal production decisions by a representative oil producer are modeled by means of a partial equilibrium model in this theoretical model oil producers are subject to exogenous shocks in world oil consumption and prices oil companies can change output levels only by incurring a fixed cost results from the simulation of this model show a strong relationship between oil production and changes in world oil consumption on the contrary the effects of changes in real oil prices on oil production decisions seem to be much lower results from the simulation of the theoretical model are then empirically investigated using time series econometric techniques the empirical evidence supports the hypothesis that oil producing countries are characterized by different responses to changes in world oil demand and in real oil prices for many countries production rapidly adjusts to changes in consumption whereas responses of oil production to innovations in real oil prices are found to be not statistically significant in addition when non linearities in the relationship between world oil demand prices and output levels are allowed for evidence of asymmetric effects of shocks to exogenous variables on output levels is found for some countries

financial development and economic growth nexus a time series evidence from india this study examines the relationship between financial development and economic growth in india for the period 1951 52 to 1995 96 the long run equilibrium and short run dynamic models are estimated using financial interrelations ratio and new issue ratio as the measures of financial development a la goldsmith 1969 the johansen 1991 estimator rejects the null of zero cointegrating vector and shows the presence of long run equilibrium relationship between financial development and economic growth the error correction model impulse response and variance decomposition analyses sims 1980 and the toda and yamamoto 1995 estimator show the presence of bidirectional granger causality between financial development and economic growth the presence of bidirectional granger causality suggested by these estimators points towards the possible problem of endogeneity and simultaneity bias in the growth models that examine the contemporaneous effect of financial development on economic growth the economic

adjustment costs uncertainty and the theory of investment the case of non renewable natural resources abstract this paper examines the effects of mineral price and extraction cost uncertainty on the investment program of a competitive resource extracting industry that faces convex costs of adjustment the results show that depletion of mineral reserves will slow down if the marginal adjustment cost function is concave or linear whereas the effect will be ambiguous if the function is convex

executive veto legislative override and structure induced equilibrium in this study the structure induced equilibrium approach for modeling democratic institutions is extended to allow for the added structural features of executive veto and legislative override a multidimensional model is presented for a budgetary process involving three actors a legislature an appropriations committee and an executive in order to focus attention on the role of the veto and override possibilities simplifying assumptions are made with regard to other aspects of the agenda formation process in particular the committee has monopoly agenda power a closed amendment control rule is operative and perfect foresight expectations are held by the committee and the executive given these assumptions utility maximization by the several actors generates a budget outcome characterized as a structure induced equilibrium the general model is illustrated geometrically with a two dimensional example permitting budget outcomes to be analyzed for various combinations of veto rules and override provisions the analysis demonstrates that budget outcomes are sensitive to alternative specifications of veto rules and override provisions in the illustration executive veto power is shown to vary directly with both the permissiveness of the veto rule and the stringency of the override provision similar relationships however are not found to exist for total budget expenditures

does ricardian equivalence hold when expectations are not rational this paper considers the ricardian equivalence proposition when expectations are not rational and are instead formed using adaptive learning rules we show that ricardian equivalence continues to hold provided suitable additional conditions on learning dynamics are satisfied however new cases of failure can also emerge under learning in particular for ricardian equivalence to obtain agents expectations must not depend on government s financial variables under deficit financing

a neoclassical perspective on budget deficits i n the 1988 presidential campaign virtually every serious candidate spoke of the urgent need to trim government budget deficits public opinion polls have identified federal deficits as a key economic issue second only to unemployment while many economists are relieved by what they perceive to be a long overdue political response to a critical economic problem others regard the fuss as much ado about nothing it is indeed remarkable that economists can disagree so severely over an issue which commands such a uniform reaction from laymen of widely different ideologies and political affiliations generally speaking there are three schools of thought concerning the economic effects of budget deficits neoclassical keynesian and ricardian before proceeding further it is useful to review the basic structure and implications of each paradigm the neoclassical paradigm envisions farsighted individuals planning consumption over their own life cycles budget deficits raise total lifetime consumption by shifting taxes to subsequent generations if economic resources are fully employed increased consumption necessarily implies decreased saving interest rates must then rise to bring capital markets into balance thus persistent deficits crowd out private capital accumulation in the current economic environment most economists would agree that these consequences would be highly detrimental

harvest decisions and asset valuation for biological resources exhibiting size dependent stochastic growth optimal harvest rules and preharvest valuation procedures are derived for biological assets with stochastic size dependent growth in a stochastic price environment these issues are analyzed as continuous time optimal stopping problems both the single rotation and ongoing rotations problems are addressed the sensitivity of harvest and valuation rules is assessed the results are compared with those derived from a myopic look ahead procedure and with the corresponding findings for age dependent growth copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

a characterization of oil price behavior evidence from jump models abstract this paper is concerned with the statistical behavior of oil prices in two ways it firstly applies a combined jump garch model in order to characterize the behavior of daily weekly as well as monthly oil prices secondly it relates its empirical results to implications of hotelling type resource extraction models the empirical analysis shows that oil prices are characterized by garch as well as conditional jump behavior and that a considerable portion of the total variance is triggered by sudden extreme price movements this finding implies that first oil price signals are not reliable and as a consequence both finding optimal extraction paths and decisions regarding the transmission to alternative technologies are likely to be compromised second this behavior is in stark contrast to the notion of deterministic trends in the price of oil

ricardian equivalence and the public and private saving nexus in india abstractthis study tests the ricardian equivalence theorem ret and examines the responsiveness of private saving to public saving in india most estimators do not provide support for the empirical validity of ret and long run cointegration between public and private saving the increases in household saving hhs seem to have been engendered by the provision of saving incentives institution of saving schemes self driven motivation to save and the precautionary accumulations induced by uncovered uncertainties in incomes rather than by ricardian behaviour of households the self imposed aversion to debt and debt bequest borrowing and liquidity constraints and the intertemporal smoothing of consumption have been the added catalysts that contributed to the increases in hhs the households with binding borrowing constraints inadequate or no insurance and uncovered uncertainties in incomes seem to have been saving more to pay for higher inflation tax the fiscal consolidation and generation of public s

irreversible investment uncertainty and ambiguity the case of bioenergy sector we analyze production and investment decisions of an agent in industrial activities that are characterized by two forms of uncertainty demand uncertainty in terms of number of buyers and competitive effect uncertainty in terms of other energy resource we apply our model on the bioenergy industries we compare the case of an ambiguity neutral agent with that of an ambiguity averse agent we show that the investment decision of an agent depends on the effects of both the capital investment and the level of production on the cost and the uncertainty the agent is confronted with moreover we find that ambiguity aversion tends to decrease the agent s optimal levels of production and investment our numerical analysis of the french case illustrates the different effects associated with demand uncertainty and competitive effect uncertainty

are consumers ricardian evidence for the united states this paper derives three empirical implications of a well specified model of consumer behavior a model that nests both ricardian equivalence and an alternative non ricardian theory ricardian equivalence is then tested against this alternative the tests reveal that ricardian equivalence cannot be rejected

government debt government spending and private sector behavior reply and update the preceding articles by martin feldstein and douglas elmendorf and by franco modigliani and arlhe sterling give us a welcome opportunity to return to the effects of fiscal policy on private consumption at stake in this debate we believe is a potential paradigm change from what kormendi 1983 termed the standard approach which bases private consumption on disposable personal income to what he termed the consolidated approach which bases consumption on aggregate income government spending and transfer payments each with separate effects the standard approach excludes ricardian equivalence a priori the consolidated approach not only incorporates ricardian equivalence but in its augmented form allows one to nest the various hypotheses associated with the two approaches feldstein and elmendorf argue that kormendi s 1983 results and implicitly those of kormendi and meguire 1986 which reject the standard approach in favor of the consolidated ricardian alternative are not robust to the exclusion of data from world war ii and other specification changes modigliani and sterling argue that accounting for temporary taxes reverses our rebuttal of their 1986 comment we first take up the challenge of feldstein and elmendorf before turning to modigliani and sterling we then assess the validity of our preference for estimating in differences by testing whether consumption income and the fiscal variables are cointegrated finally we summarize what can be learned from the debate i feldstein and elmendorf

depletion effects and nonrenewable resource supply a diagrammatic exposition to address important research and policy questions related to nonrenewable resources such as the impacts of federal tax changes on the u s extractive sector the current ill health of the u s minerals industry the impacts of environmental initiatives on coal production and use and management of outer continental shelf resources a solid conceptual description of the supply process for nonrenewable resources is needed de

testing ricardian neutrality with an intertemporal stochastic model this paper s purpose is to develop and estimate a stochastic intertemporal model of consumption be havior and to use it for testing a version of the ricardian equivalen ce proposition with time series data two channels that may give rise to deviations from this proposition are specified finite horizons a nd liquidity constraints in addition the model incorporates explici tly the roles of taxes substitution between public and private consu mption and different degrees of consumer goods durability the evid ence based on data for israel in the first half of the 1980s suppor ts the ricardian neutrality specification yielding plausible estimat es for the behavioral parameters of the aggregate consumption functio n copyright 1988 by ohio state university press

dividends and leverage how to optimally exploit a non renewable investment in this paper we model the situation where a non renewable investment is given for instance a resource reservoir and show how to optimally trade off between dividends and leverage in order to maximize a performance indicator for shareholders up to the bankruptcy time we then study the way market risk the volatility of the market price of the resource impacts the optimal policies and the default risk of the company the moments when the policies are rebalanced are analyzed and we give a measure of the agency costs which appear between the shareholders and the debt holders

executive veto power and credit claiming the line item veto has often be heralded as an effective tool in reducing pork barrel spending a model of veto bargaining over public goods and pork barrel spending in the presence of credit claiming incentives demonstrates that the item veto does not necessarily reduce pork barrel spending and reduces the executive s ability to attain his preferred level of spending on public goods the item veto also has an ambiguous effect on the balance of power between the executive and the legislature while strengthening the position of the legislative agenda setter within the legislature

estimating long run economic equilibria with stochastic trends an asymptotic theory is provided to analyze a menu of currently existing estimators of cointegrated systems we study in detail the single equation ecm seecm approach of hendry our theoretical results lead to prescriptions for empirical work such as specifying seecm s nonlinearly and including lagged equilibrium relationships rather than lagged differences of the dependent variable as covariates simulations support these prescriptions and point to problems of overfitting not encountered in the semiparametric approach of phillips and hansen 1990

aggressive oil extraction and precautionary saving coping with volatility the effects of stochastic oil demand on optimal oil extraction paths and tax spending and government debt policies are analyzed when the oil demand schedule is linear and preferences quadratic without prudence optimal oil extraction is governed by the hotelling rule and optimal budgetary policies by the tax and consumption smoothing principle volatile oil demand brings forward oil extraction and induces a bigger government surplus with prudence the government depletes oil reserves even more aggressively and engages in additional precautionary saving financed by postponing spending and bringing taxes forward especially if it has substantial monopoly power on the oil market gives high priority to the public spending target is very prudent and future oil demand has high variance uncertain economic prospects induce even higher precautionary saving and if non oil revenue shocks and oil revenue shocks are positively correlated even more aggressive oil extraction in contrast prudent governments deliberately underestimate oil reserves which induce less aggressive oil depletion and less government saving but less so if uncertainty about reserves and oil demand are positively correlated

optimal sequencing of resource pools under uncertainty abstract this paper characterizes the optimal scheduling of extraction from two reserves under price and production uncertainty an essential step in the analysis is the characterization of the optimal switching date and the associated flexibility value i e the value of the option to switch production from the first to the second reserve

executive budget proposal executive veto legislative override and uncertainty a comparative analysis of the budgetary process this study examines the roles of the executive budgetary proposal the executive veto the legislative override and legislative uncertainty about the executive s preferences in determining the outcome of a budgetary process a sequential model of the budgetary process with three institutional agents a legislature an appropriations committee and an executive is presented to focus attention on the executive proposal the veto the override provision and uncertainty simplifying assumptions are made 1 the appropriations committee has monopoly agenda power and 2 there is a closed amendment control rule in order to characterize sequential equilibria of various combinations of veto rules and override provisions we examine a particular arrangement of agents preferences and a two item budget the results demonstrate that the final budget depends critically on the executive proposal the executive veto rule the override provision and the uncertainty we achieve three striking results first the executive proposal may be effective in reducing the frequency of the exercised veto second for a given override provision a movement from the item veto to the item reduction veto leaves the executive worse off in some cases third with the same change in institutions the government budget may increase

the elephant in the ground managing oil and sovereign wealth many oil exporters accumulate large sovereign wealth funds though their portfolio allocation does not take into account below ground assets like oil similarly the above ground portfolio does not affect the decision to extract oil this paper shows that subsoil oil wealth should change a country s above ground asset allocation in two ways first the holding of all risky assets is leveraged because there is additional wealth outside the fund second more less is invested in financial assets that are negatively positively correlated with oil to hedge against the riskiness of subsoil exposure furthermore if marginal oil rents move pro cyclically with the value of the financial assets in the fund then oil will be extracted slower than predicted by the standard hotelling rule this leaves a buffer of oil to be extracted when both oil prices and asset returns are high finally any unhedged residual volatility must be managed through additional precautionary saving