access to markets and rural poverty evidence from household consumption in china abstract this paper presents evidence on the effects of access to domestic and international markets on per capita consumption of households using data from rural china the econometric analysis uses alternative identification schemes to address the potential endogeneity of access to markets we use straight line distances to coastline and navigable river along with the topography of the intervening counties as sources of exogeneous variations we also use identification through heteroskedasticity which does not rely on standard exclusion restrictions the results from alternative identification schemes show that better access to both domestic and international markets has positive effects on per capita consumption the domestic market effect is significantly larger in magnitude and there is complementarity between the access to domestic and international markets

international evidence on the demand for money one of the current questions in the literature on the demand for money is whethe r the adjustment of actual to desired money holdings is in nominal or real terms this paper describes a simple procedure that can be used to test the nominal against the real hypothesis the test is carried out for twenty seven countries the paper also tests the structural stability of the demand for money equations and the correctness of th e dynamic specification the results are strongly in favor of the nom inal adjustment hypothesis there is however some evidence of moder ate structural instability before and after 1973 the instability doe s not affect the conclusion that the nominal adjustment hypothesis do minates the real adjustment hypothesis copyright 1987 by mit press

nonfarm employment and poverty in rural el salvador abstract this paper analyzes two complementary data sets to study poverty and the nonfarm sector in rural el salvador we find that rural poverty in el salvador remains acute and significantly higher than in urban areas while the rural poor are mainly agricultural laborers and marginal farmers some nonfarm activities are also of importance to the poor in fact nonfarm activities in el salvador account for a significant share of rural employment and income for both the poor and the nonpoor the poor on the one hand are engaged in last resort nonfarm activities that are not associated with high levels of labor productivity the nonpoor on the other are engaged in productive nonfarm activities which are likely to present a potent force for upward mobility significant correlates of these high productivity occupations include education infrastructure location and gender while most of the analysis is at the household level the data also permit some focus on small scale rural enterprise activities it appears that in el salvador very few rural enterprises report utilizing formal credit in setting up their activities in addition a significant proportion of enterprises are engaged in subcontracting arrangements with some larger often urban based firm

rural income dynamics and poverty reduction in thai villages from 1987 to 2004 this article aims to examine the factors contributing to the increase in household income and the corresponding reduction in poverty in rural thai villages from 1987 to 2004 by employing household panel data it is found that there has been a significant structural shift of household income away from farm to nonfarm income sources as well as a reduction in the income gap and the difference in poverty incidence between favorable and unfavorable regions such decreases in poverty and its regional gap have been associated with the declining importance of income accrued to farm land measured by farm size and the availability of irrigation and with the increasing importance of human capital measured by the proportion of working members who have graduated from post lower secondary schools such findings indicate that the success in rural poverty reduction in thailand has resulted from the development of the rural nonfarm sector coupled with the improvement of the schooling levels of the rural population

computer automation of general to specific model selection procedures abstract disputes about econometric methodology partly reflect a lack of evidence on alternative approaches we reconsider econometric model selection from a computer automation perspective focusing on general to specific reductions embodied in pcgets starting from a general congruent model standard testing procedures eliminate statistically insignificant variables with diagnostic tests checking the validity of reductions ensuring a congruent final selection since jointly selecting and diagnostic testing has eluded theoretical analysis we study modelling strategies by simulation the monte carlo experiments show that pcgets recovers the dgp specification from a general model with size and power close to commencing from the dgp itself

testing for superexogeneity of wage equations the superexogeneity of wage equations is tested in four major european countries this is an important issue because while only weak exogeneity is needed for estimation purposes and for testing and strong exogeneity for forecasting superexogeneity is required for policy analysis the procedure suggested by engle and hendry 1993 is adopted to carry out the empirical analysis in all cases the conditional model is not affected by the first and second moments of the residuals from the marginal models this invariance result implies that the estimated linear regression models are not subject to the lucas critique over the period examined differences in wage determination between the various countries can be plausibly interpreted as resulting from the bargaining environment

stability of a uk money demand equation a bayesian approach to testing exogeneity the paper analyses an m3 demand for money equation for the united kingdom attention is paid to the policy change that occurred in 1971 with the introduction of the measure known as competition and credit control classical and bayesian single equation instrumental variables procedures are developed to investigate the exogeneity of the short term interest rate and the constancy of the parameters of the underlying relationships the parameters of the short term equation have changed as well as the exogeneity status of the interest rate variable but the parameters of the long term equation appear to be less affected by the policy change

the short run demand for money a reconsideration the partial adjustment approach to the specification of the short run demand for money has dominated the literature for more than a decade there are three basic problems with this approach first the same lag structure is imposed on all variables and each independent variable enters only as a current value in contrast a rational individual would respond to different variables income interest rates prices with quite different lags second when the general price levelis subject to gradual adjustment hut can move quickly in response to supply shocks the influence of these supply shocks should enter with a negative sign third the estimated equation for real balances may not be a money demand equation at all but rather its coefficients may represent a shifting mixture of demand and supply responses the empirical work examines several alternative dynamic specifications including a generalized partial adjustment framework and the error correction model both of the latter specifications exhibit greater structural stability after 1973 than the standard partial adjustment specification and the generalized partial adjustment model also yields relatively small errors in post sample dynamic simulations shifts in coefficients as the sample period is extended after 1973 are consistent with the interpretation that the real balance equation no longer traces out structural demand parameters hut rather a mixture of demand and supply responses this abstract was borrowed from another version of this item

livelihoods and farm efficiency in rural georgia this study contributes to the literature on the role of livelihood strategies in rural growth and poverty reduction it distinguishes between livelihood diversity strategies that contribute to sustainable growth in household incomes and those that mainly have a coping function it suggests that typically the contribution of livelihood diversity to growing household income is through relaxing dependence on credit for access to capital in this scenario livelihood diversity would lead to higher technical efficiency in agriculture via investment and thereby to higher household incomes survey data from georgia are introduced and used to test these hypotheses using a bayesian stochastic frontier approach the findings are relevant to defining more clearly the scope and aims of policies to stimulate the rural non farm economy in developing and transition countries

poverty decline agricultural wages and non farm employment in rural india 1983 2004 the authors analyze five rounds of national sample survey data covering 1983 1987 8 1993 4 1999 0 and 2004 5 to explore the relationship between rural diversification and poverty poverty in rural india declined at a modest rate during this period the authors provide region level estimates that illustrate considerable geographic heterogeneity in this progress poverty estimates correlate well with region level data on changes in agricultural wage rates agricultural labor remains the preserve of the uneducated and also to a large extent of the scheduled castes and scheduled tribes although agricultural labor grew as a share of total economic activity over the first four rounds it had fallen back to the levels observed at the beginning of the survey period by 2004 this all india trajectory masks widely varying trends across states during this period the rural non farm sector grew modestly mainly between the last two survey rounds regular non farm employment remains largely associated with education levels and social status that are rare among the poor however casual labor and self employment in the non farm sector reveal greater involvement by disadvantaged groups in 2004 than in the preceding rounds the implication for poverty is not immediately clear the poor may be pushed into low return casual non farm activities due to lack of opportunities in the agricultural sector rather than being pulled by high returns offered by the non farm sector econometric estimates reveal that expansion of the non farm sector is associated with falling poverty via two routes a direct impact on poverty that is likely due to a pro poor marginal incidence of non farm employment expansion and an indirect impact attributable to the positive effect of non farm employment growth on agricultural wages the analysis also confirms the important contribution to rural poverty reduction from agricultural productivity availability of land and consumption levels in proximate urban areas

information flow expectations and job search rural to urban migration process in india abstract probabilistic migration models assume that search for urban jobs is entirely an urban based activity and that employment in free entry activities is a transitional phase during which migrants are actively searching for formal sector employment this paper tests the empirical validity of these assumptions using data collected by the author in a sample survey in delhi in 1975 76 on 1400 migrants from rural areas the evidence indicates that the migration process postulated in probabilistic models is not realistic in the case of delhi over one half of the sample had moved to delhi after lining up specific jobs a sizeable proportion expected to enter on arrival activities generally considered to be characterized by freedom of entry and the majority of entrants into free entry activities did not search for alternative employment and were engaged in the same activities at the time of the survey

local political business cycles evidence from philippine municipalities abstract this paper establishes the existence of short term political business cycles in the philippines over the period 2003 2009 examining a balanced panel of 1143 municipalities shows that employment levels increase in the two pre electoral quarters and drop sharply in the two quarters following elections further results are consistent with the cycles being generated by incumbents attempts to increase their chances of re election cycles are stronger in sectors that incumbents are more able to influence and when they expect stronger electoral competition evidence suggests that these cycles are detrimental to development

rural nonfarm activities and agricultural crop production in nigeria although most rural households are involved in the farm sector the nonfarm sector has grown significantly in recent decades and its role in rural development has become increasingly important this article examines the effect of participation in nonfarm activities on crop expenses of farm households in nigeria the relationship is modeled using a nonseparable agricultural household model that suggests that participating in nonfarm activities can relax the credit constraints facing farm households and reduce risk thereby helping households improve farm production and smooth consumption over time the results show that participation in nonfarm activities by nigerian farmers has a positive and significant effect on crop expenses and in particular on payments for hired labor and inorganic fertilizers separate analysis of the six geopolitical zones in nigeria indicates that it is in the south south and south east zones where nonfarm participation appears to induce more hiring of labor the results support the hypothesis that nonfarm participation helps relax liquidity constraints but suggests how that liquidity is used is zone specific in general the results also indicate that liquidity is used more to pay for inputs into staple production as opposed to cash crops

interest rate volatility and monetary policy in october 1979 the federal reserve shifted from an interest rate oriented operating procedure to a reserves oriented procedure it is argued in this paper that part of the very large increase in interest rate volatility which resulted from the policy switch may have been due to shifts in the parameters of the money demand equation shifts due to the adoption of a reserve aggregates operating procedure this result is derived by comparing rational expectations equilibria in a simple theoretical model under alternative policy rules this allows the variance of interest rates to be explicitly expressed as a function of the policy rule this abstract was borrowed from another version of this item

a dynamic baumol tobin model of money demand this note considers a stochastic version of the baumol tobin model of the demand for money a dynamic demand function is derived for the case in which independent variables change to new steady state values the s s inventory policy is shown to give rise to an aggregate partial adjustment equation with a variable adjustment speed the methodology is that introduced to target threshold models by milbourne buckholtz and wasan 1983 in their study of the miller orr model

error correction mechanisms the interface between economic theory and applied econometrics is often one of uneasy compromise with the pragmatic justification for many accepted procedures resting on a theoretical base this paper examines the surprisingly strong arguments that exist in terms of economic theory for the use of error correction mechanisms in the specification of short run dynamic adjustment a common heresy exists that while economic theory provides a detailed analysis of comparative static equilibria it can offer no guidance as to the appropriate specification of dynamic adjustment towards an equilibrium perhaps in consequence it is not uncommon to find examples where the necessary dynamic specification is achieved by tacking onto an existing equilibrium specification some relatively ad hoc short run adjustment scheme the intercession of stochastic arguments in this process is confused and critical implications are frequently ignored in practice but perhaps more importantly there will typically be no guarantee that the dynamic specification is consistent with the prescribed equilibrium consistency in this sense requires that the short run dynamic adjustment be directed by the perceived disequilibrium and that eventual convergence to the equilibrium position be ensured that two separate theoretical arguments co exist within the final specification is the root cause of many difficulties both theoretical and empirical this abstract was borrowed from another version of this item

modeling the demand for narrow money in the united kingdom and the united states abstract despite the importance of well specified empirical money demand functions for inference forecasting and policy problems in modeling have arisen concerning the economic theories of money demand the data institutional frameworks financial innovation and econometric implementation by developing constant data coherent m 1 demand equations for the u k and the u s we investigate these issues and explain such puzzles as missing money the great velocity decline and the recent explosion in m 1 the endogeneity of money the lucas critique and the non invertibility of our m 1 models are also discussed

demand for money in india 1953 2003 the demand for money especially in the developing countries is an important relationship for formulating appropriate monetary policy and targeting monetary variables in this paper the demand for narrow money in india is estimated and its robustness evaluated it is found that there is a stable demand for money for almost half a century from 1953 to 2003 there is no evidence for any significant effects of the 1991 financial reforms

measuring poverty in a growing world or measuring growth in a poor world the extent to which growth reduces global poverty has been disputed for 30 years although there are better data than ever before controversies are not resolved a major problem is that consumption measured from household surveys which is used to measure poverty grows less rapidly than consumption measured in national accounts in the world as a whole and in large countries particularly india china and the united states in consequence measured poverty has fallen less rapidly than appears warranted by measured growth in poor countries one plausible cause is that richer households are less likely to participate in surveys but growth in the national accounts is also upward biased and consumption in the national accounts contains large and rapidly growing items that are not consumed by the poor and not included in surveys so it is possible for consumption of the poor to grow less rapidly than national consumption without any increase in measured inequality current statistical procedures in poor

inference in cointegrating models uk m1 revisited the paper addresses the practical determination of cointegration rank this is difficult for many reasons deterministic terms play a crucial role in limiting distributions and systems may not be formulated to ensure similarity to nuisance parameters finite sample critical values may differ from asymptotic equivalents dummy variables alter critical values often greatly multiple cointegration vectors must be identified to allow inference the data may be 1 2 rather than 1 1 altering distributions and conditioning must be done with care these issues are illustrated by an empirical application of multivariate cointegration analysis to a small model of narrow money prices output and interest rates in the uk copyright 1998 by blackwell publishers ltd

investigating stability and linearity of a german m1 money demand function starting from a linear error correction model ecm the stability and linearity of a german m1 money demand function are investigated applying smooth transition regression techniques using seasonally unadjusted quarterly data from 1961 1 to 1990 2 it is found that the money demand equation considered is both linear and stable after extending the sampling period until 1995 4 a clear structural instability due to the monetary unification on 1 july 1990 is found and subsequently modelled a non linear specification for the extended period is presented and discussed copyright 1999 john wiley sons ltd

rural nonfarm employment and incomes in the himalayas abstract nonfarm activities generate on average about 60 of rural households incomes in the himalayas this article analyzes the determinants of participation in nonfarm activities and of nonfarm incomes across rural households a unique data set collected in the himalayan region of india allows us to deal with the heterogeneity of rural nonfarm activities by using aggregations into categories that are useful both analytically and for policy purposes we conduct an empirical inquiry that reveals that education plays a major role in accessing more remunerative nonfarm employment other household assets and characteristics such as land social status and geographical location also play a role

monetary economic myth and econometric reality few of the main macro economic forecasting systems can produce sensible forecasts without the tender loving care of their proprietors many econometric equations in com mon use show significant deterioration in the accuracy with which they characterise data as time passes and many economists are sceptical about empirical evidence feeling it lacks credibility monetary relationships have the dubious distinction of being among the leaders in this field as witnessed by the very large mispredictions of m1 models in the usa over what is now known as the missing money period 1973 76 as well as during the recent great velocity decline 1979 82 in the uk models of m1 and m3 demand experienced large structural breaks following the competition and credit control regu lation changes and the move to floating exchange rates perhaps it is no surprise that goodhart s law should have been formulated with respect to money demand equations

an alternative approach to the american demand for money with a decade of evidence behind it the profession seems to have agreed on the fact that a structural break shifted the american demand for money shortly after 1973 it is difficult to pinpoint the source of the trouble precisely let alone to explain the event with an econometric model in their survey judd and scadding 1982 tentatively concluded that financial innovation is the source of the problem while this conclusion has not been universally accepted the instability of the money demand function is largely taken as a given stylized fact the primary goal of this article is to provide an alternative solution to the case of the missing money using the methods of hendry 1979 it should be stressed at the outset that as this paper deals with a problem in the applied literature it is unabashedly empirical in nature the paper attempts to explain an empirical difficulty without presenting a new theoretical model of money demand rather in the context of the standard transactions demand theory for narrow money a number of questions are analyzed with an atypical econometric model was there actually a shift or a series of shifts in the demand for money if not why have other investigators concluded that there was in fact a shift most importantly what function seems to be the most reasonable approximation to the data generation process during the period in question

the search for a stable money demand function a survey of the post 1973 literature phe question of whether the demnand function for money is stable is one of the most important recurring issues in the theory and application of macroeconomic policy what is being sought in a stable demand function is a set of necessary conditions for money to exert a predictable influence on the economy so that the central bank s control of the money supply can be a useful instrument of economic policy as such the notion of a stable demand function appears to involve three key elements e g john t boorman 1976 p 317 and david e w laidler 1977 pp 34 35 first the demand for money relation should be highly predictable in a statistical sense as measured by the usual goodness of fit statistics precision of estimated coefficients and presumably its ability to forecast accurately out of sample second a stable demand function for money has relatively few arguments a relationship that requires knowledge about a large number of variables in order to pin it down is in effect not predictable finally the variables that appear as arguments in the function should represent significant links to spending and economic activity in the real sector in sum a stable demand function for money means that the quantity of money is predictably related to a small set of key variables linking money to the real sector of the economy the importance of a stable money demand function for monetary policy can be illustrated with the standard is lm model in which interest rates and gnp are the endogenous variables in this context a stable demand function for money translates into a well defined relationship between money interest rates and gnp

rural nonfarm incomes in nicaragua abstract this paper examines nonfarm incomes of rural nicaraguan households using a nationwide survey lsms from 1998 the key findings are as follows a rural nonfarm income rnfi constitutes 41 of rural household incomes b rnfi is much more important than farm wage labor income c rnfi tends to be relatively concentrated geographically and socioeconomically toward the rural areas of the managua zone and the rest of pacific zone which are denser in infrastructure and population and toward the upper income quartile of rural households this concentration implies high entry barriers and capital requirements for rural nonfarm activity that the poor are simply not equipped to overcome equipping the rural poor through training and acquisition of diverse forms of capital to have a chance at the higher return nonfarm jobs would be a major step toward helping them to share the benefits of the rural nonfarm economy d self employment small enterprise income in manufactures is very minor probably due to the ease of obtaining manufactured goods from urban industries and imports wage employment constitutes the bulk of rnfi despite it receiving little attention in development programs and debate e three quarters of rnfi is in the service sector and only one quarter is from manufactures that can be contrasted with the emphasis on small manufactures enterprises in rural development programs and research f education road access as well as access to electricity and water were found to be important to nonfarm incomes

the demand for m1 in the united states a reply to james m boughton using general to simple methods j m boughton 1993 develops an econometric model that fits almost as well as y baba d f hendry and r m starr bhs 1992 but differs in economic implications and dynamic adjustments he claims the new model is constant is not encompassed by bhs but does not encompass bhs he concludes that the new variables in bhs do not matter for fit or constancy the authors replicate boughton s findings but their simplification encompassing test confirms the importance of the novel variables in bhs and shows that bhs encompasses his model an explanation is offered for its constancy when previous studies suffered predictive failure

long run money demand revisited evidence from a non linear approach abstract in this paper we argue that employing the conventional linear cointegration approach in examining long run money demand may not be appropriate after taking into account the existence of transaction costs we provide evidence to show that deviations from equilibrium money demand follow an exponential smooth transition autoregressive process that is mean reverting outside a given range and has a unit root inside the range our findings also provide an alternative explanation for the failure of much of the existing literature to support a long run money demand function

network effects and the dynamics of migration and inequality theory and evidence from mexico international migration is costly and initially only the middle class of the wealth distribution may have both the means and incentives to migrate which can increase inequality in the sending community however the migration networks formed lower the costs for future migrants which can in turn lower inequality this paper shows both theoretically and empirically that wealth has a nonlinear effect on migration and then examines the empirical evidence for an inverse u shaped relationship between emigration and inequality in rural sending communities in mexico after instrumenting we find that the overall impact of migration is to reduce inequality across communities with relatively high levels of past migration we also find some suggestive evidence for an inverse u shaped relationship among communities with a wider range of migration experiences

property rights labour markets and efficiency in a transition economy the case of rural china we investigate the consequences of imperfect factor market development for farm efficiency in north china we estimate the extent to which an inverse relationship in farm productivity can be attributed to the administrative as opposed to market allocation of land combined with unevenly developed off farm opportunities using a new household survey we find considerable inefficiency in the use of labour this inefficiency is alleviated by external labour markets and to a limited degree by administrative reallocations the reallocations do not go far enough however which raises important questions about con straints on rental activity and property rights formation more generally jel classification q15 012

intergenerational occupational mobility in rural economy evidence from nepal and vietnam abstract this paper presents evidence on intergenerational occupational mobility from agriculture to the nonfarm sector using survey data from nepal and vietnam in the absence of credible instruments the degree of selection on observables is used as a guide to the degree of selection on unobservables a la altonji et al 2005 to address the unobserved genetic correlations the results show that intergenerational occupational mobility is lower among women in both countries and is lower in nepal compared with vietnam in the case of nepal strong evidence favors a causal role played by the mother s nonfarm participation in the daughter s occupation choice possibly because of cultural inheritance in a traditional society

regression direction and weak exogeneity abstract the absence of testing for weak exogeneity in money demand has often led to stark conditioning claims regarding the validity of price equations this paper uses the johansen procedure to explore the conditioning properties of money demand systems for nonborrowed reserves m1 and m2 our results show that irrespective of the specification of the cointegrating relation a feedback mechanism enters the equation for money the opposite however is not true for the price equations the results also cast a warning for single equation models of money demand in that weak exogeneity is sensitive to how the system is defined

farm income variability and the supply of off farm labor if farmers are risk averse greater farm income variability should increase off farm labor supply this effect is confirmed for a sample of kansas farmers off farm employment of farmers and their spouses is also found to be significantly influenced by farm experience off farm work experience farm size leverage efficiency and farm specific education in addition farm operators and spouses who receive significant income support through government farm programs are less likely to work off the farm this may suggest that policy changes reducing farm income support payments may increase off farm employment of farmers and their spouses

macro economic forecasting and modelling confidence in macro economic forecasting has periodically been punctured by episodes of economic turbulence and concomitant predictive failure the poor performance in predicting the consumer boom in the late i98os and the depth and duration of the recession in the i99os can be viewed as merely the latest examples in a catalogue of failures with noteworthy antecedents including the under prediction of post war consumption and the i974 5 and i979 81 recessions periods of economic turbulence may be informative in highlighting model inadequacy but they also being into question the usefulness of economic forecasting 2 should we be surprised that such failures have occurred econometric theory comprises a body of tools and techniques for analysing the properties of prospective methods under hypothetical states of nature in the forecasting context the methods are forecasting models and procedures and the states of nature relate to the properties of the variables to be forecast for an econometric theory of forecasting to be useful in terms of delivering relevant conclusions about empirical forecasting those states must adequately capture thfie appropriate aspects of the real world to be forecast however the traditional text book theory of economic forecasting fails to allow for a number of vital features of the economy in particular analyses of forecasting have usually been based on assumptions that implicitly rule out structural change or regime shifts in the economy namely i a constant time invariant data generating process dgp 2 a stationary non integrated dgp 3 a unique model of the economy which coincides with the dgp under these assumptions particularly i and 3 forecasts calculated as the conditional expectation given the model are optimal in the sense that they are unbiased and efficient any other forecast will have a larger forecast error variance by definition if the model is the dgp then the expected future value of the variable given all information available at the present time is the conditional expectation with respect to the model in general forecasts are not financial support from the uk economic and social research council under grant rooo233447 is gratefully acknowledged by both authors neil ericsson provided many helpful comments on an earlier draft 1 spanos i989 considers the contemporary predictive failure of aggregate consumption functions over 1945 51 arguing that model mis specification played a role wallis i989 discusses the forecasting record of the major uk model based forecasting teams for the i974 5 and i979 8i recessions

the rural non farm sector issues and evidence from developing countries abstract the rural non farm sector has traditionally been viewed as a low productivity sector which produces low quality goods it is often expected to wither away as a country develops recent years have seen a shift away from this position towards recognition that the rural non farm sector can and often does contribute to economic growth rural employment poverty reduction and a more spatially balanced population distribution this paper reviews the literature on the conceptual and empirical underpinnings of this more recent perspective focussing on the experience in developing countries the paper documents the size and heterogeneity of the sector pointing to evidence that in many countries the sector is expanding rather than declining the issues associated with measuring the sector s economic contribution are discussed followed by empirical assessments for several countries and regions the distributional impact of non farm earnings is examined and it is found that a pro poor impact while by no means inevitable can be considerable the sector s trajectory over time in different settings is reviewed and the scope for and experience of various policy interventions is discussed

nonfarm employment and poverty alleviation of rural farm households in honduras abstract this paper analyzes the role of nonfarm income of rural farm households in honduras it uses the national income and expenditure survey from 1993 to 1994 income from nonfarm wage and self employment represents 16 25 of farm household income and is especially important for middle and higher income strata nonfarm wage labor is geographically concentrated in small rural towns and in the industrial free zones located in the northern region while self employment is particularly developed in the southern region access to nonfarm wage employment is confined to educated individuals that belong to large households while female members of wealthier households are mainly involved in self employment food security is strongly enhanced through the engagement in nonfarm activities moreover nonfarm income enables farmers to purchase external inputs for improving yields and labor productivity suitable policies to enhance nonfarm employment include education training and technical assistance to reduce labor intensity in agricultural production as well as public investment and credit services to improve access to nonfarm activities

policy regime changes and monetary expectations testing for super exogeneity abstract the super exogeneity status for weekly u s monetary expectations structure is examined the incomplete structure of the proposed model requires the use of an incidental parameter which is approximated by a linear function of certain instruments a super exogeneity test within the instrumental variables framework examines whether distributional changes stemming from the regime shifts affect the error correction parameter in the expectations structure under the assumption that the variance of the error correction term is constant the data evidence is found to reject super exogeneity

economies of scale household size and the demand for food household scale economies are plausibly attributed to shared household public goods that make larger households better off at the same level of per capita resources larger households should therefore have higher per capita consumption of private goods such as food provided that they do not substitute too much toward the effectively cheaper public goods the evidence shows exactly the opposite data from rich and poor countries indicate that at constant per capita total expenditure the per capita demand for food decreases with household size and that it does so most in the poorest countries where substitution should be the least

i 2 representations of us money demand abstract researchers have found success in estimating i 2 representations of money demand for other countries using a general equilibrium cash credit model an i 2 model for the united states is tested no bias is found from treating the variables as i 1

why has economic growth been more pro poor in some states of india than others abstract we use 20 household surveys for india s 15 major states spanning 1960 1994 to study how the sectoral composition of economic growth and initial conditions interact to influence how much growth reduced consumption poverty the elasticities of measured poverty to farm yields and development spending did not differ significantly across states but the elasticities of poverty to urban and rural non farm output varied appreciably and the differences were quantitatively important to the overall rate of poverty reduction states with higher elasticities did not experience higher rates of non farm growth the non farm growth process was more pro poor in states with initially higher literacy higher farm productivity higher rural living standards relative to urban areas lower landlessness and lower infant mortality

the demand for broad money in the united kingdom 1878 1993 using annual data from friedman and schwartz 1982 hendry and ericsson 1991a developed an empirical model of the demand for broad money in the united kingdom over 1878 1975 we update that model over 1976 1993 accounting for changed data definitions and clarifying the concept of constancy with appropriate measures of opportunity cost and credit deregulation the model s parameters are empirically constant over the extended sample which was economically turbulent policy implications follow for parameter nonconstancy and predictive failure causation between money and prices monetary targeting deregulation and financial innovation and the effect of policy on economic agents behavior

microfoundations and the demand for money the reader should note that i write this piece in a style that aims to be accessible to that much neglected representative agent the woman on the eurostar train hence unlike the man on the clapham omnibus i assume my intrepid traveller has reasonable knowledge of monetary economics and econometrics but not of the details of the demand for money space constraints force me to indulge in a certain amount of poetic licence but i hope this results in poetic justice there have been many wars fought on this particular battlefield some with almost religious zeal on the theoretical side of the debate we sometimes have the equivalent of religious fundamentalists be they muslims jews christians etc who would dismiss almost any evidence unless it were associated with a strong microtheoretic basis as laid down in the koran talmud or bible the empirical side encompasses agnostics atheists as well as born again econometricians pure theorists inhabit the sunlit uplands while applied economists and policymakers flounder in the muddy plain below occasionally gaining solace from their copy of zen and the art of motorcycle maintenance in general in economics we do not have the luxury of controlled experiments as is the case in the natural sciences what distinguishes good microfoundations from bad and how to weight priors and statistical evidence is subject to much dispute leamer i983 hendry et al i990 as in religion sometimes there is the occasional miracle proclaimed after a suitable interval a new saint may be declared and disciples flock to the new shrine later doubts may arise as to whether a miracle really did occur human behaviour is difficult to explain let alone predict so the search for the equivalent of the holy grail ark of the covenant etc is bound to be arduous in scholarly journals we generally read of the success of the demand for money like diplomats who are sent abroad to lie for the good of their country publication may require applied economists to be somewhat economical with the actualite lovell i983 leamer i983 in this article i want to be as honest as possible about our success and failures in this area the prior information an armchair economist would consider when thinking about the demand for money over the past 40 years in western industrialised countries which have experienced moderate inflation might

revisiting the us money demand function an application of the lagrange multiplier structural break unit root test and the bounds test for a long run relationship in this article we examine the issue of a levels relationship and stability of the us money demand function over the period 1959 01 to 2004 02 we use the lagrange multiplier structural break unit root test and the bounds testing approach to a long run relationship in levels of the variables namely real money demand nominal interest rate and real income we find greater evidence for a long run relationship in levels and stability of the us money demand function when we use m2 as a proxy for money demand however we find little evidence for a long run relationship between m1 and m2 with their determinants for the recent period spanning the last decade or so

implications of non farm work to vulnerability to food poverty recent evidence from northern ghana summary using survey data from northern ghana this study seeks to establish the impact of participation in non farm work on the vulnerability of resource poor households to food poverty vulnerability to food poverty is assessed based on expected future food expenditure of households the potential endogeneity problem associated with participation in non farm work by households is overcome using a novel instrumental variable approach analysis of the determinants of expected future food expenditure is done using a standard feasible generalized least squares fgls method demographic and socioeconomic variables location variables and household facilities are included in the model as control variables our study finds that participation in non farm work significantly increased the future expected food consumption thereby alleviating the vulnerability of households to food poverty our study also confirms that current food poverty and future food poverty i e vulnerability to food poverty are not independent from each other non farm work plays a crucial role in providing the means to overcome the risk of food poverty in these resource poor households policies that promote off farm income generating activities such as small businesses and self employment as well as the creation and support of businesses that absorb extra labor from the farm should be encouraged in the study region because households in the study region are exposed to above average levels of hunger and food poverty the study recommends the government of ghana and development partners to take measures that enhance the resilience of these resource poor households

land titling and rural transition in vietnam abstract we examine the impact of the 1993 land law of vietnam which gave households the power to exchange transfer lease inherit and mortgage their land use rights we use household surveys before and after the law was passed together with the considerable variation across provinces in the speed of implementation of the reform to identify the impact of the law we find that the additional land rights led to statistically significant increases in the share of total area devoted to long term crops and in labor devoted to nonfarm activities however these changes are not large in magnitude and appear to be driven mainly by the increased security of tenure provided by the law rather than by increased access to credit markets or greater land market participation

signaling in a global game coordination and policy traps this paper introduces signaling in a global game so as to examine the informational role of policy in coordination environments such as currency crises and bank runs while exogenous asymmetric information has been shown to select a unique equilibrium we show that the endogenous information generated by policy interventions leads to multiple equilibria the policy maker is thus trapped into a position in which self fulfilling expectations dictate not only the coordination outcome but also the optimal policy this result does not rely on the freedom to choose out of equilibrium beliefs nor on the policy being a public signal it may obtain even if the policy is observed with idiosyncratic noise

nonlinear equilibrium correction in u s real money balances 1869 1997 several theoretical models of money demand imply nonlinear functional forms for the aggregate demand for money characterized by smooth adjustment toward long run equilibrium in this paper we propose a nonlinear equilibrium correction model of u s money demand that is shown to be stable over the sample period from 1869 to 1997

uncertainty co ordination and path dependence abstract our objective is to assess whether dynamics hinder or assist co ordination in a game with strategic complementarities we study two dynamic aspects different agents make decisions at different points in time and extra information about a payoff relevant state of nature becomes available over time we find that the dynamic resolution of information matters most for uniqueness of equilibrium this is demonstrated by showing that the condition for uniqueness is weaker when learning occurs we also analyse how successfully agents co ordinate when there is a unique equilibrium finally we show that path dependence occurs the order in which signals arrive matters as well as the total amount of information received

migration and incomes in source communities a new economics of migration perspective from china the objective of this paper is to understand the effects of china s migration on source communities and to discuss their policy implications we draw from new economics of labor migration nelm theory to understand how migration and migrant remittances can relax or tighten market constraints in china s rural economy using simultaneous equation econometric techniques and household survey data from china we estimate net sectorspecific effects of migration on rural household income focusing on farm production and self employment our econometric findings indicate that the loss of labor to migration has a negative effect on household cropping income in source areas however we provide evidence that remittances sent home by migrants positively compensate for this lost labor effect contributing to household incomes directly and indirectly by stimulating crop and possibly self employment production this finding offers evidence in support of the nelm hypothesis that remittances loosen constraints on production in the imperfect market environments characterizing rural areas in less developed countries taking into account both the multiple effects of migration and the change in household size participating in migration increases household per capita income between 14 and 30 percent migration and incomes in source communities a new economics of migration perspective from china china is experiencing the largest peacetime flow of labor out of agriculture ever witnessed in world history solinger 1999 rozelle et al 1999 despite the rapid expansion of labor migration china s work force is still disproportionately employed in agriculture compared to other countries at similar levels of per capita gdp taylor and martin 2001 hence as china s economy continues to expand the flow of labor to urban areas will continue and even accelerate johnson 1999 the massive flow of labor away from farms has intensified research interest in china s migration in recent years however as in the broader literature on migration in less developed countries most recent studies on china s migration have focused on determining the size and composition of the labor flow macroeconomic implications of increased migration and the effects of migration on urban areas zhao 1999 yang 1999 1997 less emphasis has been placed on researching the effects of migration on the rural communities that migrants leave even though evidence shows that the rural household in the village of origin is typically the central concern of all those involved in migration both those who leave and those who stay behind exceptions include wang and zuo 1999 bai 2001 moreover the recent increase in migration has left policy makers particularly concerned regarding the way source communities will be affected moa 1999 they are concerned that as labor flows away from farms food production and crop income will decline potentially threatening china s food security furthermore policy makers are concerned about the increasing gap between urban and rural household incomes if migration exacerbates this gap some fear that as it grows rural residents eventually will flood cities ill equipped to absorb them others fear that discontent over a rising urban rural income gap could even spill over into political unrest yang 1999 because china s markets and other modern economic institutions are still relatively undeveloped migration may play a pivotal role in creating or overcoming constraints caused by the lack of well functioning markets and or institutions knight and song 1999 benjamin and brandt 2000 the new economics of labor migration nelm literature analyzes migration as a household decision rather than as an individual decision stark 1991 the nelm hypothesizes that rural households facing imperfect market environments decide

success and failure of reform insights from the transition of agriculture this paper analyzes the linkages between the reform strategies in transition countries and economic performance the authors focus on agriculture because of the sharpness of the policy changes fundamental differences among countries and relative simplicity of agricultural relationships the authors document post reform performance in the transition countries of asia and europe the authors show how a pricing reform and subsidy reductions b land rights reform and policies that affect farm restructuring and c the presence institutions that facilitate exchange either markets or market substitutes affect output and productivity the paper ends with general lessons on reforms and transition

a stable demand for money despite financial crisis the case of venezuela the demand for broad money in venezuela is investigated over a period of financial crisis and substantial exchange rate fluctuations the analysis shows that there exist a long run relationship between real money real income inflation the exchange rate and an interest rate differential that remains stable over major policy changes and large shocks the long run properties emphasize that both inflation and exchange rate depreciations have negative effects on real money demand whereas a higher interest rate differential has positive effects the long run relationship is finally embedded in a dynamic equilibrium correction model with constant parameters these results have implications for a policy maker in particular they emphasize that with a high degree of currency substitution in venezuela monetary aggregates will be very sensitive to changes in the economic environment

effects of technological change and institutional reform on production growth in chinese agriculture recent rapid agricultural production growth in chinese agriculture could be attributed to an increase in inputs technological change and institutional reform an accounting approach was used to separate the relative contribution of these three factors institutional change like the introduction of the household production responsibility system has contributed to past growth in production however technological change is crucial to furthering production growth because of the limited potential for significant increase in the use of conventional inputs in particular land continued institutional change must accompany corresponding technological changes

financial services cointegration and the demand for money in israel the main hypothesis of this study is that ignoring the state of the financial services in the demand for money is a theoretical misspecification and is an important reason for the instability of the money demand as traditionally estimated a measurement approach for the state of the financial services is developed and applied to estimation of the demand for money in israel the approach presented in melnick 1990 is further developed by analyzing the lack of cointegration between real balances and their determinants according to theory as a case of omitted variables in a nonstationary time series set up when our measure for the state of the financial services is included it yields a stable cointegrated long run demand far money relationship the validity of steady state inflation tax analysis is questioned and a negative recommendation for the use of quantitative money targets is given copyright 1995 by ohio state university press

moving toward markets labor allocation in rural china abstract china s economic reforms have brought rapid growth in rural off farm employment raising questions about the assumption that rural china is labor surplus and has poorly functioning factor markets we investigate this by testing for separability between household labor demand and supply using panel data we find that separability is rejected overall indicating that factor markets remain underdeveloped nonseparability however is associated with labor surplus in some areas and labor shortage in others moreover separability holds where substantial employment opportunities exist in the wider township suggesting that such employment promotes competitive allocation within villages as well as the inter village movement of resources

economic integration across latin america evidence from labor markets 1990 2013 combining macroeconomic and microeconomic data and three indicators of international market integration this paper assesses the degree to which latin american labor markets are integrated the results suggest that relative to east asia latin american labor markets are somewhat more integrated but considerable differences across countries persist in addition the evidence indicates that the degree of labor market integration across latin american borders is significantly less than that of labor markets within mexico and within the united states in two of the three indicators these differences may suggest opportunities for efficiency gains from further labor market integration

agricultural productivity growth rural economic diversity and economic reforms india 1970 2000 a salient theme in d gale johnson s work is the importance of agricultural development for general prosperity and for economic diversification e g johnson 2000 johnson has also noted that most of the world s poor are engaged in farming so that a key focus of development policy is to raise the incomes of farmers from a global perspective increasing the productivity of agriculture given the fixity of land is necessary for both poverty reduction and the development of the nonagricultural sector at the level of the world agricultural productivity gains poverty reduction and the growth of the nonfarm sector are complements however the question remains whether these observations imply that every poor country should focus its public resources on agricultural development in order to raise the incomes of people now engaged in farming and whether such a policy is necessary for obtaining economic diversity in this article we use the experience of india over the past 30 years to address the issue of whether agricultural technical change actually leads to economic diversification and income growth within the rural sector in the context of an open economy country in which there are cross area trade and capital flows we focus in particular on the rural sector because this is the sector in which linkages between agricultural and nonagricultural sectors are thought to be the strongest we exploit the fact that india has maintained a policy of openness with respect to agricultural technology over this period permitting and actively supporting agricultural development and has moved to a reformed regime in which goods are traded and capital is more mobile in the 1990s evidence on the relationship between agricultural growth and nonfarm

migration remittances and agricultural productivity in china in our paper we have used the new economics of labor migration framework to trace the complex linkages that exist among migration remittances and agricultural productivity in china constraints in the operation of on farm labor and capital or insurance markets or institutions provide households with a motivation to migrate and distort on farm operations when labor leaves in our household sample the net impact of migration and remittances on maize production is negative excerpt

money demand during hyperinflation and stabilization bulgaria 1991 2000 the demand for money in bulgaria is estimated over a ten year period 1991 2000 of high inflation and inflation uncertainty the paper distinguishes between three well defined sub periods high variable but not systematically accelerating inflation from 1991 until april 1996 the near hyperinflation period from may 1996 to february 1997 and the subsequent stabilization after the adoption of a currency board the empirical analysis utilizes a standard methodology of cointegration and error correction the functional determinants of the demand for money change during the different sub periods during the hyperinflation episode cagan s model is employed

currency substitution and nonlinear error correction in taiwan s demand for broad money we modify the conventional money demand function by including a real exchange rate variable to reflect the effect of currency substitution empirical evidence indicates that the variable is crucial to the long run stability of taiwan s money demand after finding the failure of a linear error correction model ecm in describing the dynamics of taiwan s money demand we apply a nonlinear ecm to examine its dynamics and support the appropriateness of the nonlinear model empirically

partisan political business cycles in the german labour market empirical tests in the light of the lucas critique this paper focuses on alternative specifications ofpartisan political business cycles partisan theory rational partisan theory and hysteresis augmentedrpt it elaborates on analogies of the natural ratehypothesis underlying all specifications and thecointegration concept accordingly problems of thespecification of hypotheses estimation and inferencein a cointegrating framework with politicalinterventions are treated super exogeneity tests areshown to be equivalent to tests of the lucas critiqueand the rpt therefore the concept ofsuper exogeneity is transferred to empirical tests ofpartisan cycles by this a new testing framework ofpartisan cycles is developed and applied to germanlabour market data

rural nonagricultural activities in development theory and application abstract this paper focusses on the potentially important role of rural nonagricultural activity in the development process using the hymer resnick z goods model as a point of departure we first show that its pessimistic conclusions are based on rather restrictive assumptions as applied to the colonial period we relax these assumptions indicating the theoretical possibility of a substantially more positive scenario for that period subsequently we analyze the role of z goods traditional and nontraditional in the post independence era again distinguishing between archetypal pessimistic and optimistic cases finally the comparative historical experience of the philippines and taiwan is brought to bear to illustrate the argument empirically

the conduct of monetary policy nowadays the central bank of a country is the monopoly supplier of legal tender currency the commercial banks are committed to making their deposits convertible at par into such currency so the banks need to keep reserves in the form of currency and deposits at the central bank the central bank primarily conducts its policy by buying and selling financial securities e g treasury bills or foreign exchange in exchange for its own liabilities i e open market operations academic economists generally regard such operations as adjusting the quantitative volume of the banks reserve base and hence of the money stock with rates prices in such markets simultaneously determined by the interplay of demand and supply central bank practitioners almost always view themselves as unable to deny the banks the reserve base that the banking system requires and see themselves as setting the level of interest rates at which such reserve requirements are met with the quantity of money then simultaneously determined by the portfolio preferences of private sector banks and non banks this difference in perceptions is discussed again in section iii whether the monetary policy operations of central banks should be viewed primarily in terms of quantity or rate setting actions though of course one is the dual of the other these had allowed inflation and inflationary expectations to become entrenched by the end of the i970s a selection of representative statistics for a number of the leading industrialised countries is given in table i below this table indicates a common pattern among the countries of interaction between interest rates inflation and the growth of output the first period i969 78 is marked by high inflation negative real interest rates and slightly above average growth the second period i979 82 by very high nominal and high real interest rates high but falling inflation and very low output growth the final period i983 7 is marked by much lower inflation lower nominal but still high real interest rates and a recovery in output growth in some cases to above average rates in contrast the relationship in these countries between the growth of their chosen key monetary aggregate and nominal incomes appears much weaker also see clinton and chouraqui i987 especially p 7 whether measured in terms of monetary growth or in terms of real interest rates i e after adjustment for prospective future inflation policy during the

forecasting in cointegrated systems we consider the implications for forecast accuracy of imposing unit roots and cointegrating restrictions in linear systems of i 1 variables in levels differences and cointegrated combinations asymptotic formulae are obtained for multi step forecast error variances for each representation alternative measures of forecast accuracy are discussed finite sample behaviour in a bivariate model is studied by monte carlo using control variables we also analyse the interaction between unit roots and cointegrating restrictions and intercepts in the dgp some of the issues are illustrated with an empirical example of forecasting the demand for m1 in the uk

nonfarm employment agricultural shocks and poverty dynamics evidence from rural uganda this article examines the role of off farm employment in poverty reduction over a short period of time by using panel data from 894 rural ugandan households in 2003 and 2005 taking advantage of the unique off farm labor supply and income data we analyzed how households respond to negative agricultural shocks especially through off farm labor supply and income to mitigate crop income loss our analysis indicates that the flexibility of labor time allocation varies across off farm jobs and that only low skilled and low wage jobs tend to be used to mitigate negative shocks especially among the asset poor

rural nonfarm activities and poverty in the brazilian northeast abstract this paper combines two complementary data sets to present a disaggregated spatial profile of poverty in the brazilian northeast and to investigate the importance of nonagricultural activities for its rural dwellers we present both univariate and multivariate profiles of nonagricultural employment and discuss its determinants while the main occupational difference between the rural poor and the rural nonpoor in brazil seems to be the greater reliance of the former on paid agricultural employment vis a vis own cultivation rather than access to nonagricultural activities the evidence nevertheless suggests that diversification into this growing sector provides both an important complement to the budgets of the poor and possibly a self insurance mechanism against negative shocks despite the substantial heterogeneity of the sector two general findings are robust returns to education are comparatively high and location in relation to urban areas is an important determinant of both employment and earnings in rural nonagricultural activities

non farm activity household expenditure and poverty reduction in rural vietnam 2002 2008 summary diversifying into non farm activities has been suggested as an effective way out of poverty for rural households in developing countries using the vietnamese household living standards surveys of 2002 2004 2006 and 2008 we test this claim and investigate the effect of non farm sector involvement on poverty and expenditure growth our endogeneity corrected estimates show that an additional household member involved with non farm activity reduces the probability of poverty by 7 12 and increases the household expenditure by 14 over a two year period our findings also indicate that non farm involvement reduces the hours worked on farm but not the household agricultural income

personal networks and nonagricultural employment the case of a farming village in the philippines abstract this article based on an intensive village survey in the philippines analyzes the effects of personal networks on rural villagers access to nonagricultural occupations and the terms of employment given to them a key finding is that personal networks are selectively used to reduce transaction costs and their impacts on employment conditions vary by size and by location of enterprises we find that when villagers are employed in unskilled work at small enterprises those who use family relative networks receive wage premiums however if we limit our sample to small enterprises located near our study village the family relative network premiums become insignificant presumably because of the overriding influence of the community wide network within a narrow local community contrary to the case of small enterprises unskilled workers wages at large enterprises are not much affected by personal networks but are largely determined by years of schooling and work experience the recent developmen

exogeneity within the m2 demand function evidence from a large macroeconomic system a large body of literature investigates whether a stable and predictable long run association between money and its arguments exists one point of variation between models is whether to include an interest rate measure directly within the long run relationship several recent studies indicate that empirical findings are sensitive to the choice therefore the present article reexamines the empirical significance of the interest rate within a four equation macroeconomic system the results suggest that the interest rate 1 may be excluded from the m2 demand function 2 is strongly exogenous to most of the system s remaining variables and 3 may represent a common trend jel e41 e52 c32 i introduction much of recent macroeconomic literature has been dedicated to investigating whether long run relationships exist between macroeconomic variables 1 such preoccupation is understandable given the myriad models in which these relationships play a dominant role a significant portion of this literature has focused on whether a long run relationship exists between money demand and its arguments 2 of course the close association between the variables is an integral part of theories that suggest that the monetary authority may qualitatively influence the direction of the aggregate economy the estimation of long run money demand models have differed in their methodological approach and in countless other ways one specific way in which they may differ in whether the investigator s incorporates an interest rate measure directly within the long run relationship for example although fischer and nicholetti 1993 and baba et al 1992 incorporate various interest rate measures to identify the long run money demand function hendry and mizon 1998 and hendry and ericsson 1991 estimate the long run money demand function without an interest rate measure although the theoretical importance of the interest rate within the money demand function predates pigou s 1917 classic treatment and has been discussed at length elsewhere the importance empirically has recently been high lighted by sims 1980 in examining whether money granger causes output sims s results suggest that the tests are sensitive to whether a short term interest rate measure is included campbell and perron 1991 further argue that sims s findings are an outgrowth of whether the trivariate model of money prices and output are cointegrated that is i 0 or whether reduction to stationarity requires the introduction of a fourth variable the interest rate reduction to stationarity is important because estimating granger causality with nonstationary residuals may yield biased estimates due to nonstandard residual distributions the present article reexamines the significance of the interest rate within the long run money demand function specifically i examine two aspects of interest rate money behavior the initial examination is to test whether the interest rate measure three month treasury bill rate can be directly excluded from the long run m2 demand function following the methodology advanced by hendry and mizon 1993 johansen and juselius 1992 1994 and ericsson et al 1990 the test involves estimating the long run relationship with the interest rate measure and then impose the overidentifying zero restriction the associated log likelihood ratio statistics are distributed chi square n where n represents the number of overidentifying restrictions this approach however only examines whether the interest rate may be removed from the long run money demand vector a second area of interest is concerned with the short run responses of the interest rate more specifically the short run responses provide a test for granger causality within the cointegrated variables following ericsson et al 1998 granger causality is estimated where one or more cointegrated variables reject strong exogeneity

the buffer stock notion in monetary economics not the least of harry johnson s contributions to our discipline was the series of survey papers on aspects of monetary economics which he produced during the 1960s and 1970s it is no exaggeration to say that the way in which the literature of monetary economics is organised even now follows the design which johnson first set out in 1962 and built on in the subsequent decade nevertheless the subject has not stood still and one of the more interesting developments of the last few years has involved the introduction of what has been variously described as the disequilibrium money shock absorber or as i prefer to call it the buffer stock notion into monetary economics the development of this line of thought was getting underway before johnson s untimely death much of it indeed under the auspices of his own research programme at the lse even so this did not happen early enough for the relevant ideas to be put in their proper niche by johnson himself and the buffer stock approach is not yet fully integrated into the mainstream of monetary economics much of the relevant literature is empirical concerned with modelling particular aspects of the monetary experience of specific countries hence it is fragmented and contains few papers which attempt a coherent account of just what this approach is and how it relates to other approaches to monetary analysis although essays by goodhart 1982a b and judd and scadding 1982a contain important discussions of these issues to the best of my knowledge only jonson 1976a and knoester 1979a have devoted entire papers solely to this central issue and these are relatively inaccessible and hence less widely known than they deserve to be in this lecture i shall attempt to give a brief account of the essentials of this approach first i shall sketch out its microeconomic background and then i shall discuss those theoretical characteristics which differentiate it from the neo austrian analysis of robert e lucas jr and his associates as well as from the conventional keynesian approach to monetary economics last but by no means least i shall argue that it yields simple theoretical insights into important empirical and policy related issues which are troublesome for alternative approaches in short my tribute to harry

responsiveness flexibility and market liberalization in china s agriculture been at most only limited gains from market liberalization if one were to take the findings of this admittedly scant literature seriously it would appear as if there is at most only a relatively small impact from market reforms in china we believe there are three possible but only one plausible explanations for the findings first if market liberalization actually contributes little to no growth or increases in output or incomes this would of course in part explain why economies that lead reform with market liberalization do not experience significant gains theory and the experiences of other economies in other settings however would argue against such an interpretation second it could be that china s agricultural market liberalization has just proceeded so slowly that it is still too early for output to have been positively affected by market liberalization however as seen above the record on the market expansion and the observations of many researchers would not support this view

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

identification and estimation of money demand in most natural sciences physics chemistry biology theories are validated by controlled experiment however in other natural sciences astronomy meteorology and in most social sciences including economics the data are characteristically generated not by experiment but by measurement of uncontrolled systems in economics theories take the form of restrictions on the models assumed to generate the data and statistical methods replace experimental controls in testing these restrictions and here is the difficulty in economics particularly macroeconomics the theory used to derive tests ordinarily does not generate a complete specification of which variables are to be held constant when statistical tests are performed on the relation between the dependent variable and the independent variables of primary interest accordingly in such cases there will be a set of often very different candidate regression based tests each of which has equal status with the others since each is based on a different projection of the same underlying multivariate model except in the unlikely event that the explanatory variables are mutually orthogonal the conditional regression coefficients which generally form the basis for the test statistic will depend on the conditioning set we conclude from this that if a theory which does not generate a complete specification of the regression test is nonetheless to have testable implications these implications must be robust over the permissible alternative specifications if the restrictions indicated by the theory are satisfied in some projections but not in others that have an equal claim to represent implications of the theory one cannot conclude that the theory has been confirmed the fact that the observable implications of valid theories must obtain over a broad but usually incompletely specified set of regressions rather than for a single regression introduces a large and unavoidable element of imprecision into hypothesis testing in macroeconomics generally it appears to be appropriate to weaken the statistical criterion for rejecting theories consider for example the theory of money demand which will engage our attention in this paper the tobin baumol square root formula implies that the elasticity of money demand with respect to the interest rate is exactly one half but which interest rate should wealth be held constant inflation in view of such uncertainties it would be inappropriate to insist in a literal minded fashion on rejecting the tobin baumol model if in some regression the measured interest elasticity differed from one half by more than two standard deviations and only then obviously a more flexible approach is called for the practice has been to conclude that the statistical evidence is consistent with the tobin baumol model as long as the interest rate coefficient is negative if it is negative and significant or negative and insignificantly different from minus one half that would provide somewhat stronger confirmation but a positive coefficient particularly a significantly positive coefficient would be viewed as raising questions about the validity of the theory in macroeconomics generally as in the money demand application the typical response to specification uncertainty has been to regard a theory as supported if the signs of the estimated coefficients agree with those expected from theory and as disconfirmed otherwise there is no theoretical justification for this procedure but it seems to be a reasonable course to follow the point that economic theory ordinarily generates incompletely specified statistical university of california santa barbara we have received helpful comments from andrew abel robert clower michael darby robert engle stephen goldfeld david laidler edward leamer robert lucas frederic mishkin and edward prescott thomas hall provided able research assistance

financial innovation and monetary control the economic conjuncture of the 1970s and 1980s was extremely disturbed with high and volatile inflation interest and exchange rates this led the monetary authorities of most western coun tries to adopt monetary targets as a financial discipline to constrain inflationary pressures but this same conjuncture also encouraged the process of financial innovation which subsequently eroded the stability of the links between certain monetary aggregates and nominal incomes which had provided the empirical basis for such targetry thus in his recent book financial in novations and the money supply podolski 1986 argues that

land allocation in vietnam s agrarian transition while liberalizing key factor markets is a crucial step in the transition from a socialist control economy to a market economy the process can be stalled by imperfect information high transaction costs and covert resistance from entrenched interests the authors study land market adjustment in the wake of vietnam s reforms aiming to establish a free market in land use rights following de collectivization inefficiencies in the initial administrative allocation are measured against an explicit counterfactual market solution the authors tests using a farm household panel data set spanning the reforms suggest that land allocation responded positively but slowly to the inefficiencies of the administrative allocation they find no sign that the transition favored the land rich or that it was thwarted by the continuing power over land held by local officials