an environmental performance index for products reflecting damage costs abstract several studies have demonstrated how to use dea data envelopment analysis based techniques to estimate environmental performance indices none of these studies however are taking information on the environmental damage costs of the pressure types considered into account this study is bridging a gap between environmental indices founded in physical pressures and damage costs founded in welfare economics the aim of the paper is twofold first to demonstrate how to implement the information on environmental damage costs within a dea based environmental performance index and second to estimate these indices at product level by using danish input output data and environmental data from 1997

jump diffusion processes and the term structure of interest rates the authors investigate the term structure of interest rates when the underlying state variables and production technologies follow the jump diffusion processes even in some cases where the traditional expectations theory about the term structure is consistent with general equilibrium under diffusion processes the traditional theory is not consistent under jump diffusion processes it is shown that bond prices are strictly higher under jump risks than otherwise and that consumers with logarithmic utility functions will develop hedge portfolios in the presence of jump diffusion a number of continuous time asset pricing models have been derived under stochastic diffusion processes with continuous sample paths see e g black and scholes 2 merton 21 breeden 3 and cox ingersoll and ross 8 however recent empirical studies see e g brown and dybvig 4 feinstone 10 and jarrow and rosenfeld 17 suggest that the underlying processes may follow

the price of pollution a dual approach to valuing so2 allowances under the 1990 clean air act amendments a market based scheme to reduce u s sulfur dioxide emissions takes effect in 1995 indications are that participation in the market will be light and allowance prices will be lower than was once expected using an output distance function approach for wisconsin coal burning utility plants we estimate the shadow price of so2abatement which should approximate the allowance price the estimated average shadow price is above the prices at which the few observed allowance trades have occurred wisconsin s stringent state so2legislation may explain a portion of this divergence

one market one number a composite indicator assessment of eu internal market dynamics we consider the lack of consensus about an appropriate theoretical framework linking sub indicators as a defining characteristic of composite indicators this intrinsic feature implies uncertainties about the appropriate normalization and aggregation of the raw data the two are related index theory offers some valuable guidelines about their connection yet these do not fully solve the basic problem of expert disagreement we embed such residual disagreement in the aggregation method itself specifically we apply an impartial benefit of the doubt weighting procedure where weight restrictions incorporate the available information on experts opinions we apply this procedure to the dynamic performance assessment of eu internal market effects thereby highlighting its capacity to disaggregate member states observed performance shifts into changes relative to benchmarks and performance changes of the benchmarks i e catching up versus genuine progress our results indicate that the latter factor is more important in explaining the observed progress

waste performance of nuts 2 regions in the eu a conditional directional distance benefit of the doubt model abstract this paper attempts to benchmark the municipal solid waste msw management performance of the nuts 2 regions in the eu by constructing a composite indicator in order to account for commensurability weighting and aggregation issues of the performance indicators in regional waste and materials management this paper advocates a conditional directional distance version of the benefit of the doubt weighting technique in addition the waste management hierarchy defined by the eu is strongly embedded in the construction of our composite indicator the results reveal considerable differences in the aggregate performance of the regions even within member states in general waste sectors of the nuts 2 regions in austria belgium and germany generally do well in terms of msw management our results also reveal that some differences in the operating environment of the regions such as the number of tourist overnight stays are related to the aggregate performance of the regions however the observation that other conditions are not significantly related to the performance on a regional level is interesting as many policy makers frequently argue that the level of performance in their regions cannot be compared to that in other regions precisely due to this difference in operating conditions

interest rate volatility and the term structure a two factor general equilibrium model we develop a two factor general equilibrium model of the term structure the factors are the short term interest rate and the volatility of the short term interest rate we derive closed form expressions for discount bonds and study the properties of the term structure implied by the model the dependence of yields on volatility allows the model to capture many observed properties of the term structure we also derive closed form expressions for discount bond options we use hansen s generalized method of moments framework to test the cross sectional restrictions imposed by the model the tests support the two factor model there are essentially two approaches to the modeling of the term structure of interest rates in continuous time the equilibrium approach pioneered by

stationary properties of the real interest rate and the per capita consumption growth rate empirical evidence for theoretical arguments many economic theories connecting the real interest rate and the per capita consumption growth rate require that both rates evolve together over time this article investigates whether these rates present similar stationary behaviour for the seven most industrialized countries over the 1957 2005 period the analysis relies on the unit root tests developed by elliott et al 1996 and lopez 2006 to look for stationary or regime wise stationary behaviour respectively furthermore the final break selection uses bai and perron s 2003 method the results show for all the countries considered that both rates are either stationary or regime wise stationary with the same number of breaks and mostly with corresponding dates the results hold whether the rates are calculated annually or quarterly

eco efficiency analysis of power plants an extension of data envelopment analysis abstract in public discussion on environmental policy the notion of eco efficiency is often used the joint production of goods and undesirable outputs such as pollutants which may not be freely disposable without costs causes difficulties to measure the overall performance of the firm because of the absence of market prices for the undesirable outputs we are not able to estimate the environmental costs some of the measurement and evaluation difficulties can be overcome by employing data envelopment analysis dea as the efficiency measurement vehicle we propose the use of two different approaches in the first approach we start by decomposing the problem into two parts 1 the problem of measuring technical efficiency as the relation of the desirable outputs to the inputs and 2 the problem of measuring so called ecological efficiency as the relation of the desirable outputs to the undesirable outputs separately those two efficiency indicators are then combined in the second approach we treat pollutants as the inputs in the sense that we wish to increase desirable outputs and decrease pollutants and inputs the approaches are applied to the problem of measuring the efficiency of 24 power plants in a european country

regime changes in international real interest rates are they a monetary phenomenon in this paper we use the bai and perron 1998 2001 2003 methodology to test for multiple structural breaks in the mean real interest rate for 13 industrialized countries we find extensive evidence of structural breaks in the mean real interest rate for all 13 countries in an attempt to explain the breaks in international real interest rates we also test for multiple structural breaks in the mean inflation rate for the 13 countries once again we find extensive evidence of structural breaks in the mean inflation rate for all of the countries interestingly the breaks in inflation rates and real interest rates often coincide with increases decreases in the mean inflation rate as we move from one regime to the next typically associated with decreases increases in the mean real interest rate

productivity growth technical progress and efficiency in their comment subhash c ray and evangelia desli 1997 hereafter rd point out that the specification of the decomposition of the malmquist productivity index used by fare et al 1994 hereafter fgnz is not unique and propose and compute an alternative specification of that decomposition we will discuss additional decompositions at the end of this note but proceed here by comparing the rd decomposition with fgnz based on both conceptual and computational grounds rd provide a discussion of the overall malmquist productivity index including the important issue of when this index is equivalent to the traditional notion of total factor productivity tfp namely under the condition that the reference technology be consistent with constant returns to scale crs as they point out this will yield a measure of tfp even if the true underlying technology is not crs for example both rd and fgnz use the crs reference technology to compute overall malmquist productivity one of the key issues raised is the role of the underlying scale properties of the benchmark technologies used to define and compute both productivity and its components in particular two reference technologies are employed in both rd and fgnz what we refer to as crs and variable returns to scale vrs technologies by construction these technologies are nested the crs technology contains the vrs technology as in figure 1 in rd this nestedness provides the logical basis for our decomposition at a very intuitive level we would argue that these two benchmarks can be used to provide bounds on the underlying true but unknown technology 2 intuitively we see the vrs technology providing a type of convex inner approximation whereas the crs technology provides a type of convex outer approximation thus these two technologies provide alternative benchmarks they do not require that the data satisfy either crs or vrs another possible intuitive interpretation is that the crs captures a perhaps hypothetical long run and the vrs approximates the short run as a reference technology the crs technology has some very useful features for example it captures the notion of maximal

racing with uncertainty and strategic interaction between competitors as the race unfolds most of the existing literature examines one or other of these features but not the two combined our aim is to see how the efforts of competitors in a race vary with the intensity of rivalry between them in our principal model whch is of a one dimensional race it is shown that the leader in the race makes greater efforts than the follower and efforts increase as the gap between competitors decreases under certain conditions the same results hold in our second related model which is of a two dimensional race

exploring the green total factor productivity of china s metallurgical industry under carbon tax a perspective on factor substitution abstract the characteristics of high emissions and high energy consumption in metallurgical industry have brought great challenges to the green and low carbon transition in china as a low carbon economic instrument carbon tax is generally considered to be an effective way to reduce co2 emissions through raising energy cost but whether it will promote the green total factor productivity gtfp of china s metallurgical industry is still unanswered under this background this paper uses provincial panel data over years 2000 2015 to investigate the impact of carbon taxation on gtfp of metallurgical industry from the perspective of inter fuel and inter factor substitution the lock in mechanism is also incorporated in the three stage estimation model to better reflect the asymmetric price response of factors and fuels the results reveal that the slow marketization process of energy price and the rigid demand for energy in china s metallurgical industry hinder the substitution effect of energy the implementation of carbon tax has limited effect on energy saving and co2 reduction in the metallurgical industry of china and levying a carbon tax has a negative effect on gtfp during the research period therefore the government should not achieve co2 reduction targets at the expense of green economic growth gtfp is suggested to be considered in future assessment criteria in the process of transforming to low carbon economy

evidence of nonlinear mean reversion in the real interest rate this article utilizes tests for a unit root that have power against nonlinear alternatives to provide empirical evidence on the time series properties of the ex post real interest rate in the g7 countries we find that the unit root hypothesis can be rejected in the presence of a nonlinear alternative motivated by theoretical literature on optimal monetary policy rules this represents a reversal of the results obtained using standard linear unit root and cointegration tests tests for linearity reject this hypothesis for canada france italy and japan for which we estimate nonlinear models capturing the dynamics of the interest rate for these countries ex post real interest rates follow a nonlinear model characterized by mean reversion and provide statistical evidence for the fisher effect

are oil shocks permanent or temporary panel data evidence from crude oil and ngl production in 60 countries this paper examines the unit root properties of crude oil production for 60 countries employing a range of panel data unit root tests for the period 1971 to 2003 the study first employs a number of panel data tests that do not accommodate structural breaks and then proceeds to apply the lagrange multiplier lm panel unit root test with one structural break the results of the panel data tests without a structural break are inconclusive with at best mixed support for joint stationarity the findings from the lm panel unit root test with a structural break however are conclusive suggesting that for a world panel and smaller regional based panels crude oil and ngl production are jointly stationary

the influence of fomc member characteristics on the monetary policy decision making process abstract this paper provides new empirical evidence on a monetary policy committee with heterogeneous members whose decisions affect the efficacy of monetary policy it thereby provides a link between the literature on monetary policy committees and central bank monetary policy implementation through monetary rules using a novel dataset of the idiosyncratic characteristics of fomc members over the period from august 1979 to february 2014 the empirical findings show that characteristics such as education age and to a lesser extent work experience are not important in understanding the fomc decision making process instead the results point to the importance of time spent within the federal reserve system tenure on the fomc itself and the influence of the chair in shaping the decision making process the results are expected to have implications for the capacity of economic agents as well as various markets in the economy to more readily interpret public monetary policy information that reaches them this makes the monetary policy decision process less noisy and thus enhances the capability of agents and markets to attach the correct weight to this information

targeting conservation investments in heterogeneous landscapes a distance function approach and application to watershed management to achieve an environmental objective at least cost decision makers must integrate information about spatially variable biophysical and economic conditions although the biophysical attributes that contribute to an environmental outcome are often known the way in which these attributes interact to produce the outcome is often unknown we introduce a nonparametric conservation targeting approach that relies on distance functions to cost efficiently allocate conservation funds we apply the approach empirically to the case of conservation contracting for water quality objectives the contract portfolios derived from the application have many desirable properties including intuitive appeal and robust performance across plausible parametric scoring measures

the method of endogenous gridpoints with occasionally binding constraints among endogenous variables we show how the method of endogenous gridpoints can be extended to solve models with occasionally binding constraints among endogenous variables very efficiently we present the method for a consumer problem with occasionally binding collateral constraints and non separable utility in durable and non durable consumption this problem allows for a joint analysis of durable and non durable consumption in models with uninsurable income risk which is important to understand patterns of consumption saving and collateralized debt we illustrate the algorithm and its efficiency by calibrating the model to us data

is there a world real interest rate abstract this study uses panel data techniques to estimate a common component to the ex post real interest rates of nine countries with liberal capital markets over the past 16 years we show that the residuals from such a regression have almost no serial correlation and that each country s real interest rate is highly correlated with the estimated world real interest rate the primary exception to these findings is the behavior of the us real interest rate which exhibits large and persistent deviations from the estimated world real interest rate although it is still highly correlated with the world real interest rate

twin sons of different mothers the long and the short of the twin deficits debate i introduction the relationship between the government budget deficit and the current account deficit has been a contentious subject in empirical macroeconomics for at least the past 20 yr papers have variously found a positive link no link and three recent pieces even find a negative link between the two there are however some things that almost all these studies have in common for example they ignore the possibility of structural breaks in the series when examining their time series properties most previous studies treat the variables under study as being integrated of order 1 which is to say as having a unit root this is a hard assumption to square with the fact that the variables are measured as fractions of gross domestic product gdp and have over the last half century at least shown no inclination toward typical unit root behavior by contrast in three recent pieces corsetti and muller 2006 kim and roubini 2008 muller 2006 the two series are simply treated as pure stationary processes without any pretesting which obviously conflicts with results from the traditional unit root tests in this article we show that both the budget deficit and the current account deficit are stationary around an occasionally shifting mean which is to say that they have structural breaks but are stationary after allowing for those breaks since it is well known that traditional unit root tests have little power when the underlying data contain structural breaks this explains the puzzling finding that the budget deficit and the current account deficit expressed as fractions of gdp test out as i 1 series in practice our findings also cast doubt on the validity of assuming the two series are purely stationary processes given our framework a simple test for the existence of a long run equilibrium relationship between budget and current account deficits is to compare the number and timing of their structural shifts we find that the two series are not closely related either in their number of breaks or in their timing of structural shifts we thus conclude that over the long run genetically the deficits are not twins another factor that existing studies have in common is their treatment of the error structure of the model as homoskedastic despite relatively clear visual evidence of volatility clustering conditional heteroskedasticity in least squares residuals when we consider the short run dynamics of the demeaned variables through a vector autoregression var analysis we show that the error covariance of this var model is significantly conditionally heteroskedastic and go on to specifically account for this phenomenon with a var generalized autoregressive conditional heteroskedasticity garch model we consider a trivariate model that also includes the real interest rate here we find a significant and sizeable positive short run effect of budget deficit innovations on the current account deficit in both the impulse response functions and the variance decompositions of the model our answer to the question of the paternity of the two deficits thus depends on the horizon studied each series has structural breaks that are largely independent of each other so they are not twins at all over the long run however once we allow for these secular shifts the short run dynamics reveal a very strong family resemblance indeed the rest of the article is organized as follows in section ii we review some of the existing empirical literature section iii discusses the time series properties of the data and presents our results about the long run evidence on the twin deficits question section iv sets out our var garch model and presents our results on short run twin deficits behavior section v is a brief conclusion ii an overview of the empirical literature the relationship between current account deficits and government budget deficits has been a subject of extensive study

non parametric productivity analysis with undesirable outputs an application to the canadian pulp and paper industry this article extends the chavas cox approach to non parametric analysis by incorporating undesirable outputs to provide a more complete representation of the production technology inner and outer non parametric technology bounds are constructed the methods are illustrated with application to time series data for the canadian pulp and paper industry conventional measures that ignore changes in pollutant outputs underestimate true productivity growth further there is a large gap between estimates generated with reference to inner and outer bounds to the technology suggesting that researchers need to be aware of the limitations of results derived from analyses relying only on dea methods copyright 2001 oxford university press

a kuznets curve in environmental efficiency an application on oecd countries the role of the environment is an important issue in policy making andthe accurate assessment of the environmental conditions is vital inthis paper using nonparametric techniques an environmental efficiencyindex is developed for each of the oecd countries these indexes allowone both to do cross section comparisons on the state of each country sproduction process in its treatment of undesirable outputs and also totrace each country s modification of their production processesovertime furthermore in this study we investigate the factorsunderlying societies environmental concerns that eventually lead tochanges in the environmental efficiency the results provide furtherempirical evidence for the environmental kuznets curve hypothesis

inflation stationarity during latin american inflation insights from unit root and structural break analysis inflation stationarity has important theoretical and policy implications yet most of the literature has focused on low inflation countries this article investigates inflation stationarity in brazil argentina chile mexico and bolivia during a hyperinflationary period from 1980 to 2004 we test for structural breaks in inflation discuss the breaks in terms of changes in monetary regimes and test if accounting for these structural breaks changes the nonstationarity results for those nations that fail the traditional augmented dickey fuller adf test for inflation all five are found to have inflation rates that are i 0 once the structural breaks analysis is incorporated into our unit root tests

an intertemporal general equilibrium model of asset prices this paper develops a continuous time general equilibrium model of a simple but complete economy and uses it to examine the behavior of asset prices in this model asset prices and their stochastic properties are determined endogenously one principal result is a partial differential equation which asset prices must satisfy the solution of this equation gives the equilibrium price of any asset in terms of the underlying real variables in the economy in this paper we develop a general equilibrium asset pricing model for use in applied research an important feature of the model is its integration of real and financial markets among other things the model endogenously determines the stochastic process followed by the equilibrium price of any financial asset and shows how this process depends on the underlying real variables the model is fully consistent with rational expectations and maximizing behavior on the part of all agents our framework is general enough to include many of the fundamental forces affecting asset markets yet it is tractable enough to be specialized easily to produce specific testable results furthermore the model can be extended in a number of straightforward ways consequently it is well suited to a wide variety of applications for example in a companion paper cox ingersoll and ross 7 we use the model to develop a theory of the term structure of interest rates many studies have been concerned with various aspects of asset pricing under uncertainty the most relevant to our work are the important papers on intertemporal asset pricing by merton 19 and lucas 16 working in a continuous time framework merton derives a relationship among the equilibrium expected rates of return on assets he shows that when investment opportunities are changing randomly over time this relationship will include effects which have no analogue in a static one period model lucas considers an economy with homogeneous individuals and a single consumption good which is produced by a number of processes the random output of these processes is exogenously determined and perishable assets are defined as claims to all or a part of the output of a process and the equilibrium determines the asset prices our theory draws on some elements of both of these papers like merton we formulate our model in continuous time and make full use of the analytical tractability that this affords the economic structure of our model is somewhat similar to that of lucas however we include both endogenous production and

an alternative approach to monetary aggregation in dea this paper proposes a set of alternative dea based money indices that are proved to be both theoretically and empirically competing monetary aggregates since they perform as good as the divisia aggregates based on all the results concerning causality forecasting and money demand we conclude that dea money aggregates prove to be at least competing alternatives to the divisia aggregates and hence suggest that these new aggregates may be considered along with the existing weighted monetary aggregates like the divisia ones given the inherent benefit of the doubt weighting mechanism underlying the dea models where the optimal weight assigned by dea to each monetary asset reflects the ongoing financial innovation and the reserve bank of india s policy priority in the distribution of total liquidity we feel that the dea money indices can truly capture the liquidity better with ongoing financial innovations in the economy

high and volatile real interest rates where does the fed fit in the federal reserve s new procedures for the conduct of monetary policy introduced on october 6 1979 have been the subject not only of considerable academic and political interest but also of intense debate b friedman 1982 roley 1982 walsh 1982 1984 mascaro and meltzer 1983 among others the fed s new operating procedures generally are perceived to have resulted in abnormally high and volatile real interest rates and thus to have contributed to if not been totally responsible for the deepest recession in postwar history in this paper we address the following question was the advent of the increased volatility and level of the real rate of interest concurrent with the fed s october 1979 change in operating procedures that is was the real rate of interest high and more volatile immediately after the october 1979 change in policy procedures in which case we might infer a connection between the fed s change in policy procedures and the increased volatility and level of the real rate or did the real rate become high and more volatile some time following the policy change which might lead us to conclude that the increased volatility and the increased level of the real rate was connected to some other event s occurring after the october 1979 policy change

measuring macroeconomic performance in the oecd a comparison of european and non european countries abstract we study the macroeconomic performance of 19 oecd countries over the period 1970 1990 performance is defined in terms of the ability of a country s macroeconomic managers to provide four services to their citizens a high level of real gdp per capita a low rate of inflation a low rate of unemployment and a favorable trade balance we use linear programming techniques to construct a best practice macroeconomic performance frontier and to measure the performance of each country in each year relative to the frontier we then add two environmental disamenities carbon and nitrogen emissions to the service list and repeat the analysis to see if the performance rankings change throughout the analysis emphasis is placed on a comparison of the performance of 14 european oecd countries with that of five non european oecd countries we find that performance rankings do change and that the relative performance of the european countries declines when the environmental disamenities are added to the service list

on real interest rate dynamics and regime switching abstract we find evidence of regime switching dynamics in the usa and the uk real interest rates over the period 1881 2003 for the uk there is a regime in which the real interest rate displays a relatively stronger mean reversion and a regime in which it displays a relatively weaker mean reversion the former regime is characterized by a relatively larger error in the estimation of the reversion parameter and higher volatility for the usa the two regimes differ in volatility the probability of transition from one regime to another is found to be significantly related to the inflation rate regime and to the political regime the results highlight the importance of regime switching in the dynamics of the real interest rate as well as the role of inflation and political regimes in explaining this switching

the role of environmental factors in growth accounting this paper explores a relatively new methodology the directional distance function method to analyse productivity growth the method allows us to explicitly evaluate the role that undesirable outputs of the economy such as carbon dioxide and other greenhouse gases have on the frontier production process which we specify as a piecewise linear and convex boundary function we decompose productivity growth into efficiency change catching up and technology change innovation we test the statistical significance of the estimates using recently developed bootstrap methods we also explore implications for growth of total factor productivity in the oecd and asian economies copyright 2004 john wiley sons ltd

optimal disclosure delay in multistage r d competition abstract this paper analyzes the effects of a policy of disclosure with delay on the speed of discovery and incentives to invest in a multi stage patent race depending on the parameters four equilibrium configurations are obtained in the first a single firm acts as a monopolist in the second a single firm invests at the initial stages but the second firm joins the race after the disclosure of the intermediate product in the third both firms invest when they have equal knowledge but only the leader invests before the disclosure of the intermediate product in the last configuration firms always compete except when the disclosure date is close the determination of the optimal disclosure delay involves a trade off between the incentives to invest and the expected time of discovery of the final product

technological change technological catch up and capital deepening relative contributions to growth and convergence we decompose labor productivity growth into components attributable to 1 technological change shifts in the world production frontier 2 technological catch up movements toward or away from the frontier and 3 capital accumulation movement along the frontier the world production frontier is constructed using deterministic methods requiring no specification of functional form for the technology nor any assumption about market structure or the absence of market imperfections we analyze the evolution of the cross country distribution of labor productivity in terms of the tripartite decomposition finding that technological change is decidedly nonneutral and that both growth and bipolar international divergence are driven primarily by capital deepening jel o30 o47 d24

multilateral productivity comparisons when some outputs are undesirable a nonparametric approach multilateral productivity comparisons of firms producing multiple outputs some of which are undesirable are obtained by making two modifications to the standard farrell approach to efficiency measurement the restriction that production technology satisfy strong disposability of outputs is relaxed to allow for the fact that undesirable outputs may be freely disposable and the efficiency measures are modified to allow for an asymmetric treatment of desirable and undesirable outputs performance measures that satisfy these requirements are calculated as solutions to programming problems the methodology is applied to a sample of mills producing paper and pollutants

congressional influence on u s monetary policy abstract congressional influence is generally discounted or ignored in political models of federal reserve behavior here i show that changes in the leadership of the senate banking committee are significantly correlated with monetary base growth more liberal committee leaders are associated with significantly higher base growth other factors held constant the result is shown to hold across several econometric specifications and different definitions of the congressional preference variable

are there increasing returns to pollution abatement empirical analytics of the environmental kuznets curve in pesticides abstract according to the environmental kuznets curve ekc hypothesis economic growth and the reduction of environmental degradation are compatible goals an inverted u shaped relationship between economic performance and environmental pollution suggests that empirically an economy is associated with smaller levels of pollution after some threshold income point one potential explanation for the empirical evidence of an ekc is increasing returns to pollution abatement where the abatement efficiency rises with an increase in the scale of abatement doubling the clean up efforts more than doubles the abatement of pollution as this efficiency gain makes abatement less expensive pollution might fall as more abatement is undertaken this study tests the hypothesis that there are increasing returns to abating pollution empirical evidence on environmental risks in the us agricultural sector since 1970 support the existence of increasing returns in addition i estimate the productivity of pollution abatement using refined empirical productivity measurement methods and explicitly control the level of technology the results show the importance of including an environmental productivity variable in the ekc framework

accounting for the changing role of family income in determining college entry in this paper i analyze the determinants of college enrolment and the changes in these determinants over time i propose a quantitative life cycle model with college enrolment altruistic parents provide financial support to their children using counterfactual experiments i find that 24 percent of all households are financially constrained in their college decision constraints become more severe over time i show that my model is consistent with a narrow college enrolment gap between students from rich and poor families as previously reported in the empirical literature the estimation of enrolment gaps is a popular reduced form approach for measuring the fraction of constrained households my results suggest that these reduced form estimates are misleading and that a structural model of parental transfers is needed to correctly identify constrained households further i show that parental transfers are an important driver behind the changing role of family income as a determinant of college entry a fact that is well documented for the us economy

government spending interest rates prices and budget deficits in the united kingdom 1701 1918 abstract the british data from the early 1700s through wwi provide an unmatched opportunity for studying temporary changes in government purchases temporary increases which appeared mainly as wartime spending raised long term interest rates but significantly increased the growth rates of money and prices only during suspensions of the gold standard 1797 1821 and 1914 1918 temporary changes in military spending accounted for the bulk of budget deficits over the sample of more than 200 years i found only two major non war deficits one associated with compensation payments to slaveowners in 1835 1936 and the other with a dispute over the income tax in 1909 1910 interest rates did not react much to these exogenous deficits

political regime change and the real interest rate the effect of changes in policy regimes on real interest rates has important implications for financial and economic theory there is little current evidence that policy regime changes have any impact on the level of real interest rates we use large political changes as our measure of policy regime changes changes in presidential administration are more significantly correlated with real rate changes than are changes in the federal reserve chair or the mean shift points identified by garcia and perron 1996 using time series methods we also show that change of party control of congress is a significant factor explaining real rates we argue that theoretical models built on the assumptions of constant or policy invariant real interest rates are at variance with the empirical evidence

econometric estimation of technical and environmental efficiency an application to dutch dairy farms in this article we estimate the technical and environmental efficiency of a panel of dutch dairy farms nitrogen surplus arising from the application of excessive amounts of manure and chemical fertilizer is treated as an environmentally detrimental input a stochastic translog production frontier is specified to estimate the output oriented technical efficiency environmental efficiency is estimated as the input oriented technical efficiency of a single input the nitrogen surplus of each farm the mean output oriented technical efficiency is rather high 0 894 but the mean input oriented environmental efficiency is only 0 441 intensive dairy farms are both technically and environmentally more efficient than extensive farms

productivity measurement in radial dea models with a single constant input abstract we consider productivity measurement based on radial dea models with a single constant input we show that in this case the malmquist and the hicks moorsteen productivity indices coincide and are multiplicatively complete the choice of orientation of the malmquist index for the measurement of productivity change does not matter and there is a unique decomposition of productivity change containing two independent sources namely technical efficiency change and technical change technical change decomposes in an infinite number of ways into a radial magnitude effect and an output bias effect we also show that the aggregate productivity index is given by the geometric mean between any two periods of the simple arithmetic averages of the individual contemporaneous and mixed period distance functions

the effect of money shocks on interest rates in the presence of conditional heteroskedasticity most current empirical work finds no evidence that money shocks lower interest rates we show that these nonresults are mainly due to a failure to model the conditional heteroskedasticity of interest rates autoregressive conditional heteroskedasticity arch models find a significant liquidity effect where ordinary least squares ols models do not the existence of a liquidity effect is found using different models and sample periods when arch models are used in estimation but never when ols is employed

using data envelopment analysis to assess macroeconomic policy performance it is common practice to summarize the macroeconomic performance of countries in terms of the four well known dimensions captured by the magic diamond of the oecd this study provides a comparison of several synthetic indicators that merge the four separate indicators into one single statistic these indicators are inspired by data envelopment analysis dea based models which allow for unequal weighting of the different economic objectives the calculated weights then act as proxies for the true policy priorities comparison of the models focuses on the underlying assumptions as well as on the empirical results they generate

dynamic environmental performance analysis a malmquist index approach abstract this article presents a general framework for dynamic environmental performance analysis by generalizing the approach proposed by kuosmanen and kortelainen kuosmanen t kortelainen m 2005 measuring eco efficiency of production with data envelopment analysis journal of industrial ecology 9 4 59 72 from a static to a dynamic setting for this purpose we construct an environmental performance index epi by applying frontier efficiency techniques and a malmquist index approach compared to other dynamic environmental productivity and efficiency analysis approaches based on these methods our approach builds on the standard definition of eco efficiency as it is presented in the ecological economics literature recognizing the importance to analyze the sources of environmental performance changes we show how changes in overall environmental performance can be decomposed into changes in relative eco efficiency and shifts in environmental technology respectively we apply the presented technique at the macro level to dynamic environmental performance analysis of 20 member states of the european union in 1990 2003 according to the results environmental technical change mostly explains the improvement in overall environmental performance while relative eco efficiency change has been minor for most countries during the sample period

productivity growth and pollution in state manufacturing the directional output distance function chambers chung fare 1996 is used to construct a malmquist luenberger index of total factor productivity growth for manufacturing when both good and bad outputs are jointly produced the index is constructed using information on good and bad output quantities and input quantities circumventing the problem of recovering shadow price information for the bad output needed for the fisher or tornqvist type of productivity indices accounting for toxic releases in manufacturing productivity growth averages 1 4 an nually during 1988 1994 the findings also suggest that the failure to account for toxic releases in manufacturing results in a significant under statement of total factor productivity growth

total factor productivity growth technological progress and technical efficiency change dimensions of productivity change in yugoslavia 1965 1978 this article total factor productivity growth technological progress and technical efficiency change dimensions of productivity change in yugoslavia 1965 78 was reprinted with permission from the december 1982 issue of the economic journal this article proposes a methodology that decomposes total factor productivity change into two distinct elements technological progress and changes in technical efficiency technological progress is defined as the change in the best practice production frontier all other productivity change is attributed to technical efficiency change the article provides a theoretical framework for decomposing total factor productivity growth as well as a specification and estimation of the deterministic frontier production function it employs a programming technique to estimate a flexible functional form of the production frontier the paper then applies this technique to empirical data from yugoslavia of the period from 1965 to 1978 it concludes that for yugoslavia improvements to technical efficiency comprise the dominant contribution to total factor productivity change this agrees with accumulating evidence that in many developing economies productivity gain due to technological mastery of imported technology is substantial

congressional oversight committee influence on u s monetary policy revisited abstract grier 1991 shows that monetary policy is influenced by congress in that increases in the liberality of the senate banking committee leadership are significantly positively correlated with monetary base growth chopin cole and ellis 1996 claim that the house leadership statistically dominates the senate leadership for predicting money growth but that the direction of the effect is perverse a more liberal house leadership is associated with a lower rate of base growth in this paper i show that chopin cole and ellis s claims are unfounded properly measured both house and senate leadership have a significant positive effect on base growth over grier s 1991 original sample in later periods money growth regressions are not sufficiently stable to support hypothesis tests

testing for real effects of monetary policy regime shifts the rational expectations revolution in macroeconomics has forced economists to think about macroeconomic policy in terms of alternative policy rules or regimes huizinga and mishkin 1986 for example have argued recently that monetary policy has important effects on the ex ante real rate of interest and as evidence they cite apparent changes in the stochastic properties of the real rate coinciding with major shifts in monetary policy regimes more specifically they claim that in the post war period the real rate process in the united states shifted in october 1979 the month the fed changed operating procedures and in october 1982 when the fed deemphasized monetary aggregates mishkin 1986 has argued that these results suggest monetary policy not fiscal deficits bears responsibility for high u s real interest rates in the early 1980s because an understanding of the impact of monetary policy shifts on real interest rates is important for many issues in macroeconomics suggested methods for detecting real rate shifts deserve careful scrutiny the method employed by huizinga and mishkin 1986 tests for shifts in a projection equation of the expost real rate on a set of information variables such as the nominal interest rate and past inflation this projection equation approach is straightforward to apply and therefore potentially of use in testing a variety of macroeconomic hypotheses such as the neutrality of money for the projection equation approach to be valid it is desirable that it exhibit shifts if and only if the true real rate generating process has shifted the purpose of this paper is to show that changes in the real rate process while sufficient to

structural breaks in international tourism demand are they caused by crises or disasters it is recognised that the tourism industry is vulnerable to some form of crises or disaster however despite the attention given to the nature and consequences of tourism crises and disasters there is a gap in the literature regarding the ex post detection of these events in this article we estimate both the number and date of structural breaks in international tourism arrival series for 25 countries and madeira island using the bai and perron 1998 structural break test we compare the date of tourism crises and disasters to the dating of these structural breaks we observe that tourism crises and disasters are largely consistent with the dates of breaks therefore this method allows us to solve a gap in the tourism industry related to the correct allocation of negative shocks in international tourism arrival demand to crisis or disaster phenomena

does government ideology matter in monetary policy a panel data analysis for oecd countries this paper examines whether government ideology has influenced monetary policy in oecd countries we use quarterly data in the 1980 1 2005 4 period and exclude emu countries our taylor rule specification focuses on the interactions of a new time variant index of central bank independence with government ideology the results show that leftist governments have somewhat lower short term nominal interest rates than rightwing governments when central bank independence is low in contrast short term nominal interest rates are higher under leftist governments when central bank independence is high the effect is more pronounced when exchange rates are flexible our findings are compatible with the view that leftist governments in an attempt to deflect blame of their traditional constituencies have pushed market oriented policies by delegating monetary policy to conservative central bankers

black swans before the black swan evidence from international libor ois spreads abstract the libor ois spread is a closely monitored indicator of the financial health of economy previous research has used this spread to identify and anticipate abrupt changes in financial markets taylor and williams 2009 refer to the drastic increase in the us libor ois spread on august 7th 2007 as a black swan in the money market in this paper rather than rely on visual observations of black swans we estimate them using bai and perron s 1998 procedure we estimate structural breaks granger causality tests and innovation accounting in international libor ois spreads and a cds index to better understand their dynamics during the recent crisis our results reveal that black swans appeared in smaller economies prior to that in large ones during the financial crisis in addition we find that only shocks to the us libor ois spread has any statistically significant effects after 30 days

biased technical change and the malmquist productivity index the malmquist productivity index has many attractive features one is that it can be epxressed as the product of a technical efficiency change index and a technical change index in this paper we express the technical change index as the product of a magnitude index and a bias index we then express the bias index as the product of an output bias index and an input bias index and we state conditions under which each bias index makes no contribution to productivity change

some evidence on the international inequality of real interest rates abstract this paper undertakes econometric tests of the hypothesis that ex ante real interest rates are equal across countries with highly integrated capital markets the issue is of practical importance because the violation of real rate equality is a necessary condition for monetary policy to influence the open economy through the real interest rate channel although an empirical literature concerning real rate equality already exists previous investigators have focused on pre tax real rates this paper contributes to the literature by attempting to incorporate the effects of taxation into the analysis

an analysis of inflation and interest rates new panel unit root results in the presence of structural breaks abstract this paper investigates the order of integration of inflation and interest rates in a panel of 19 countries the results show that once multiple endogenous breaks are allowed for and appropriate critical values are used the series appear to be i 0

productivity and technical change the case of taiwan this paper analyses productivity growth in 16 of taiwan s manufacturing industries during the period 1978 1992 the non parametric data envelopment analysis approach is used to compute malmquist productivity indexes these are decomposed into efficiency change and technical change the latter is further decomposed into an output bias an input bias and a magnitude component in addition the direction of input bias is identified empirical results indicate that the sector s tfp increased at a rate of 2 89 per annum which could be ascribed to a technical progress 2 56 and an efficiency improvement 0 33

deregulation and productivity decline the case of spanish savings banks abstract during the 1980s many regulatory constraints limiting competition in spanish banking were relaxed or removed although deregulation came later to savings banks than to the rest of the banking sector two consequences of partial deregulation of savings banks have been a rapid growth in branching activity much of it geographically dispersed and a burst of merger activity in this paper we investigate productive efficiency and total factor productivity change in spanish savings banks over the 1986 1991 post deregulation period neither branching nor mergers provide an adequate explanation for the magnitude or the nature of the productivity decline we observe over the period

novelty and disclosure in patent law the stringency of the novelty requirement in patent law affects the pace of innovation because it affects the amount of technical information that is disclosed among firms it also affects ex ante profitability of research we compare weak and strong novelty requirements from the standpoint of social efficiency we ask how our answer depends on the rule that determines which firm gets a patent when two firms have patents pending on the same technology the possible rules are first to invent which applies in the u s and first to file which applies everywhere else

collusion and research joint ventures i examine the question whether cooperation in r d among firms producing similar products leads to product market collusion suppose that firms engage in a stochastic r d race while maintaining the collusive equilibrium in a repeated game framework innovation under non cooperative r d leads to an inter firm asymmetry destabilizing collusion in pre discovery and post discovery periods innovation sharing under cooperative r d preserves the symmetry and also increases total profit thereby facilitating collusion however welfare may increase with cooperative r d i also examine the condition for collusion under licensing and compare the results

dynamic r d competition the authors study a simple two stage stochastic patent race involving two firms they examine the behavior of the participants as they gain the lead or fall behind in the race the authors find that the leader engages in rd 2 a policy of issuing patents for intermediate research results and 3 the effects of research joint ventures whereby the firms coordinate their initial research efforts and share their results copyright 1987 by royal economic society

productivity growth technical progress and efficiency change in industrialized countries this paper analyzes productivity growth in 17 oecd countries over the period 1979 1988 a nonparametric programming method activity analysis is used to compute malmquist productivity indexes these are decomposed into two component measures namely technical change and efficiency change we find that u s productivity growth is slightly higher than average all of which is due to technical change japan s productivity growth is the highest in the sample with almost half due to efficiency change jel c43 d24 in this paper we apply recently developed

environmentally sensitive productivity analysis of the canadian pulp and paper industry 1959 1994 an input distance function approach abstract this study employs a parametric input distance function that incorporates both desirable and undesirable outputs to provide a more complete representation of the production technology from which environmentally sensitive productivity and efficiency measures can be generated this framework also generates pollution abatement cost estimates that are useful for policy making an input based malmquist index of productivity growth that appropriately credits the producer not only for increases in marketable or desirable outputs but also for the production of improved environmental quality through pollution abatement activities is derived from the input distance function the method was applied to time series data from the canadian pulp and paper industry our shadow price estimates indicate that the marginal cost to producers of pollution control has been rising the main conclusion of this study is that productivity improvement from the social viewpoint has been stronger than conventional measures would suggest

monetary regime changes and the behavior of ex ante real interest rates a multi country study abstract previous research has found that u s monetary regime changes are related to changes in the behavior of ex ante real interest rates this paper examines monetary regime changes in other countries to test whether changes in expected real interest rates are related to monetary regime changes in a systematic manner the results show that while real rates have not been constant across monetary regimes the characteristics of the real rate process shifts differ across countries this evidence is consistent with theories that predict the neutrality of monetary regime changes with respect to real variables

valuing environmental factors in cost benefit analysis using data envelopment analysis abstract environmental cost benefit analysis ecba is used for the social evaluation of investment projects and policies that involve significant environmental impacts economic valuation of environmental impacts forms one of the critical steps of ecba we develop a new method for this purpose which does not require price estimation for environmental impacts using stated or revealed preference methods our approach is based on data envelopment analysis dea which is modified to ecba by using absolute shadow prices instead of relative prices we also discuss how the method can be used for sensitive analysis in ecba we illustrate the method by means of a hypothetical numerical example

an activity analysis model of the environmental performance of firms application to fossil fuel fired electric utilities the productivity of firms when some outputs pollution are undesirable has been studied in the literature for some time in this paper we introduce an environmental performance indicator based on the decomposition of overall factor productivity into a pollution index and an input output efficiency index this indicator is compared to the more conventional jaggi and freedman 1992 model results are given for illustrative purposes using data from u s fossil fuel fired electric utilities the rankings of the utilities obtained with the two models show significant divergence which is due to the different ways in which the undesirable outputs are dealt with as well as due to the different possible tradeoffs between the pollutants released into the atmosphere and the resources used as inputs

pre grant patent publication and cumulative innovation abstract we examine the implications of pre grant publication pp of patent applications in the context of a cumulative innovation model we show that pp leads to fewer applications and fewer inventions but it may raise the probability that new technologies will reach the product market and thereby enhances consumer surplus and possibly total welfare as well

an economic approach to environmental indices abstract this study uses the directional output distance function from economic productivity theory as an alternative approach to environmental index construction we use the directional output distance function to aggregate multiple environmental objectives into one measure of environmental performance we apply this method to a set of watershed data and compare our results to the existing u s environmental protection agency epa index values when modeling the same set of objectives the directional output distance function and the existing epa index yield similar measures of environmental performance we discuss the mathematical properties of both indices using the axioms of economic index theory and explore the possible advantages to our approach the mathematical properties of the directional output distance function are well established and this approach provides a nonparametric way to aggregate individual characteristics this advances the standard use of a priori weighted summation and circumvents the often contentious selection of index weights

inflation presidents fed chairs and regime shifts in the u s real interest rate several recent papers agree on the existence of significant regime shifts in the u s real interest rate but disagree on the proximate causes of the shifts caporale and grier 2000 point to large political changes as correlates while rapach and wohar 2004 show that real rate breaks are correlated with inflation regime shifts and argue that the inflation regime changes cause the real rate shifts in this paper we show that controlling for the timing of changes in the inflation regime dummy variables representing either party change in the presidency or change in the identity of the fed chair are still strongly significant for explaining real interest rate fluctuations when we control for a fixed coefficient linear relationship between inflation and the real rate we find two real rate regime shifts that line up almost exactly with the accessions of paul volcker and alan greenspan even if we first let inflation regime switches explain the real rate and then look for regime shifts in the residuals we find almost exactly the same two breaks these results imply that fed chairs sometimes differ with respect to their preferred equilibrium real interest rate

unit root properties of crude oil spot and futures prices in this article we examine whether wti and brent crude oil spot and futures prices at 1 3 and 6 months to maturity contain a unit root with one and two structural breaks employing weekly data over the period 1991 2004 to realise this objective we employ lagrange multiplier lm unit root tests with one and two endogenous structural breaks proposed by lee and strazicich 2003 minimum lagrange multiplier unit root test with two structural breaks review of economics and statistics 85 1082 1089 2004 minimum lm unit root test with one structural break working paper no 04 17 department of economics appalachian state university we find that each of the oil price series can be characterised as a random walk process and that the endogenous structural breaks are significant and meaningful in terms of events that have impacted on world oil markets

short term interest rates as predictors of inflation on testing the hypothesis that the real rate of interest is constant in an innovative and provocative paper in this review eugene fama presents evidence which appears to be consistent with the joint hypothesis that the real rate of interest ignoring taxes is a constant and that the market for u s treasury bills is efficient in the sense of embodying rational expectations those findings are strikingly at variance with a long list of previous studies which seemed to support the view that the real rate of interest varies over time and can be related to economic variables such as real output monetary policy and so forth 2 the methodologies which lead to these contradictory conclusions are quite different previous studies had followed the lead of irving fisher by relating nominal interest rates to distributed lags on past rates of inflation 3 these distributed lags are generally interpreted as approximations to the market s expected rate of inflation and thus any remaining variation is attributed to variation in the real rate 4 fama s methodology on the other hand draws on the fact that the difference between the market interest rate and the subsequently observed rate of inflation the ex post real interest rate consists by definition of the ex ante real interest rate plus a pure forecasting error 5 the hypothesis of market efficiency implies that these forecasting errors must be serially random thus observing ex post real rates is equivalent to observing ex ante real rates with random measurement error these errors of course confound the problem of identifying variation in the ex ante real rate in this paper we will argue that the relative magnitude of these measurement errors is such that the tests carried out by fama were not powerful enough to reject the joint hypothesis that the ex ante real rate is a constant and expectations are rational more powerful tests which are presented in this paper using the same data do lead to rejection of that hypothesis of course rejection

competing commitments technocracy and democracy in the design of monetary institutions in this article i refine and expand the agenda for research on monetary institutions first i evaluate the analyses and research designs presented in this special issue of international organization out of this evaluation several ideas about how to produce a third generation of research on this topic emerge specific ideas include how to create a better synthesis with certain branches of economics such as information economics broaden the welfare criteria on which institutional choices are made deepen the analyses of coalitional and other political processes on which the choice of institutions are based and strengthen the tests that are offered in support of these choices in the second part of this article i explore questions of how popular sovereignty over economic policy and institutional choice are achieved i show that the institutional regimes proposed in the special issue are in a sense democratic as long as the public s perceived consensus about economic policies and macroeconomic outcomes is real however if as new work suggests there is genuine dissensus about policy and macroeconomic objectives it is no longer clear that the regimes proposed in the special issue are democratic in the conclusion i briefly discuss a possible crisis of imagination in institutional design