capital utilization and habit formation in a small open economy model this paper shows the effects of endogenous capital utilization and habit formation in consumption on the predictions of a small open economy model calibrated to canada capital utilization improves the fit of the model by increasing the volatility of output investment and hours worked while habit formation improves the fit of the model by improving the dynamic properties of consumption and the current account it is also shown that while shocks to the world interest rate sometimes improve the fit of the baseline model they do not improve the fit of the model with capital utilization and habit formation jel classification e32 f32 utilisation du capital et formation d habitudes dans un modele de petite economie ouverte ce memoire etudie les effets de l utilisation endogene du capital et de la formation d habitudes de consommation sur les previsions d un modele de petite economie ouverte calibre pour le canada l utilisation du capital ameliore l ajustement du modele en accroissant la volatilite de l output de l investissement et des heures travaillees alors que la formation d habitudes ameliore l ajustement du modele en ameliorant les proprietes dynamiques de la consommation et du compte courant on montre que si des chocs affectant les taux d interet au niveau mondial ameliorent parfois l ajustement du modele de base ils n ameliorent pas l ajustement du modele quand il y a utilisation de capital et formation d habitudes

corporate taxation and capital accumulation evidence from sectoral panel data for 14 oecd countries abstract we present new empirical evidence that sector level capital output ratios are strongly influenced by corporate tax incentives as summarised by the tax component of a standard user cost of capital measure we use sectoral panel data for the usa japan australia and eleven eu countries over the period 1982 2007 our panel combines internationally consistent data on capital stocks value added and relative prices from the eu klems database with corporate tax measures from the oxford university centre for business taxation our results for equipment investment are particularly robust and strikingly consistent with the basic economic theory of corporate investment

explaining business cycles in small open economies abstract this paper analyzes the role of world price shocks fluctuations in the prices of capital intermediate and primary goods and in the world real interest rate in the generation and propagation of business cycles in small open developing countries i construct a stochastic dynamic multi sector small open economy model the model is a variant of the specific factors model and reflects the major structural characteristics of developing economies i utilize variance decomposition methods to quantitatively evaluate the impact of world price shocks the results indicate that world price shocks account for a significant fraction of business cycle variability in developing countries

what do interest rates reveal about the functioning of real business cycle models abstract this paper begins by documenting the extent to which the predictions of standard real business cycle rbc models are incompatible with observed movements in real interest rates the main finding of the paper is that extending the baseline model to include habit persistence in consumption and adjustment costs to capital significantly improves the model s empirical performance in our evaluation of the model s performance we take special care of estimating and testing predictions of the model using both moments drawn directly from the data and moments calculated after identifying shocks to the stochastic trend

aggregating heterogeneous capital goods in adjustment cost technologies this paper deals with the existence of an aggregate adjustment cost technology that characterizes the feasible intertemporal paths of an aggregate capital stock an aggregate investment rate and aggregate net outputs the results indicate that only very restrictive adjustment cost technologies can be aggregated consistently therefore the use of aggregative models cannot be justified by functional structure assumptions except in relatively uninteresting circumstances so that alternative justifications and interpretations should be investigated

farm household production efficiency evidence from the gambia this article investigates the economic efficiency of farm households with an application to the gambia the efficiency analysis is conducted not at the farm level but at the household level thus capturing the importance of off farm activities output based measures of technical allocative and scale efficiency are generated using nonparametric measurements an econometric analysis of factors affecting the efficiency indexes is then conducted using a tobit model technical efficiency is fairly high indicating that access to technology is not a severe constraint for most farm households the cost of scale inefficiency is modest allocative inefficiency by contrast is found to be important for the majority of farm households on the basis of the tobit results imperfections in markets for financial capital and nonfarm employment contribute to significant allocative inefficiency

investment specific shocks and external balances in a small open economy model we set up a standard small open economy business cycle model driven by govern ment spending shocks neutral productivity tfp shocks and investment specific shocks the model is calibrated to quarterly canadian data and its predicted moments and sample paths are compared with their canadian counterparts we find that the model captures the dynamics in investment and in the trade balance better than special cases of the model where either one of the productivity shocks is omitted more specifically the model matches the variance of the trade balance output ratio its correlation with output and its autocorrelation it also matches the output investment correlation jel classification f41 e32

the role of investment specific technological change in the business cycle this is a quantitative investigation of the importance of technological change speci c to new investment goods for postwar us aggregate uctuations a growth model that incorporates this form of technological change is calibrated to us data and simulated using the relative price of new equipment to identify the process driving investmentspeci c technology shocks the analysis suggests that this form of technological change is the source of about 30 of output uctuations 2000 elsevier science b v all rights reserved

policy reform and productivity change in chinese agriculture a distance function approach abstract agricultural policy reform has been an important source of change in the chinese agricultural sector the reforms led to productivity growth and helped china to pursue its self sufficiency goal especially in the grain sector in order to analyze whether observable productivity growth stems from technologically induced components or from the market induced parts a multi input multi output model is derived by using an econometric distance function framework a decomposition allows to distinguish allocative effects scale effects technological change and technical efficiency change data on farms in zhejiang from 1986 to 2000 are used to analyze the impact of policy reform

profit efficiency among basmati rice producers in pakistan punjab farm specific profit inefficiency among basmati rice producers was estimated from a variable coefficient profit frontier the mean level of inefficiency at farm resources and price levels was 28 with a wide range 5 87 average loss of profit was rs 1 222 per hectare socioeconomic factors related to profit loss were the farm household s education nonagricultural employment and a credit constraint institutional determinants of profit loss were a water constraint and the late application of fertilizer punjab wide benefits of increasing farmer s profit efficiency are large a 25 reduction in profit loss among basmati rice producers may generate over rs 240 million in extra profits each rice season rice is a major export commodity for pakistan generating about 2 5 billion pakistan rupees rs annually or 20 of foreign exchange earnings from commodity trade in the early 1980s two varieties dominate in pakistan s international trade in rice basmati 370 a high quality long grained aromatic variety and the medium long grained irri 6 distinct export markets exist for these rices over 90 of the basmati is exported to oil rich middle eastern nations while the mediumlong varieties are mainly marketed in southeast asia in 1983 the export price of basmati was about rs 7 900 per ton while the price of medium long grained varieties averaged rs 2 700 per ton pakistan has a comparative advantage in the international market for basmati but probably not for medium long grained rices azhar and mamhud historically pakistan had a near monopoly in international trade in basmati but now faces increased competition from thailand and the united states efferson therefore pakistan must strive to increase the efficiency of basmati production to retain its comparative advantage and competitive edge in foreign rice markets basmati 370 is a pure line selection made in

the existence of input and output aggregates in aggregate production functions in this paper we make two contributions to the literature on aggregating inputs and outputs in economy production functions first we present necessary and sufficient conditions for aggregating efficiently allocated goods under general assumptions on the technology second we present a general theorem on the conditions for the existence of aggregates of both efficiently allocated goods and arbitrarily allocated goods we use this theorem to elucidate the role of efficiency in determining the existence of aggregates

formal microlending and adverse or nonexistent selection a case study of shrimp farmers in bangladesh microcredit schemes have become a popular means of improving smallholders access to credit and making long term investment possible however it remains to be explored whether the current microcre

a shadow price frontier measurement of profit efficiency in chinese agriculture a shadow price profit frontier model is developed to examine production efficiency of chinese farm households the model incorporates price distortions but retains the advantages of stochastic frontier properties the shadow prices and shadow profit are derived through a behavioral profit function empirical results using household survey data show that the conventional assumption of profit maximization based on market prices is inappropriate farmers resource endowment and education influence their allocative efficiency family size per capita net income and family members operating as village leaders are positively related to households production efficiency reducing market distortions should increase farm households production efficiency

production efficiency of chinese agriculture evidence from rural household survey data a shadow price profit frontier model is developed to examine production efficiency of chinese rural households in farming operations the model incorporates price distortions resulting from imperfect market conditions and socioeconomic and institutional constraints but retains the advantages of stochastic frontier properties the shadow prices are derived through a generalized profit function estimation the shadow price profit frontier is then estimated and an efficiency index based on the estimated profit frontier is computed and decomposed to household characteristics empirical results using data from china s rural household survey for 1991 reject the neoclassical profit maximization hypothesis based on market prices in favor of the general model with price distortions farmers resource endowment and education influence their response to the market restrictions thus alter their performance in terms of efficiency the estimated efficiency index ranges from 6 to 93 with a sample average of 62 households educational level family size and per capita net income are positively related to production efficiency households living in mountain areas or with family members employed by the government or state industries are relatively inefficient reducing market intervention allowing right of use of farm land to be transferred among households encouraging migration of excess farm labor and promoting farmers education will improve rural households efficiency in agricultural production

dynamics of the trade balance and the terms of trade in ldcs the s curve abstract in their analysis of the dynamic behavior of terms of trade and the trade balance backus kehoe and kydland found that the lead and lag correlation between these two variables is s shaped for a set of oecd countries furthermore they show that this s curve can be replicated by a two country dynamic general equilibrium model surprisingly the s curve also describes the dynamic relationship between terms of trade and the trade balance for a large set of ldcs this s curve can also be reproduced by a small open economy model which captures some important features of ldc economies the s curve is unexpectedly robust to variations in the key parameters of the model the model also captures the business cycle properties of the ldc data

aggregation without separability tests of the united states and mexican agricultural production data the generalized composite commodity theorem gcct and testing procedure is extended to test for consistent aggregation of the united states and mexican agricultural production data in each category for which earlier tests rejected homothetic separability nonrejected gcct and separability hypotheses provide empirical support for aggregating all the united states agricultural outputs into as few as two categories crops and livestock mexican agricultural outputs also can be aggregated into as few as two categories support for aggregating all outputs into a single category is ambiguous in both countries and is only provided by the gcct

how to define and study farmers management capacity theory and use in agricultural economics textbooks and articles on farm management stress the importance of the management capacity of the farmer with respect to his farm results however explicit definitions together with an elaboration of this concept are hard to find in this article aspects of management capacity are grouped into 1 personal aspects consisting of farmer s drives and motivations farmer s abilities and capabilities and his biographical facts such as age and education and 2 aspects of the decision making process consisting of practices and procedures with respect to planning implementation and control of decisions at the farm empirical studies on the role of management capacity in relation to farm results are reviewed frontier production functions are widely used in recent literature to estimate technical and economic efficiency of farms however in explaining differences in efficiency most studies do not go further than adding a biographical variable e g level of education this study concludes that a next step would be to include aspects of the decision making process longitudinal on farm observations which give possibilities for studying the dynamic aspects of the decision making are suggested to further analyze the concept of management capacity

the real interest rate and aggregate supply abstract this paper analyzes the effects of the anticipated real interest rate on aggregate supply variables in a model where time to produce and variable capital utilization play a crucial role the potential importance of the present mechanism for business cycle theory lies in its ability to generate positive co movements of employment capital utilization labor productivity output and investment these variables are predicted to be affected negatively by the real interest rate reduced forms for output and employment are derived and tested with canadian data taking estimates of the real interest rate prevailing in the united states as the relevant exogenous price

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

the impact of china s economic reforms on agricultural productivity growth this paper presents a method for assessing the relative importance of price increases and strengthened individual incentives due to the introduction of the responsibility system for the post 1978 increase in china s agricultural productivity data on post 1978 chinese agricultural performance suggest that a little over three quarters of the measured productivity increase is due to payment system changes and the remainder to price increases we also use our method to calculate incentive indices giving an estimate of the fraction of their marginal product that peasants received under the pre 1978 regime

technical efficiency in developing country agriculture a meta analysis abstract a meta analysis is performed to review empirical estimates of technical efficiency te in developing country agriculture the objective of the study is to contribute to a better understanding of the factors that influence estimates of mean te a data set of 51 observations of te from 32 studies is used in order to test if specific characteristics of the data and econometric specifications account for systematic differences in the efficiency estimates results using the two limit tobit procedure indicate that factors such as primal versus dual number of fixed inputs and number of variable inputs increase average te estimates on the other hand using the cobb douglas functional form and cross sectional data yields a lower level of te other factors including the number of variables in the model crop type stochastic versus deterministic frontiers and sample size do not seem to significantly affect estimates of te across studies

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

on measuring economic efficiency summary this paper considers a system consisting of a production frontier and factor share equations to measure firm specific technical efficiency and input specific allocative efficiency simultaneously in estimating the system as a whole the joint distribution of all errors in the equations is used this is more efficient than using the marginal distribution of a function of the errors as one does by estimating either the profit function or the production function alone the workability of the method is illustrated by applying it to farm level data from philippines agriculture

output growth the real wage and employment fluctuations this paper is an attempt to contribute to the integration of business cycle analysis with long term growth a real business cycle model with endogenous growth is developed and estimated with u s data in the present framework wage movements do not have to be transitory to generate fluctuations in labor effort the reduced form is a constrained bivariate output hours or real wage hours vector autoregressive process the bivariate setup provides a useful framework for analyzing the persistence of output fluctuations given that the theory implies that hours of work contain information about future output movement copyright 1991 by american economic association

the macroeconomic effects of distortionary taxation abstract prescott 1986 estimates that technology shocks account for 75 of the fluctuations in the postwar u s economy this paper reestimates the contribution of technological change for a standard business cycle model that includes a public sector and fiscal disturbances i find that a significant fraction of the variance of aggregate consumption investment output capital stock and hours of work can be explained by disturbances in labor and capital tax rates and government consumption i also use the model to quantify the welfare costs of capital and labor taxation for both the time series and welfare calculations maximum likelihood estimates of taste technology and policy parameters are used

the international transmission of economic fluctuations abstract this paper suggests that for a wide class of international real business cycle models including models with imperfect competition the traditional channels of international transmission of business cycles through world interest rate and terms of trade variations cannot explain the cyclical response of the canadian economy to innovations in u s output empirically testable quantitative models of the effects on canadian economic activity of shocks to the u s economy are developed and their empirical relevance is tested by comparing impulse responses estimated from vector autoregressions to the quantitative predictions of the theoretical models

stylized facts of investment in canada although fixed business investment accounts for a large and growing share of uptput in canada surprisingly little is known about it some stylized facts of investment in canada are set forth and the ability of some of the standard price variables to explain canadian data are briefly reviewed the behavior of aggregate investment and its components are analysed in both the time domain and in the frequency domain it is founjd that there is only a weak relationship between expenditure on non residential structures and on machinery and equipment and also that at the industry level there has been a great deal of variation of patterns in investment by industry in one example investment in the commercial services indusry is found to lead investment in the manufacturing sector it is also noted that investment and output in the united states lead investment and output in canada with the lead in investment being less strong thatn the lead in output in keeping with the patterns observed in expirical models

common and country specific fluctuations in productivity investment and the current account abstract dynamic factor analysis and kalman filtering are used to construct a measure of common economic activity for the g7 countries we find that the common fluctuations are strongly associated with movements in us investment common fluctuations have substantial impact on fluctuations in both productivity and investment in these countries but very little impact on the current account country specific investment fluctuations have a significant negative impact on the current account while country specific productivity movements have little independent effect these findings are shown to be generally consistent with the predictions of a multi country dynamic model calibrated to the empirical decomposition of productivity shocks

explaining business cycles a multiple shock approach abstract aiyagari 1992 and prescott 1986 1991 claim that a large fraction of the variance of united states quarterly detrended real gnp is attributable to an unobservable shock to total factor productivity this paper argues that the importance of a productivity shock in explaining the variance of output is fundamentally indeterminate any model that is in accord with the several time series that make up united states macroeconomic data must feature multiple shocks that are correlated at all leads and lags sorting out the separate effects of these various shocks on a single variable such as real gnp is impossible we illustrate this argument using a multiple shock version of the king plosser rebelo 1988 benchmark real business cycle model

the multivariate flexible accelerator model its empirical restrictions and an application to u s manufacturing this paper derives an exhaustive set of restrictions implied by the multistock flexible accelerator specification of the adjustment cost model for the firm the flexible accelerator specification of the demand for capital and labor is estimated using u s manufacturing annual data for the 1947 1976 period the consistency of the data with the model is examined by testing the validity of the derived restrictions finally the conditions which permit aggregation over firms are determined and tested empirically the flexible accelerator specification has been popular in the empirical literature on interrelated investment and employment decisions see nadiri and rosen 38 coen and hickman 10 and schramm 40 more recent examples include sargent 39 berndt fuss and wavermann 4 berndt and morrison 6 and meese 34 under suitable assumptions the specification may be rationalized by the adjustment cost model of the firm eisner and strotz 13 lucas 30 mortensen 35 extends the work of lucas and derives some empirically testable restrictions of the accelerator specification that are implied by the adjustment cost framework the broad objective of this paper is to provide a more rigorous and comprehensive test of the adjustment cost model than is presently found in the literature this objective is achieved in three stages first we offer an alternative derivation of the mortensen restrictions and more importantly we prove theorem 1 that his restrictions are exhaustive i e we establish an integrability result for the flexible accelerator adjustment cost model second the flexible accelerator specification of the demand for capital and labor is estimated using total u s manufacturing annual data for the 1947 76 period it is assumed that firms minimize expected production costs subject to a technology which implies that capital and labor stocks are costly to adjust while a third factor materials is freely adjustable the consistency of the data with the adjustmentcost framework is examined by testing for the validity of the derived restrictions further we test the validity of some separability restrictions on the adjustmentcost technology that to varying degrees are imposed a priori in all of the cited empirical studies finally we provide a complete characterization of the individual firm technologies which justify the common assumption of the existence of a representative firm this problem of aggregation over firms which has been

stochastic depreciation and the business cycle the authors study a version of the neoclassical growth model in which shocks to both aggregate productivity and the depreciation of capital generate fluctuations around the steady state growth path depreciation shocks induce an inverse comovement between average labor productivity and hours worked when the model is calibrated to u s data it generates a correlation between productivity and hours which is significantly closer to the observed value than that of standard real business cycle models furthermore the addition of depreciation shocks does not cause a deterioration of the predictions of the model concerning other comovements copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

can world real interest rates explain business cycles in a small open economy abstract while the world real interest rate is potentially an important mechanism for transmitting international shocks to small open economies much of the recent quantitative research that studies this mechanism concludes that it has little effect on output investment and net exports we re examine the importance of world real interest rate shocks using an approach that reverses the standard real business cycle methodology we begin with a small open economy business cycle model but rather than specifying the stochastic processes for the shocks and then solving and simulating the model to evaluate how well these shocks explain business cycles we use the model to back out the shocks that are consistent with the model s observable endogenous variables then we use variance decompositions to examine the importance of each shock we apply this methodology to canada and find that world real interest rate shocks can play an important role in explaining the cyclical variation in a small open economy in particular they can explain up to one third of the fluctuations in output and more than half of the fluctuations in net exports and net foreign assets

a dynamic small open economy model with involuntary unemployment it is well known that real business cycle small open economy soe models rely on greenwood hercowitz and huffman 1988 preferences to match the countercyclical trade balance observed in open economies as well as other second moments while standard preferences a la king plosser and rebelo 1988 are commonly labelled ineffective owing to their inability to yield the countercyclical trade balance in this paper i show that an soe model with standard preferences and involuntary unemployment with efficient risk sharing can obtain a countercyclical trade balance and match main empirical regularities in small open economies il est bien connu que les modeles de cycles d affaires reels dans une petite economie ouverte peo comptent sur des preferences a la greenwood hercowitz et huffman 1988 pour etre compatibles avec la balance commerciale contre cyclique observee dans les economies ouvertes ainsi que sur d autres second moments alors que les preferences standards a la king plosser et rebelo 1988 sont considerees comme ineffectives a cause de leur inhabilitea engendrer la balance commerciale contre cyclique dans ce texte l auteur montre qu un modele de peo avec preferences standards et chomage involontaire et partage efficient du risque peut engendrer une balance commerciale contre cyclique et s arrimer aux principales regularites observees dans les petites economies ouvertes

measurement of profit efficiency using behavioural and stochastic frontier approaches the objectives of this study are to estimate profit inefficiency of farms in the north west frontier province of pakistan using stochastic frontier and the behavioural profit functions the derived measure of inefficiency based on a half normal distribution of the stochastic error term is related to socio economic variables and of these the size of holding fragmentation of land subsistence needs the higher age of farmers contribute positively to inefficiency the behavioural approach satisfies most of the assumptions of the dual profit function and the likelihood ratio test rejects the market efficiency hypothesis it is also shown that use of manures labour and fertilizers is below the optimum small farms seem to have higher productive efficiency than large farms and therefore small farm ownership needs to be encouraged

recent developments in the market for rural land use in china a market for rural land use or the right to use land has resurged since the early 1980s when the system of contracting land to individual households was introduced in china the market per se is not as common as in most countries as ownership of land is vested in rural collectives it has been a most controversial issue in recent years though some amendments to land policy have been made this paper is an attempt to clarify the actual situation and major characteristics of the market a case study is presented brief conclusions and proposals follow

what do residuals from first order conditions reveal about dge models the first order condition foc associated with labour in many dynamic general equilibrium models involves only current period variables residuals constructed from this foc are inconsistent with aggregate us data in that they are very large and highly persistent the persistence suggests that models which introduce dynamic terms in the labour foc may be more consistent with the data three such models one with learning by doing one with habit formation and one with labour adjustment costs confirm that they can reduce the persistence in the residuals making the models more consistent with the joint dynamics of consumption output and hours

aggregating quasi fixed factors the problem of aggregating quasi fixed factors within the context of the adjustment cost model is addressed two alternative theoretical justifications are considered one based on a form of hicks aggregation and the other on weak separability it is argued that the latter is not relevant to practical situations on the other hand the former can be used to justify empirical dynamic factor demand studies which employ aggregated input categories some implications for data construction procedures are discussed

stochastic growth in the united states and euro area this paper estimates using data from the united states and the euro area a two country stochastic growth model in which both neutral and investment specific technology shocks are nonstationary but cointegrated across economies the results point to large and persistent swings in productivity both favorable and adverse originating in the united states but not transmitted to the euro area more specifically the results suggest that while the euro area missed out on the period of rapid investment specific technological change enjoyed in the united states during the 1990s it also escaped the stagnation in neutral technological progress that plagued the united states in the 1970s

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

trade in capital goods and investment specific technical change abstract this paper studies the role of trade in capital goods and investment specific technical change in the determination of the cross country correlation of output and the volatility of the terms of trade the cross country correlation of output for g7 countries ranges from 0 42 to 0 85 and the relative volatility of the terms of trade ranges from 1 24 to 6 06 the standard model with total factor productivity change and trade in final goods only generates an average cross country correlation of 0 05 and an average volatility of 0 68 models with trade in capital goods and investment specific technical change produce an average cross country correlation of 0 71 and an average volatility of 2 81

long run implications of investment specific technological change an attempt is made to disentangle its effects from the more traditional hicksneutral form of technological progress the balanced growth path for the model is characterized and calibrated to u s national income and product account nipa data the quantitative analysis suggests that investment specific technological change accounts for the major part of growth jel e13 030 041 047

the relation between firm growth and q with multiple capital goods theory and evidence from panel data on japanese firms we derive from a model of investment with multiple capital goods a one to one relation between the growth rate of the capital aggregate and the stock market based q we estimate the growth q relation using a panel of japanese manufacturing firms taking into account the endogeneity of q identification is achieved by combining the theoretical structure of the q model and an assumed serial correlation structure of the technology shock which is the error term in the growth q equation for early years of our sample cash flow has significant explanatory power over and above q the significance of cash flow disappears for more recent years for the heavy industry when japanese capital markets was liberalized the estimated q coefficient implies that the adjustment cost is less than a half of gross profits net of the adjustment cost

using theory for measurement an analysis of the cyclical behavior of home production abstract a significant amount of economic activity takes place within the home unfortunately it is difficult to assess the cyclical properties of home production because the available data are too sporadic using a real business cycle rbc model we construct quarterly data on three variables that are unobservable at a quarterly frequency hours worked in the home sector hours spent in leisure and the consumption of home produced goods three results emerge leisure is countercyclical while nonmarket hours are acyclical hours spent in home production have declined significantly since the 1970s fluctuations in market output are a good measure of fluctuations in individual utility as long as home and market consumption are either extreme complements or extreme substitutes in the production of utility

the terms of trade productivity growth and the current account abstract this paper extends the analytical framework provided by glick and rogoff 1995 journal of monetary economics 35 159 192 to an economy with traded and nontraded goods and it analyzes the impact of country specific and global productivity shocks on the current account and investment each of these disturbances have different implications for the current account and investment that are largely consistent with the empirical results first the current account responds more than investment to country specific traded productivity growth second global traded productivity and country specific nontraded productivity growth have no effect on the current account but they have a significant impact on investment third the global component of nontraded productivity is negligible and has no significant impact on either the current account or investment in addition the response of the current account and investment to relative prices the terms of trade and exchange rate are insignificant this paper also discusses the potential reasons for it

intertemporal price indices for the firm abstract a notion of intertemporal price aggregation is analysed within the adjustment cost model of the firm and is shown to be feasible precisely for those technologies which imply an accelerator adjustment rule a unique feature of the common quadratic production function specification is established the analysis is shown to be relevant to the possibility of decentralization within the firm to functional form specification for dynamic demand functions and to comparative dynamics analysis

the dynamic effects of neutral and investment specific technology shocks the neoclassical growth model is used to identify the short run effects of neutral technology shocks which affect the production of all goods homogeneously and investment specific shocks which affect only investment goods the real equipment price crucial for identifying the investment shocks experiences an abrupt increase in its average rate of decline in 1982 so the analysis is based on a split sample on the basis of the preferred specification the two technology shocks account for 73 percent of hours and 44 percent of output s business cycle variation before 1982 and 38 percent and 80 percent afterward the shocks also account for more than 40 percent of hours and 58 percent of output s forecast errors over a three to eight year horizon in both samples the majority of these effects are driven by the investment shocks

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances

consumer durables permanent terms of trade shocks and the recent us trade deficits abstract this paper employs an open economy real business cycle model to suggest that part of the 1980s us trade deficits may have been driven by permanent declines in consumer durable import prices we also show that most of the resulting decline in the trade balance is due to wealth effects not substitution effects

semi parametric predictions of the intertemporal approach to the current account abstract this paper uses the method dynamic programming dp by gmm and canadian data to estimate a dynamic model of a small open economy dp by gmm has several appealing features it does not impose certainty equivalence it accommodates multiple shocks and imposes few restrictions on the properties of the shocks in the model also since it uses the actual shocks series to estimate approximate decision rules it produces sample paths for the endogenous variables in the model the model estimated fits the data well in particular the variance of the predicted trade balance output ratio matches its empirical counterpart