optimal pricing and return policies for perishable commodities this paper considers the pricing decision faced by a producer of a commodity with a short shelf or demand life a hierarchical model is developed and the results of the single period inventory model are used to examine possible pricing and return policies the paper shows that several such policies currently in effect are suboptimal these include those where the manufacturer offers retailers full credit for all unsold goods or where no returns of unsold goods are permitted the paper also demonstrates that a policy whereby a manufacturer offers retailers full credit for a partial return of goods may achieve channel coordination but that the optimal return allowance will be a function of retailer demand therefore such a policy cannot be optimal in a multi retailer environment it is proven however that a pricing and return policy in which a manufacturer offers retailers a partial credit for all unsold goods can achieve channel coordination in a multi retailer environment this article was originally published in marketing science volume 4 issue 2 pages 166 176 in 1985

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

non nested models of australia s overseas aid program after briefly surveying the existing on overseas aid motivations some empirical results are presented for australian bilateral aid in terms of the two competing theories in the aid literature namely the recipient need model and the donor interest model the empirical results for austrlia are atypical in that there is support for both hypotheses this is contrast to the results of previous studies of large nation states the united states britain germany france and japan which have found support for the donor interst model but not the recipient need model given that the empirical results reported here are consistent with both models this paper then proceeds to apply the relatively new tests of non nested hypotheses to the models the results indicate that australia s aid program has both recipient need and donor interest concerns i some years the recipient need motive dominates and in other years donor interest dominates

financial technology shocks and the case of the missing m2 m2 growth was unusually weak in the early 1990s when its velocity soared although m2 growth subsequently recovered its velocity plateaued at a high level giving rise to a case of missing money these swings in m2 growth have accompanied opposite swings in bond mutual fund inflows m2 growth is better tracked and the missing m2 problem is resolved when money models are modified to account for shifts in bond mutual fund costs this approach avoids the capital gains and portfolio substitution problems posed by adding bond or equity funds to m2 while capturing the substitution effects relevant to money demand

the holmes smyth effect some preliminary exercises with the uk demand for narrow money the primary purpose of this paper is to test a plausible data coherent representation of the consumption based model of the demand for money against and analogus representation of the standard income based formulation on the basis of non nested tests neither model canbe maintained consequently the possibility of tax cuts being contractionary the holmes smyth effect is still an open question

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

multiple and pairwise non nested tests of the influence of taxes on money demand the minimal computational requirements of the linear embedding techniques initiated by davidson and mackinnon 1981 accommodate multiple and binary tests of autoregressive non nested regression models with different dependent variables the small sample adjustments of fisher and mcaleer 1981 effectively reduce the size of the p tests for our models our application to transactions demand for money models supports the holmes and smyth 1972 hypothesis that pre tax variables are preferred to gnp in m1 money equations

unifying chow s demand for money via the multiple cox test abstract the multiple cox test developed by sawyer 1984 is used to discriminate between four non nested models of money demand the results show that the short run real partial adjustment transactions model dominates a nominal adjustment mechanism and two long run assets models

the economic lot sizing problem with perishable items and consumption order preference abstract we consider the economic lot sizing problem with perishable items els pi where each item has a deterministic expiration date although all items in stock are equivalent regardless of procurement or expiration date we allow for an allocation mechanism that defines an order in which the items are allocated to the consumers in particular we consider the following allocation mechanisms first expiration first out fefo last expiration first out lefo first in first out fifo and last in first out lifo we show that the els pi can be solved in polynomial time under all four allocation mechanisms in case of no procurement capacities this result still holds in case of time invariant procurement capacities under the fifo and lefo allocation mechanisms but the problem becomes np hard under the fefo and lifo allocation mechanisms

work related perks agency problems and optimal incentive contracts work related perks such as corporate jets nice offices and so forth improve the tradeoff between incentives and insurance that determines the optimal incentive contract we show that i such perks may be offered even if their direct consumption benefits are offset by their costs ii they will be offered for free iii agents in more uncertain production environments will receive more perks iv senior executives should receive more perks and v better corporate governance can lead to more perk consumption by ceos our analysis also offers insights into firms decisions about how much autonomy they should grant to their employees

the appropriate interest rate and scale variable in money demand results from non nested tests the views expressed are those of the individual authors and do not necessarily reflect official positions of the federal reserve bank of st louis the federal reserve system or the board of governors federal reserve bank of st louis working papers are preliminary materials circulated to stimulate discussion and critical comment references in publications to federal reserve bank of st louis working papers other than an acknowledgment that the writer has had access to unpublished material should be cleared with the author or authors photo courtesy of the gateway arch st louis mo www gatewayarch com

a critique of the proposed tests of the natural rate rational expectations hypothesis the failure of the governments of most industrialised countries over the past decade to deal successfully with the problems of rising unemployment and high and often accelerating rates of price and wage inflation has revived interest in the pre keynesian macro economics of sound money and has renewed the controversy of the 1930 s over what governments should or should not do if they wish to achieve full employment with reasonable price stability in democratic societies keynesian economics has come under attack both by those who primarily oppose interventionist policies on ideological grounds and by the so called new classical macro economists who adhere to the natural rate of unemployment hypothesis nrh advanced by phelps i967 and friedman i 968 and the hypothesis of rational formation of expectations reh originally due to muth i96i armed with this joint natural rate rational expectations nr re hypothesis the new classical macro economists have argued that in a world capable of being represented by linear or log linear relations with a unique and stable equilibrium and no information discrepancy between the government and the private sector no government macro economic policy whether monetary or fiscal no matter how ingeniously formulated and how effectively implemented can have any systematic or lasting impact upon the level of output or the rate of unemployment 2 clearly this fundamental policy

integrating deterioration and lifetime constraints in production and supply chain planning a survey abstract items with short lifetimes that are subject to deterioration are important in the business world research has a long tradition in integrating deterioration and value loss effects into mathematical models for inventory planning and control where such effects are understood as a general loss or shrinkage of inventory however there has been little work in the modeling of lifetime restrictions of items to prevent wastage and disposals especially in a dynamic planning context globalization and other trends extend the consideration of single companies to whole supply chains implying increased coordination and information needs this is important as planning decisions impact lead times and thus the quality of items in the whole supply chain products that exceed their useful lifetime can impose high costs due to inventory loss or the need to rework them this implies increased utilization of scarce resources e g machine time metals and or energy thereby increasing co 2 levels we survey the state of the art regarding depreciation effects and the modeling of lifetime constraints as well as a classification of models following business planning functions of the value chain a critical evaluation of approaches and their limitations is provided highlighting directions for future research

money demand and the effects of fiscal policies this paper reexamines the choice of the scale variable in the money demand function a variety of evidence suggests that consumer spending is a better scale variable than gnp changing the money demand specification along these lines can profoundly affect the standard keynesian analysis of a tax cut copyright 1986 by ohio state university press

monetary fiscal policy interactions and fiscal stimulus abstract increases in government spending trigger substitution effects both inter and intra temporal and a wealth effect the ultimate impacts on the economy hinge on current and expected monetary and fiscal policy behavior studies that impose active monetary policy and passive fiscal policy typically find that government consumption crowds out private consumption higher future taxes create a strong negative wealth effect while the active monetary response increases the real interest rate this paper estimates markov switching policy rules for the united states and finds that monetary and fiscal policies fluctuate between active and passive behavior when the estimated joint policy process is imposed on a conventional new keynesian model government spending generates positive consumption multipliers in some policy regimes and in simulated data in which all policy regimes are realized the paper reports the model s predictions of the macroeconomic impacts of the american recovery and reinvestment act s implied path for government spending under alternative monetary fiscal policy combinations

foreign trade elasticities and import discipline this paper provides new evidence on the trade as discipline7rsquo hypothesis by considering the determination of price cost margins with a panel of 41 four digit us food manufacturing industries from 1972 to 1987 following the empirical specification suggested by competitive fringe oligopoly models we include estimated domestic demand elasticities and cross price elasticities of import demand as explanatory variables and the empirical results confirm the importance of these variables in assessing the hypothesis

specification tests of the money demand function in an open economy this paper addresses empirically the issues of selecting the appropriate opportunity cost and scale variables of the money demand function in the presence of alternative nonnested hypotheses as part of the process of model specification the role of currency substitution in the demand for money function in an open economy is examined the tests are carried out with quarterly data from the open economy of greece over the floating exchange rate period 1975 82

a guide to public sector debt and deficits government deficits reinterpreted willem h buiter public sector debt and deficits are a matter of concern to governments throughout the world after presenting data on the public debt and deficits in the uk and abroad this paper considers four key issues first does an increase in the budget deficit today make an increase in inflation in the future more likely in economies like the uk the answer is no because the scope for raising revenue by money creation is limited compared to raising taxes second how does one evaluate the consistency of a given spending and tax programme a number of measures are presented which indicate the adjustment that must be made to spending and tax plans if the government is to remain solvent third it is often argued that an increase in budget deficits will merely crowd out private spending the paper shows that the truth of this proposition depends critically on the state of the economy the time horizon and whether the increased deficit is temporary or permanent finally the question of deriving a suitable measure of fiscal stance is considered developing an index of fiscal impact requires a suitable economic model and a number of different measures are considered and criticized conventional deficit measures whether actual cyclically corrected or inflation corrected are a poor indicator of the government s true fiscal stance

returns policy new model introduction and consumer welfare abstract this paper investigates how economic outcomes differ for new model introduction between two extreme contracts outright sales contract and returns policy contract with full credit under the outright sales contract we show that the retailer s incentive to introduce a new model can lead to a reduction of consumer welfare when the retailer is moderately risk averse the primary conclusion from this study is that the returns policy contract resolves this conflict between firms and consumers and that the supply chain introduces the new model only when consumer surplus from the new model is higher than that from the old model

separate misspecified regressions and the u s long run demand for money function t he purpose of this paper is to extend the traditional analysis of specification error to models that are separate i e non nested in the sense that one may not be obtained from the other by the imposition of restrictions or as a limiting form of a suitable approximation the general theoretical approach to testing separate families of hypotheses was pioneered by cox 1961 1962 and subsequent work has largely been based on the many suggestions in these two papers in an important extension atkinson 1970 derived a test statistic that is asymptotically equivalent to the cox test under the null hypothesis however pereira 1977 showed that while the cox procedure always provides a consistent test of the null atkinson s variation does not this is an important result since the power of an inconsistent test does not tend to unity in large samples where power is taken to be the probability of rejecting a false null model the general results obtained by cox for separate distributions were specialized to regression analysis by pesaran 1974 and pesaran and deaton 1978 dastoor 1981a and fisher and mcaleer 1981 modified the cox test using atkinson s procedure and demonstrated pereira s caveat regarding test inconsistency to be unwarranted for separate linear and non linear regressions respectively with normal disturbances several algorithms for calculating approximations to the cox statistic via artificial regression models have recently been developed by davidson and mackinnon 1981 and fisher and mcaleer 1981 these test statistics which are asymptotically equivalent under the null as well as under local alternatives see pesaran 1982b will also be analyzed with regard to the effects of misspecification in spite of the potential usefulness of the cox test in applied econometric research it is surprising that there have been so few published empirical papers employing it quandt 1974 deaton 1978 it is also notable that theoretical work involving considerations of power has concentrated on local i rather than fixed alternatives since serious misspecification arises only when the difference between the null and the alternative model does not disappear in large samples it would seem more helpful from the practical viewpoint to analyze specification error when the null is tested against a fixed alternative and this is one of the primary objectives of the present paper the other objective is to provide an empirical example illustrating the consequences of misspecifying separate models the plan of the paper is as follows alternative procedures for testing separate regression models are outlined in section ii and the consistency of the tests is investigated in the light of specification error in section iii it is demonstrated that i both the cox and atkinson procedures provide consistent tests of the null when variables are incorrectly included in the alternative and ii it is possible that neither procedure will provide a consistent test when variables are incorrectly excluded from the alternative it is argued that specification error in the null does not affect the consistency of the tests some consequences of the results are discussed in section iv an illustrative empirical example related to alternative specifications of the u s long run demand for money function is presented in section v some concluding remarks are given in section vi received for publication may 18 1981 revision accepted for publication february 25 1982 australian national university queen s university and australian national university respectively the authors wish to thank noxy dastoor adrian pagan deane terrell and especially anil bera for helpful comments les godfrey for permission to refer to his unpublished paper and eva klug for efficient research assistance responsibility for the final product rests with the authors alone the present paper is a substantially revised and extended version of mcaleer and fisher 1981 i when the concept of local alternatives is used the sample size is taken to be sufficiently large so that the asymptotic results are valid but not so large that the sequence of local alternatives has converged to the null see cox 1962 p 407 pesaran 1982a examines the local power of alternative tests of non nested models but makes the somewhat restrictive assumption that the dimension of the null model is not exceeded by that of the alternative

do real balance effects invalidate the taylor principle in closed and open economies this paper examines the determinacy implications of forecast based monetary policy rules that set the interest rate in response to expected future inflation in a neo wicksellian model that incorporates real balance effects we show that the presence of such effects in closed economies restricts the ability of the taylor principle to prevent indeterminacy of the rational expectations equilibrium the problem is exacerbated in open economies particularly if the policy rule reacts to consumer price rather than domestic price inflation however determinacy can be restored in both closed and open economies with the addition of monetary policy inertia

the role of money supply shocks in the short run demand for money abstract previous money demand models are either inconsistent with contemporaneous adjustment of the price level to expected changes in the nominal money supply or imply implausible interest rate fluctuations in response to innovations in nominal money we propose a shock absorber money demand model in which money supply shocks affect the synchronization of asset transactions and so engender a temporary increase or decrease in desired money holdings expected changes do not engender such fluctuations in real money inventories in simultaneous estimates for eight industrial countries the shock absorber model proved empirically superior

choosing among multiple nonlinear non nested regression models with different dependent variables abstract the linearly embedded regression model approach of davidson and mackinnon 1981 is used to construct joint tests of seven non nested autoregressive money demand equations with different regressands the results support the holmes smyth 1972 hypothesis that taxes affect money demand

a returns policy for distribution channel coordination of perishable items abstract this paper deals with a retailer s operating policies for a perishable product when he agrees with his supplier not to return the unsold product to his supplier provided that the supplier gives some discount on the wholesale price mathematical formulations are developed based on a periodic review inventory model under lifo and fifo issuing policies the demand rate is assumed to be a function of the retail price and instantaneous inventory level decision variables are the amount of supplier s price discount that the retailer can accept in return for adopting the no returns condition the retail price and order size also numerical examples are solved with tabu search algorithm for sensitivity analysis

output the stock market and interest rates this paper develops a simple model of the determination of output the stock market and the term structure of interest rates the model is an extension of the is lm model and borrows from it the assumption that output is determined by aggregate demand and that the price level can only adjust over time to its equilibrium value however whereas the is lm emphasizes the interaction between the interest rate and output this model emphasizes the interaction between asset values and output asset values rather than the interest rate are the main determinants of aggregate demand and output current and anticipated output and income are in turn the main determinants of asset values it is this interaction that the model intends to capture its goal is to characterize the joint response of asset values and output to changes in the environment such as changes or announcement of changes in monetary and fiscal policy as the above brief description makes clear anticipations are central to the story the assumption made in this paper will be one of rational expectations the paper is organized as follows section i describes the model and sections ii iv characterize the behavior of the economy under the extreme but convenient assumption that prices are fixed forever sections v and vi extend the analysis to the case where prices adjust over time to their equilibrium value

the appropriate scale variable in the u s money demand an application of nonnested tests of consumption versus income measures the purpose of this article is to employ several nonnested procedures to empirically test the proposition put forward by mankiw and summers that consumption rather than income is the appropriate scale measure in the money demand function real income real disposable income consumer spending on nondurables personal consumption expenditures and total private spending are tested as candidates for the scale variable tests are carried out for both m1 and m2 concepts of money the results based on both m1 and m2 support the mankiw summers position but the results based on m2 are not as strong as those based on m1 implications for fiscal and monetary policies are discussed

the policy implications of deflationary tax cuts 1990 the policy implications of deflationary tax cuts applied economics vol 22 no 6 pp 719 722

an optimal procurement policy for items with an inventory level dependent demand rate and fixed lifetime abstract this paper investigates an optimal procurement policy for items with an inventory level dependent demand rate and fixed lifetime the demand rate is assumed to be a function of current inventory level and each unit has its fixed expiry date so any units which remain unused by their expiry date are considered outdated and must be disposed of for the system presented a mathematical model and solution methodology were developed sensitivity of the decision variables to changes in the parameter values is examined and future research needs are discussed in brief

the effect of barter on the demand for money an empirical analysis abstract the impact of barter on the m2 money demand for the u s is explored the results show that in addition to the traditional explanatory variables the level of barter must be included in the estimates of the demand for money

joint price and lot size determination under conditions of permissible delay in payments and quantity discounts for freight cost abstract this paper deals with the problem of determining the retailer s optimal price and lot size simultaneously under conditions of permissible delay in payments it is assumed that the ordering cost consists of a fixed set up cost and a freight cost where the freight cost has a quantity discount offered due to the economies of scale the constant price elasticity demand function is adopted which is a decreasing function of retail price investigation of the properties of an optimal solution allows us to develop an algorithm whose validity is illustrated through an example problem

the dependence of pay performance sensitivity on the size of the firm i analyze the relationship between firm size and the extent to which executive compensation depends on the wealth of the firm s shareholders i use a simple agency model to motivate an econometric model of this relationship estimating this model on chief executive officer ceo compensation data using nonlinear least squares i determine that pay performance sensitivity as defined by jensen and murphy 1990b appears to be approximately inversely proportional to the square root of firm size however measured i also analyze the properties of pay performance sensitivity for teams of executives working for the same firm and show it to have similar properties as ceo pay performance sensitivity

compensation perks and welfare in an agency model with moral hazard and limited liability we show that the provision of perks can be inefficient even if perks are contractible interestingly there can be over as well as underinvestment in perks we also demonstrate that perks may actually harm the agent although perks per se are enjoyable for the agent

leakages from the money demand function the performance of alternative scale variables is explored in a simple demand function for narrow money sequential test establish consumers expenditure as the preferred measure the implications for fiscal policy and the paradox of thrift are outlined