money anticipated changes and policy effectiveness the lucas sargent wallace l s w proposition states that expected policy changes have no influence on real economic variables even in the short run see robert lucas 1972 and thomas sargent and neil wallace 1975 one form of empirical test of the l s w proposition the neutrality proposition began with robert barro s 1977 1978 seminal articles supporting the neutrality proposition however more recent papers including those by david small 1979 john makin 1982 and frederic mishkin 1982a b have reexamined the relationships between anticipated and unanticipated money vs output unemployment and inflation and have found evidence suggesting that anticipated monetary changes do have real effects all of the above cited studies use expectations procedures which estimate for example a money growth equation over the entire period under consideration however this approach assumes that when expectations are being formed at the beginning of the period economic agents have the relevant information for the entire period in this note i reexamine the impact of expected vs unexpected monetary changes focusing on the informational restrictions actually faced by economic agents when formulating expectations the structure of the model used here is similiar to the models of barro and mishkin a measure of real output is assumed to be a function of a policy variable and a vector of predetermined variables the policy variable can be decomposed into anticipated and unanticipated components algebraically

anticipated and unanticipated money a case study of malaysia the paper tests the lsw proposition that unanticipated policy changes affect real economic variables by using malaysian data over the period 1970 1 1990 4 the empirical evidence changes in fiscal policy and balance of payments do not affect real output thus lending support to the proposition on the other hand anticipated monetary policy and inflation influence output in the short run lending support to mishkin s views of the economy and rejecting the lsw proposition in addition the long run neutrality proposition is not supported by the data moreover unanticipated changes in inflation do influence real output in the short run lending support to the lsw proposition however unanticipated changes in monetary policy balance of payments and fiscal policy do not influence real output lending support to the classical view of the economy and rejecting the lsw proposition furthermore the monetarist s view that inflation is a monetary phenomenon is rejected the findings also show that unanticipated

a little bit more evidence on the natural rate hypothesis from the u k abstract the evidence for the neutrality of anticipated changes in monetary policy in the u k over the period 1963q1 1982q1 is examined breaks in the stochastic process generating the money stock are used to identify the model the results are generally unfavourable to the proposition that only unanticipated money matters

prices output and the balance of payments in an open economy with rational expectations abstract the paper outlines an open economy version of the lucas competitive equilibrium rational expectations model it analyses the determination of output prices exports imports and the exchange rate under fixed and floating exchange rate regimes where information on the current exchange rate is used to infer the current values of foreign and domestic monetary shocks output is influenced by both foreign and domestic monetary shocks but independent of systematic foreign and domestic monetary growth under both exchange rate regimes flexible exchange rates insulate the domestic economy from systematic foreign monetary growth

evidence on the cross country transmission of monetary shocks the international transmission of monetary shocks between the us and canada is explored focusing on real variables such as consumption investment employment and the bilateral trade balance along with measures of us and canadian money the empirical analysis examines the impact of a monetary shock in one country on real activity in both countries the long run analysis provides evidence of cointegration among the variables and suggests that money plays an important role in the equilibrium relationships between the two countries variance decompositions and impulse response functions reveal interesting avenues of real transmission in the short run the short run analysis provides strong evidence that us monetary shocks affect real activity in both the usa and canada the analysis also indicates that canadian monetary disturbances affect canadian and us real activity and that many of these effects are similar in magnitude to the effects of us monetary shocks the importance of the nominal exchange rate

impacts of climate change on self sufficiency of rice in china a cge model based evidence with alternative regional feedback mechanisms abstract climate change would pose a direct and severe challenge to china s rice production and self sufficiency here we use global trade analysis project gtap model to evaluate the impacts of climate change on the self sufficiency of rice in china due to 2 c rise in temperature and further analyze the impact and transmission mechanisms of climate change through market and trade our simulation method switches different regional mechanisms in the gtap model by employing alternative closures and scenarios our results suggest that the fluctuation in rice price is much larger than that of rice production the active regional feedback mechanism has much larger effects than the passive one in assessing climate change impacts with the passive regional feedback mechanism single regional general equilibrium srge and multi regional general equilibrium with china s shock mrge c china s rice export would decrease by more than 8 and import would increase by over 5 which leads to a decrease in rice self sufficiency by more than 0 06 percentage points with the active regional feedback mechanism multi regional general equilibrium with global shock mrge w climate change will increase china s rice export by 2 7 as rising rice exports to south korea overweight the export decrease to other countries concurrently china s rice import would decrease by 0 04 which leads to a slight increase in rice self sufficiency as a whole climate change will not severely threaten china s rice self sufficiency by the decomposition analysis climate change impacts on china s rice self sufficiency mainly depend on the changes in china s domestic rice production interestingly the source of china s rice import will switch from vietnam to pakistan under mrge w which derives from the input structure of paddy rice and rice sectors in different countries

exchange market pressure in paraguay 1963 88 monetary disequilibrium versus global and regional dependency the relevance of the monetary approach to exchange market pressure for paraguay s small open economy is compared to that of two competing keynesian structural approaches which emphasize respectively global and regional dependency effects estimation results for the three models including formal comparisons using nonnested hypothesis tests and forecast accuracy staistics suggest that the explanatory power of the monetary model is dominated by that of the regional dependency model with the global dependency model having an intermediate degree of applicability this result is intuitive given the extreme dependency of the paraguayan economy on argentina and brazil

food grain policy in the republic of korea the economic costs of self sufficiency governments in many countries have manipulated agricultural prices to achieve a variety of social economic and political objectives these policies which often conflict with the prescriptions of neoclassical trade theory have led economists toward attempts to estimate the welfare losses associated with government intervention in the marketplace of more interest to many governments is the performance of changes in policy aimed at attaining specific national goals this paper addresses the case of food grain policy in the republic of korea and assesses the impacts of the change in grain price policy that occurred at the end of the 1960s in particular the success of price policy in attaining self sufficiency and raising farm incomes is evaluated the implications for consumers producers foreign exchange earnings and price stability are also analyzed it is worth noting here that through policy nations pursue a wide range of noneconomic objectives that are impossible to quantify in considering the findings of this analysis the reader should be cognizant of these other objectives and implications that are not specifically included

the trade off between economic efficiency and food self sufficiency in using sudan s irrigated land resources abstract a shift in sudan s food production strategy towards more reliance on the irrigated sector for food supply has been induced by the severe food shortages following the early 1980s drought and reduced availability of food aid coupled with the high yield potential of irrigated wheat under modern technology revealed by recent research results this led to significant expansions in the areas of irrigated food crops especially wheat after 1989 this paper used domestic resource cost analysis to examine whether the expansion in irrigated wheat production represents the most efficient option for using sudan s irrigated land resources as compared to cotton the country s most important cash crop competitor at the 1993 prices medium staple cotton dominated various wheat technologies in terms of economic efficiency an efficiency frontier was constructed to evaluate the sensitivity of competitiveness results to changes in productivity gains and price shifts wheat yields currently achieved by average farmers on the scheme need to increase by more than 50 for wheat to compete with cotton at the 1996 prices in other words currently one ha of exported cotton generates economic returns that are sufficient to import about 50 more wheat than can be domestically produced from the same ha under average farmers practices in gezira in addition to its superiority over wheat in economic efficiency terms cotton has larger employment benefits than wheat being the more labour intensive enterprise this means that expanding irrigated wheat production in gezira for food self sufficiency at the expense of cotton reduces employment opportunities in addition to compromising economic efficiency priority should therefore be given to increased investment in research on improving cotton production technology marketing and lint quality on the other hand it is important to introduce more effective policy measures for faster adoption of improved wheat technologies to close the gap between potential and current yield levels

is the dollar high because of large budget deficits abstract it is widely believed that the u s dollar has been high in recent years because of large u s budget deficits using three statistical techniques this paper shows that the belief has no empirical support ricardian equivalence may explain the lack of a positive association between the budget deficit and the dollar s exchange rate

the influence of unanticipated money growth on real output some cross country estimates two major propositions can be deduced from the theories of the business cycle developed in 4 14 15 161 1 monetary growth affects real output only if it is unanticipated 2 the impact on output of unanticipated monetary growth declines the more unpredictable monetary growth becomes proposition 1 has been tested on u k data in 2 3s on u s data in 5 6 7 and on canadian data in 19 the best known but somewhat informal test of proposition 2 is contained in 15 on data from a cross section of eighteen countries l in this paper we apply the method described in 3 to test proposition 1 using data from a range of countries furthermore we develop and discuss a formal method of testing proposition 2 and apply that method to the same data our main conclusion is that neither proposition can be decisively rejected

fiscal policy and the exchange rate in the big seven abstract we isolate the aggregate demand effects of u s government spending from its asset supply effects working through increased deficits and examine the former with the help of a two country rational expectations model of the united states versus the rest of the world the simulation results suggest that even in the absence of asset supply effects the consequences of a government spending cut in the united states can be substantial a depreciation of the effective dollar rate of 4 percent and a fall in long term bond rates at home and abroad of 180 basis points in response to a sustained 50 billion cut 1982 dollars provided that the cuts are permanent and are perceived to be so by the public some multi country simulations suggest that u s fiscal shocks are not likely to cause strains within the ems if there is consistency in member countries monetary policies

u s deficits since world war i the tax smoothing theory suggests that deficits would respond particularly to recession temporarily high government spending and anticipated inflation my empirical estimates indicate that a relation of this type is reasonably stable in the u s since at least 1916 in particular the statistical evidence does not support the idea that there has been a shift toward a fiscal policy that generates either more real public debt on average or that generates larger deficits in response to recessions further the deficits for 1982 3 and popular projections formed in 1984 for 1984 5 are consistent with the previous structure the high values of these deficits reflect the customary response to substantial recession interacting with big government and to expected inflation

budget deficits money growth and causality further oecd evidence abstract this paper investigates the causal linkage between budget deficits and money growth in seven major oecd countries using multivariate granger causality tests combined with akaike s aic criterion and zellner s iterative seemingly unrelated regressions the accommodation hypothesis that deficits granger cause positive long run changes in money growth is systematically rejected across all countries the reverse hypothesis that money growth granger causes long run changes in deficits is also rejected across countries these results suggest that monetary and fiscal policies are set independently in each of the oecd countries

a disequilibrium model of rational expectations for the u k so far the new classical model and the policy ineffectiveness proposition have been tested essentially within an equilibrium framework and disequilibrium methods of estimation have been used to estimate the labor market models in this paper the authors develop an aggregate goods market model for the united kingdom in which the new classical rational expectations hypothesis and the disequilibrium approach are integrated their estimates of the model show that the structural parameters are well determined and price adjustment in the united kingdom is very sluggish therefore the new classical policy ineffectiveness proposition is not valid for the united kingdom copyright 1991 by royal economic society

the impact of us economic variables on bank of canada policy direct and indirect responses abstract the impact of us economic variables on canadian monetary policy is assessed using quarterly data for 1963 88 canadian monetary base growth is regressed upon the least squares predictors of 11 us and canadian variables using a generalized least squares procedure that permits isolation of i direct responses by the monetary authority to its expectations of the us variables and ii indirect responses to past us influences that impact upon the current fitted values of the canadian variables the results reveal significance of both direct and indirect us influences on canadian policy across fixed and floating exchange rate regimes

federal deficits macro stabilization goals and federal reserve behavior the effects of federal deficits on federal reserve behavior as proxied by changes in the growth rate of the monetary base are analyzed in this study multivariate granger causality tests are employed in the analysis the deficit measure that is the focus of the analysis is the change in the real market value of privately held federal debt the tests indicate that the deficit granger causes the monetary base additionally concerns for financial market stability real output and exchange rate movements in the period of floating rates also affect federal reserve behavior

anticipated monetary policy and real output evidence from latin american countries this paper is an empirical investigation of the effects of anticipated and unanticipated monetary policies on real output for 13 ldcs in latin and central america the well know mishkin econometric procedure is applied to the annual imf date for the decomposition of actual money growth into anticipated and unanticipated components and the evidence of significant relation between anticipated money supply and real output for each country is reported the results derived in this paper thus provide additional empirical support for the validity of the non classical rational expectations macro models of fisher and phelps and taylor

monetary policy and central bank financing of government budget deficits we examine the relationship between monetary policy objectives and the central bank financing of the government deficit in eight countries under fixed and flexible exchange rates we find using seasonally adjusted data that only the bundesbank and the federal reserve do not accommodate the government deficit in either exchange rate period furthermore the movement to monetary targeting reduces the linkage between monetary policy and government deficits using seasonally adjusted data only the banca d italia and the nederlandse bank possess significant accommodation of the government deficit during flexible exchange rates additional results are derived for other monetary policy objectives

real effects of anticipated and unanticipated money some problems of estimation and hypothesis testing abstract the paper addresses two issues that arise in estimation and testing of the real effects of anticipated and unanticipated money first it is shown that identification of the effects of unanticipated or unperceived monetary growth on real output is possible only if the a priori restriction is imposed that monetary growth does not depend on unanticipated or unperceived output second the existing empirical work of barro and others does not allow for three known channels through which money can affect real variables these are 1 past and present anticipations of future monetary growth the inflation tax channel 2 expectations of monetary growth in a given period conditioned at various preceding dates the fischer phelps taylor effect and 3 past and present revisions in forecasts of future monetary growth the presence of the first of these would mean that alternative open loop monetary growth rules have real effects the presence of the other two implies that monetary feedback rules can have real effects omission of the first channel can lead to biased estimates of the effects of past anticipated monetary growth potentially serious observational equivalence problems are associated with the other two

does anticipated monetary policy matter another look recent work by mishkin 1982a 1982b and gordon 1982 tests the lucas sargent wallace henceforth lsw policy ineffectiveness proposition with econometric methods this work generally finds support for the alternative proposition that there is some short term influence of anticipated demand policy or anticipated money growth on output as mccallum 1982 has pointed out one difficulty with these studies is they presume movements in output and employment are best represented as stationary fluctuations around deterministic trends in constrast to evidence given by nelson and plosser 1982 which suggests these variables are nonstationary processes that have no tendency to return to a deterministic path if these series are nonstationary processes then the distribution theory implicit in the hypothesis tests of the gordon and mishkin studies does not apply and their results are open to question also as mccallum 1982 p 4 points out the methods of overcoming the observational equivalence difficulty sargent 1976 are not entirely satisfying in these studies in effect gordon and mishkin are forced to make some untested restrictions in order to distinguish the anticipated from the unanticipated components

inflation and government deficits there is a pronounced positive correlation of inflation andgovernment deficits in the united states since world war ii the purpose of this paper is to test the three leading explanationsof this correlation these three explanations are a a deficitincreases prices through a wealth effect b a deficit results inthe federal reserve purchasing debt thus increasing the moneysupply and prices and c expected inflation increases the deficit which is the change in the nominal value of bonds no supportis found for either of the first two hypotheses the results indi cate that expected government deficits have no significance forfuture inflation since world war ii the united states has experienced large federal government deficits and a sustained peacetime inflation three differentconnections between the deficits and inflation are prominent in theliterature the most direct connection between government deficits and inflationis that by increasing the real value of outstanding bonds and perceived netwealth a deficit can raise total spending and the price level this connec tion is also the most long standing and is suggested by metzler 1951 andpatinkin 1965 for example monetarists generally and buchanan and wagner 1977 in particularhave emphasized a different link between deficits and inflation they sug gest that the federal reserve purchases government bonds when the trea sury sells bonds thus increasing high powered money the money supply and the price level the federal reserve might behave this way for exam ple because it is attempting to hold down interest rates on governmentsecurities when deficits occur recently barro 1978 1979 has put forward a hypothesis that deficitsare a result of inflation rather than inflation being a result of deficits thegovernment deficit is the change in the nominal value of outstanding gov ernment bonds if the anticipated inflation rate increases then the nomi nal value of bonds must increase i e the government will run a deficit tokeep the same anticipated real amount of bonds all three of these possible connections between government deficitsand inflation are consistent with the observed positive correlation of defi cits and inflation the implications however are strikingly different con

the economic costs of food self sufficiency in china abstract despite the surge in agricultural output since the late 1970s a comparison of china s resource endowments with those of its trading partners suggests that with continued rapid income growth food imports will again expand unless relative domestic prices are raised quantitative analysis of price policies which would achieve self sufficiency in the 1990s indicates net economic costs ranging between 2 3 of gnp annually these results are however particularly sensitive to the relatively undocumented changes taking place in the dependence of china s rapidly growing livestock sector on feed grains

the international convergence of inflation rates during fixed and floating exchange rate regimes abstract according to the assets approach to the balance of payments exchange rate under a fixed exchange rate regime inflation must grow at the same rate in each of the participating countries at least in the long run the model implies that reserve currency inflation causes world inflation the mechanism by which inflation is transmitted when currencies are allowed to float is more complex the long run international convergence of inflation is studied using modern time series techniques on post war data from the g 7 countries the evidence on the convergence of inflation during the fixed regime portion of the sample is strong and consistent with the notion of reserve currency causality i e from the us to the rest of the world the evidence of convergence over the floating portion of the sample is also quite strong but no single currency can be characterized as the common underlying source of world inflation implying the inflation rates are endogenous

the transmission of inflation in a small economy an empirical analysis of the influence of us monetary disturbances on canadian inflation 1962 1980 abstract the paper examines the transmission of inflation in canada during 1962 1980 using an empirical methodology which is very flexible in determining the direction of casuality and the shape of distributed lag effects the paper finds that us monetary growth exerted an important effect on canadian inflation during both fixed and flexible exchange rate periods the evidence also shows that canadian monetary growth has remained linked to us monetary growth under the present flexible exchange rate regime

disaggregate supply evidence for the uk 1989 disaggregate supply evidence for the uk applied economics vol 21 no 10 pp 1397 1409

presidential politics budget deficits and monetary policy in the united states 1960 1976 this paper has focused on the extent to which the traditional tools of macroeconomic management in the united states monetary and fiscal policy have contributed to a political business cycle regardless of whether politicians can successfully influence real economic variables to their own ends the evidence presented here suggests that they tried and that they enjoyed some at least indirect aid from their independent monetary authorities in doing so several major conclusions emerge

unanticipated money output and prices in greece in this paper we estimate and test a small neoclassical macromodel for greece the model incorporates the natural rate hypothesis in that only unanticipated inflation can affect real output and is monetarist in nature as the demand for output is derived from the demand for money function the restrictions implied by the model cannot be rejected by either single equation or simultaneous equation tests thus we find little evidence against the proposition that no monetary policy rule can affect real output once it becomes anticipated and that the elasticity of prices with respect to money is unity

food self sufficiency making sense of it and when it makes sense food self sufficiency gained increased attention in a number of countries in the wake of the 2007 08 international food crisis as countries sought to buffer themselves from volatility on world food markets food self sufficiency is often presented in policy circles as the direct opposite of international trade in food and is widely critiqued by economists as a misguided approach to food security that places political priorities ahead of economic efficiency this paper takes a closer look at the concept of food self sufficiency and makes the case that policy choice on this issue is far from a straightforward binary choice between the extremes of relying solely on homegrown food and a fully open trade policy for foodstuffs it shows that in practice food self sufficiency is defined and measured in a number of different ways and argues that a broader understanding of the concept opens up space for considering food self sufficiency policy in relative terms rather than as an either or policy choice conceptualizing food self sufficiency along a continuum may help to move the debate in a more productive direction allowing for greater consideration of instances when the pursuit of policies to increase domestic food production may make sense both politically and economically

econometric issues in macroeconomic models with generated regressors the paper critically reviews the literature on the econometric issues raised by the use of generated regressors gr in empirical models the economic rationale for the use of gr is considered with examples being drawn from several macroeconomic examples including new classical macroeconomic ncm models which postulate monetary neutrality various estimation methods are discussed for models which include surprise or unexpected terms and the strengths and weaknesses of each approach are investigated drawing upon the work of mcaleer and mckenzie 1991 situations where the typically inefficient two step estimation 2se method will be efficient are highlighted problems of model misspecification and measurement errors are also investigated an empirical section highlights some of the dangers of using uncorrected 2se estimation results through a careful consideration of many recent attempts to test the ncm monetary neutrality hypothesis copyright 1993 by blackwell publishers ltd

the effects on output of anticipated and unanticipated money growth a case study of an oil producing country the new classical macroeconomic hypotheisis regarding the effecs of money growth on real variables sugggests that the anticipated changes in money supply on real variables are neutral irrespective of the time horizon whereas the unanticipated changes in the money supply although neutral in the long run exert significant influence on real variables in the short run this proposition has produced unsettled empirical results the present study attempts to verify empirically the new classical hypothesis in the case of a developing oil producing middle eastern country iraq our study suggests that the anticipated components of money growth rates have positive and significant influence on real variables the results of this study do not lend support to the new classical hypothesis instead they suggest that a steady growth rate of money supply that is fully anticipated by economic agents builds confidence by reducing errors in expectation regarding the behaviour of the money supply and provides easier ac

a quarterly model of unanticipated monetary growth output and the price level in the u k 1963 1978 abstract this paper develops and estimates using quarterly data from 1963 to 1978 a three equation model of the u k economy in which output is affected only by unanticipated monetary growth whereas the price level is influenced by both anticipated and unanticipated changes in the money supply expectations of monetary growth are assumed to be muth rational the model was estimated using efficient procedures and tests of the over identifying restrictions were favourable to the model specification in particular anticipated monetary growth was found to have no significant effect on output

fair trade or trade fair international food trade and cross border macronutrient flows abstract this study examines global food trade from a nutritional perspective paying particular attention to its implications for food security in low income countries by describing food trade in terms of the quantities of three essential macronutrients carbohydrates lipids and proteins embedded in food the analysis goes beyond a simple description of trade values quantities or caloric content as is common in the literature furthermore the study provides estimates of the implicit price of each macronutrient their evolution over time and their implications in terms of north south food trade the data show that over the 1996 2014 period the volume of macronutrients exchanged on international markets has more than doubled with carbohydrates accounting for over 60 of trade flows but proteins and lipids growing at a faster pace proteins were found to be the most expensive macronutrient followed by lipids and carbohydrates in general macronutrients embedded in animal and processed products are more expensive than those in vegetal and unprocessed food the results also suggest that the participation in international food trade has positive effects on low income countries aggregate food availability and food access two pillars of food security indeed low income countries register a net inflow of all macronutrients and take advantage of nutritional arbitrages available on international food markets due to macronutrients price differentials

international transmission of us macroeconomic policy and the inflation record of western europe abstract the interaction between monetary policy government budget deficits and inflation is examined for the four largest western european economies comprising france italy the united kingdom and west germany in order to assess the possible impact of us macroeconomic policy past us monetary base growth deficits and inflation rates are included in the set of explanatory variables for each of the european countries empirical results for the 1962 2 1985 4 sample period reveal interplay between domestic monetary and fiscal policy to be augmented by a significant impact of the us variables across all four countries in the sample

budget deficit and inflation the peruvian experience the purpose of this paper is to investigate the role of huge budget deficits in peru s near hyperinflation during recent years we use the rational expectations macro model of inflation to find out effect of the anticipated budget deficits on inflation rates by using the quartely data of peru for the period 1973 1 to 1988 1 our major finding has been that the budget deficits as well as the rate of growth of money supply do have significant impact on the inflation rates in peru

innovation accounting for the impact of fluctuations in u s variables on the canadian economy innovation accounting is conducted on a nine variable vector autoregression estimated using u s and canadian monthly data for january 1971 to december 1983 this reveals inter alia a positive impact of the u s interest rate on the canadian rate with the role the exchange rate plays in cushioning this impact being clearly apparent a positive effect of the u s money supply on both u s and canadian interest rates a positive albeit muted response of canadian production to a shock in u s production and a persistent influence of u s prices on production negatively and prices positively in canada are also detected l impact des fluctuations dans les variables americaines sur l eonomie canadienne une analyse utilisant la technique d innovation accounting les auteurs utilisent la technique d innovation accounting dans le cadre d un systeme a neuf variables estime comme autoregression vectorielle a l aide de donnees mensuelles canadiennes et americaines couvrant la periode de janvier 1971 a decembre 1983 cette analyse revl un effet positif de la masse monetaire americaine a la fois sur les taux d interet canadiens et americains une reaction positive mais en sourdine du niveau de production au canada a un choc dans le niveau de production americaine et une influence persistence des niveaux de prix americains sur le niveau de production au canada influence negative ainsi que sur les niveaux de prix canadiens influence positive we should like to thank gordon anderson douglas clarke john kennan john kuszczak angelo melino and stanely winer for a number of helpful discussions earlier versions of the paper were presented at the meetings of the canadian economics association in vancouver in june 1983 at the winter meetings of the econometric society in san francisco in december 1983 and in a session of invited papers at the meetings of the canadian economics association in guelph in june 1984 our discussants jacques raynauld in vancouver thomas doan and stephen king in san francisco and allan gregory in guelph offered many useful comments as too did the members of the money macro workshop at the university of western ontario alan harrison also thanks the economics department at the university of warwick for its hospitality and the social science and humanities research council of canada for financial support canadian journal of economics revue canadienne d economique xviii no 4 november novembre 1985 printed in canada imprime au canada 0008 4085 85 784 98 1 50 canadian economics association this content downloaded from 40 77 167 14 on fri 16 sep 2016 06 02 12 utc all use subject to http about jstor org terms impact of fluctuations in us variables 785

cross regime evidence of macroeconomic rationality rational expectations macromodels predict that the short run effects of monetary shocks on real output x should be negatively related across policy regimes to the variability of such shocks this paper presents cross regime tests of this and related propositions based on a sample of 47 countries the within regime estimates reveal a consistent pattern of positive short run real output effects with neutrality of money holding in the long run the cross regime tests show that x is negatively related to the variance of monetary shocks positively related to the variance of real output shocks negatively related to the variance of velocity shocks and unrelated to either the mean or variance of anticipated money growth

food in sub saharan africa trends and policy challenges for the 1990s abstract the food situation in africa can be expected to become increasingly serious as the end of the century approaches the gap between domestic supply and food needs in rapidly widening yield increasing technology becomes essential in view of land scarcity in high potential areas and sustainability problems in marginal zones the concern of governments for food self sufficiency however must not divert attention from the primary objective of household food security which is essentially a question of households real income accelerated rural growth and improved rural health and sanitation services accessible to the poor are central elements for household food security improvement

are money growth and inflation related to government deficits evidence from ten industrialized economies abstract we present empirical evidence on the relation between the government debt growth money growth and inflation for ten industrialized countries over the post world war ii period non parametric and parametric tests reveal little evidence that government debt growth is either related to money growth or permanently related to inflation over periods of a decade or less but the level of debt is significantly associated with subsequent inflation from 1974 to 1983 these results are consistent with the hypothesis that central banks in developed economies can conduct independent monetary policy over long periods notwithstanding government deficits

u s budget deficits and the european economies resolving the political economy puzzle this paper prepared for the annual meetings of the american economic association discusses how the increases in the u s budget deficits since 1980 have affected the economies of western europe the analysis emphasizes that u s deficits have not only affected these economies directly but have also induced them to adopt more restrictive monetary and fiscal policies than they would otherwise have chosen this induced shift in domestic policies is the primary reason why european governments have pressed for a reduction in the u s budget deficits despite the favorable impact of those deficits on european trade surpluses this abstract was borrowed from another version of this item

international transmission of aggregate shocks under fixed and flexible exchange rate regimes united kingdom france and germany 1959 to 1985 abstract this paper analyzes the transmission of aggregate shocks between the usa and three major european economies the uk france and germany under fixed and flexible exchange rate regimes using time series techniques short run linkages are investigated in the context of vector autoregression models while long run relations are analyzed by testing for cointegration empirical findings indicate that flexible exchange rates have not in general completely insulated domestic economies from foreign shocks and that the degree of insulation and interdependence across exchange rate regimes and over the long and short runs differs substantially across the european countries

a test of price sluggishness in the simple rational expectations model u k i950 i980 a recurrent feature of the empirical output and price equations derived from simple rational expectations models is that the effects of nominal shocks persist for a long period of time in barro s i977 a unemployment equation unanticipated monetary growth influences unemployment with lags of up to 2 years in his price equation barro i 98 i unanticipated money has a lag of up to 5 years in the price equation fitted to uk data by attfield et al i 98i real money balances influence prices with a one year lag and unanticipated monetary growth influences them with a 2 year lag of course the existence of lags is neither necessary nor sufficient for the negation of the neutrality proposition of rational expectations models lucas i975 sargent 1979 and blinder and fischer i98i have provided rationales for the existence of lags in the supply equation and demonstrated their consistency with the neutrality proposition similarly the work of attfield et al i98i has indicated that lagged adjustments in the demand for money are also consistent with neutrality in both cases the combination of lagged adjustments with perfectly flexible market clearing prices yields all the neutrality propositions of the models of lucas and others however it is also the case that traditional keynesian type models with sluggish price adjustment imply lags in output and price equations the final equations with keynesian type lags may look very similar to the equations derived by lucas barro and others but their implications about the effectiveness of policy may be very different in the model with sluggish price adjustment supply is not equal to demand so some other rule will have to be found to determine employment and output anticipated monetary policy may be able to influence real economic variables if the employment and output rules are not specifically designed to offset the effects of anticipated policy for this reason a strong test of the neutrality proposition should be able to differentiate between different sources of lags and be able to identify them empirically if the test consists merely of a reduced form equation that identifies the lags and a rationalisation of them that is consistent with the neutrality proposition it can provide only weak evidence which may also be consistent

does anticipated monetary policy matter an econometric investigation a heated debate has arisen over the policy ineffectiveness proposition associate with the work of lucas sargent and wallace it postulates that anticipated aggregate demand policy will have no effect on business cycle fluctuations so that one deterministic feedback policy rule is as good as any other from the point of view of stabilizing the economy this paper develops a methodology for empirically analyzing rational expectations models displaying this neutrality result and then applies it to the important question of whether anticipated monetary policy matters to the business cycle

macroeconomic policy and aggregate fluctuations in a semi industrialized open economy greece 1951 1980 abstract in this paper we model the effects of macroeconomic policy in a semi industrialized open economy greece is our case but the model could apply to other similar economies with tightly controlled financial markets and comprehensive foreign exchange restrictions where both the exchange rate and interest rates are administered prices the model consists of three equations which determine output the price level and the trade balance it is largely non keynesian but through the real exchange rate it allows for anticipated monetary policy to affect real output the model is estimated by fiml and its various restrictions cannot be rejected a policy simulation suggests that even friedman s x money growth rule would ensure greater macroeconomic stability in the 1970s than the monetary policy that was actually followed

alternative modes of deficit financing and endogneous monetary and fiscal policy in the u s a 1923 1982 this paper first investigates the effects of alternative modes of deficit financing on the unemployment rate the inflation rate and the real interest rate within the framework of a small complete macroeconomic model secondly it examines the nature of monetary and fiscal reaction functions the two periods 1923 1960 and 1961 1982 are considered with substantial differences in behaviour and policy being shown to exist between them the most important conclusion is that long run monetary neutrality properties shown to exist over the latter period are not intrinsic to the u s economy but rather are the result of the stabilization policies being conducted over that period

the international liquidity explosion and worldwide inflation the evidence from sterilization coefficient estimates abstract many commentators have pointed to the huge us payments deficits and international liquidity explosion of the early 1980s as the major cause of the concomitant rapid rates of monetary expansion abroad and subsequent acceleration of worldwide inflation this international monetarist interpretation rests however on the assumption of only limited sterilization of reserve inflows by foreign monetary authorities this paper uses the major econometric estimates of sterilization coefficients to calculate the implied contributions of the reserve increases of this period to foreign monetary expansion these suggest that the reserve increases did in fact make a non trivial contribution to global monetary expansion but that for most countries they were not the dominant cause

deficits and money growth in the united states 1872 1983 abstract this paper reports empirical evidence on the relation between government budget deficits and the growth of high powered money in the united states high powered money growth appears to be positively related to war spending during periods when such spending is a substantial fraction of gnp there is little evidence that the growth of high powered money is related to the non war government deficit measured either in cash or in real terms after controlling for the level of overall economic activity

measuring monetary policy interdependence abstract this paper measures the degree of monetary policy interdependence between major industrialized countries from a new perspective the analysis uses a special data set on central bank issued policy rate targets for 14 oecd countries methodologically our approach is novel in that we separately examine monetary interdependence due to 1 the coincidence in time of when policy actions are executed from 2 the nature and magnitude of the policy adjustments made the first of these elements requires that the timing of events be modeled with a dynamic discrete duration design the discrete nature of the policy rate adjustment process that characterizes the second element is captured with an ordered response model the results indicate there is significant policy interdependence among these 14 countries during the 1980 1998 sample period this is especially true for a number of european countries which appeared to respond to german policy during our sample period a number of other countries appeared to respond to u s policy though this number is smaller than that suggested in preceding studies moreover the policy harmonization we find appears to work through channels other than formal coordination agreements

international expected real interest rates new tests of the parity hypothesis and u s fiscal policy effects abstract this paper investigates the links among expected real interest rates across countries and also those between international expected real interest rates and u s fiscal policy we analyze the cross sectional mean of international ex post real interest rates as an estimator for the mean international expected real interest rate our results strongly reject the international expected real interest rate parity hypothesis reveal that u s budget deficits have no independent effects on international real rates given the impact of u s government defense spending and suggest that forces other than u s fiscal policy account for the post 1980 rise in international real rates

international macroeconomic policy coordination when policymakers do not agree on the true model the authors relax the assumption of the literature on international coordination that policymakers know the true model t wo countries will still be able to agree on a cooperative policy pack age that each believes will improve the objective function relative t o the nash noncooperative solution however the bargaining solution may move the target variables in the wrong direction these points ar e illustrated with monetary and fiscal multipliers taken from simulat ions of ten leading econometric models out of 1 000 possible combina tions of models that could represent u s beliefs non u s beliefs and the true model monetary coordination improves u s welfare in on ly 546 cases copyright 1988 by american economic association

deficits politics and money growth the authors examine the linkage between federal deficits and money growth by allowing the fed s resp onse to any given deficit to vary systematically according to how the deficit is generated and the party affiliation of the current presid ent in equations for m1 and monetary base growth the structural def icit is consistently significant and invariant across political chang es while the cyclical component of the deficit or a direct measure of the business cycle is significant only during the tenure of democ ratic presidents copyright 1987 by oxford university press

unanticipated monetary growth output and the price level u k 1946 1977 abstract this paper develops and estimates using annual data from 1946 1977 a three equation model of the u k economy in which output is affected only by unanticipated monetary growth whereas the price level is influenced by both anticipated and unanticipated changes in money supply expectations of monetary growth are assumed to be muth rational the model was estimated using efficient procedures and tests of the over identifying restrictions were generally favourable to model specification some features of the price equation are unsatisfactory and the results in this section must be considered tentative

an analysis of the implications of omitting variables from the monetary growth equation in a model of real output and unanticipated money growth abstract for a barro type model of output and unanticipated monetary growth the paper derives the conditions under which the underlying true model can be tested when the model actually being estimated has been misspecified in the sense that important explanatory variables have been omitted from the money growth equation

forecasting rational expectations and the phillips curve an empirical investigation abstract the rational expectations version of the phillips curve is empirically evaluated for switzerland using a wide variety of specifications it turns out that the results are highly sensitive to measurement of both the natural rate and expectations of nominal variables no reliable phillips curve seems to exist in addition information on the relative quality of different forecasting schemes is obtained for a number of important macroeconomic variables

further evidence on the relationship between federal government debt and inflation does an increase in the federal debt cause inflation dwyer 1982 using a par value measure of debt finds no support for such a causal link cox 1985 using a market value measure finds evidence that increases in debt produce higher inflation rates we reconcile these results by demonstrating that failure to capture the interest rate effects inherent in the market value measure accounts for the finding that debt causes inflation incorporating interest rates into our test equations using the market value series leads us to conclude that like the par value series results increases in federal debt do not cause higher rates of inflation

interaction between central bank behaviour and fiscal policy the us case federal reserve behaviour is analysed using a model which incorporates an effect an effect of iscal pressure on monetary policy formulation incentive structures are hypothesized to be such that the central bank plans over a longer horizan than that relevant to the administration with the cyclically adjusted deficit proxying for fiscal pressure from the administration the response to the deficit then plays an interactive role in affecting the trade off weights applied to the competing goals of monetary policy the model performs well for the usa and provides a pattern of policy that is stable over the full 1961ndash 83 period

comment upon a new classical model of the postwar uk the results presented by attfield demery and duck 1981 in the european economic review 18 p 367 385 are replicated the model is re estimated to take account of the policy switch to floating exchange rates in 1972 with rather less than favourable results a major problem being misspecification of the monetary growth equation