short run exchange rate uncertainty in latin america this paper to obtain an ex ante measure of exchange rate uncertainty in 11 latin american countries as a preliminary issue the purchasing power parity ppp condition is tested using engle and granger two step procedure and johansen method the argument is that exchange rate uncertainty could be lower if ppp holds in the long run the expected exchange rate uncertainty is estimated according to an extended version of the autoregressive conditionally heteroscedastic arch model the results show that the arch adjusment produces more efficient estimates in seven countries and that the acceptance of ppp has little effect on exchange rate uncertainty

structural break nonlinearity and asymmetry a re examination of ppp proposition in this study we examine the validity of the ppp proposition for 28 european countries for this purpose we propose a new unit root test procedure that allows for both gradual structural breaks a

purchasing power parity in the long run a cointegration approach this paper utilizes cointegration analysis to examine purchasing power parity relationships over a long time horizon the results indicate that the exchange rate is cointegrated strongly with the wholesale price index ratio and somewhat weakly with the consumer price index ratio the cointegrating coefficient between the exchange rate and the price ratio is close to one when cointegration is confirmed the hypothesis that the real exchange rate follows a random walk is rejected in most cases finally a new test for common trends finds no such common trends in exchange rates or price ratios copyright 1990 by ohio state university press

deviations from purchasing power parity in the long run this paper demonstrates that deviations from purchasing power parity reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible rate periods for a wide variety of countries and in both monthly and annual data since this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage the paper proposes an alternative explanation which instead relies on financial arbitrage in bonds as the underlying mechanism this paper will demonstrate that deviations from purchasing power parity ppp reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible exchange rate periods for a wide variety of countries and in both monthly and annual data this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage the paper therefore proposes an alternative explanation which does not presuppose free trade in goods but which instead relies on financial arbitrage in bonds as the underlying mechanism the major implication of the theory and the results is that ppp is as likely to be violated in the long as in the short run as an empirical matter deviations from ppp can be observed for most currencies at any instant see kravis et al 21 stockman 37 and genberg 15 among others these deviations are typically both cumulative and persistent the real exchange rate can remain on either side of parity for lengthy but variable time intervals of a year or more as a consequence the current consensus shared

national price levels purchasing power parity and cointegration a test of four high inflation economies abstract the time series properties of exchange rates and wholesale prices from four high inflation countries show some evidence in support of purchasing power parity tests for stationarity of real exchange rates and cointegration among price and exchange rate variables are presented for argentina brazil chile and israel during the 1970s and 1980s error correction models describe the mechanism of adjustment to long run equilibrium

floating exchange rates in less developed countries a monetary analysis of the peruvian experience 1950 54 since the collapse of the bretton woods system in 1973 there has been an increasing discussion concerning the appropriateness of different exchange rate systems for less developed countries ldcs however this discussion has been marked by the absence of empirical analysis on how floating exchange rate systems behave in ldcs the purpose of this paper is to analyze from a monetary perspective the peruvian experience with floating exchange rates during the early l950s a short run version of the simple monetary approach to exchange rate determination is tested using monthly data for 1950 54 the results obtained are quite satisfactory indicating that the monetary view of exchange rate determination provides a useful benchmark for analyzing the behavior of floating exchange rates in developing economies l

exchange rate policies for developing countries the i98os saw major changes in exchange rate regimes in many developing countries the significance of which can now be assessed in addition there have been since i978 some fascinating experiments in the use of exchange rate policy for inflation stabilisation these experiences raise important issues this paper draws on a world bank supported project which examined in depth the macroeconomic experience of eighteen developing countries since i965 and especially during the period i 980 go table i lists the countries and gives some relevant information about them all examples come from these countries and generalisations are based on their experiences the focus here is on the contrast or competition between the real targets approach to exchange rate policy and the nominal anchor approach 2 the real targets approach might be described as orthodox but the nominal anchor approach has been frequently advocated especially by europeans the issues are somewhat similar to those debated in europe in connection with membership of the exchange rate mechanism of the ems and the proposed moves towards monetary union but as noted in section vi below in developing countries the balance of considerations is probably different and experiences certainly are first i shall deal with the choice of exchange rate regime for countries starting with low or moderate inflation the role of exchange rate policy in the stabilisation programmes of high inflation countries will be discussed in section v

the collapse of purchasing power parities during the 1970 s one of the striking facts concerning the relationship beiveen prices and exchange rates during the 1970 s has been the dismal performance of the predictions of the simple versions of the purchasing power parity doctrine ppp that doctrine in its absolute version states that the equilibrium exchange rate between domestic and foreign currencies equals the ratio of domestic to foreign price levels the relative version of the doctrine relates equilibrium changes in exchange rates to changes in the ratio of domestic to foreign prices during the 1970 s short run changes in exchange rates bore little relationship to short run differentials in national inflation rates and frequently divergences from purchasing power parities have been cumulative this paper reviews and analyzes the empirical record of exchange rates and prices during the 1970 s and the analysis is based on the experience of the dollar pound the dollar frecch franc and the dollar dm exchange rates section 2 presents the evidence on ppp during the 1970 s and contrasts it with the evidence from the 1920 s a period during which the doctrine held up reasonably well this analysis is relevant for assessing whether the flexible exchange rate system was successful in providing national economies with an added degree of insulation from foreign shocks and whether it provided policymakers with an added instrument for the conduct of macroeconomic policy the evidence regarding devia tions from purchasing power parities is also relevant for determining whether there is a case for managed float section 3 attempts to explain what went wrong with

real and nominal effective exchange rates for 22 ldcs 1971 1 1990 4 the international monetary fund constructs and publishes the real and nominal effective exchange rates mostly for developed but not less developed countries this paper employs a method of constructing real and nominal effective exchange rate from the literature to produce quarterly data over the 1971 1990 period for 22 developing nations as an application the stationarity of real effective exchange rates are determined to establish the empirical validity of the purchasing power parity theory ppp the results reveal that ppp fails to hold for most countries

new evidence on purchasing power parity from 17 oecd countries there is a large literature that investigates whether or not real exchange rates are stationary in an attempt to unravel support for purchasing power parity ppp at best the empirical results are mixed this paper applies a unit root test that allows for a simultaneous structural break in the intercept and slope shown by sen 2003 to minimize power distortions to examine ppp for 17 oecd countries our results on ppp are mixed when the real exchange rate is based on the us dollar evidence is found of ppp for only france portugal and denmark when the real exchange rate is based on the deutschmark we find evidence of ppp for austria belgium norway spain netherlands switzerland and denmark

purchasing power parity and unit root tests using panel data abstract this paper reports the results of unit root tests for real exchange rates using a panel framework this panel approach provides greatly improved power compared to conventional univariate time series unit root tests we obtain evidence supporting ppp over the recent flexible exchange rate period for g 6 and oecd countries we show explicitly that failure to find such evidence in previous research was due to the low power of the tests

are real exchanges rate series really persistent evidence from three commonwealth of independent states countries this article sets out to examine the degree of persistence in the real exchange rates of kazakhstan kyrgyzstan and russia and tests the validity of purchasing power parity ppp using monthly data covering 1995 01 2013 12 period the sum of autoregressive ar coefficients is used in order to examine persistence of the real exchange rate series and grid bootstrap method is employed for the confidence intervals the tests performed suggest two results 1 covering the full sample and sub sample periods excluding kyrgyzstan in 1995 01 1998 07 and russia in 2008 09 2013 12 periods disregarding the structural breaks in the data generating process there is high persistency in real exchange rates 2 there is evidence in support of ppp covering the full sample for every country except for kyrgyzstan in 1995 01 1998 07 and russia in 2008 09 2013 12 periods

real exchange rate behavior abstract using random simulations with artificial data with identical sample characteristics to the long sample exchange rate data employed by lothian and taylor lothian j r and taylor m p 1996 the recent float from the perspective of the past two centuries journal of political economy 104 488 509 we show that standard unit root tests have extremely low power over sample sizes corresponding to the recent float the probability of rejecting the null hypothesis when it is false is extremely low with 20 years or even 50 years of data and only reaches an acceptable level over much longer spans

mean reversion in g 10 nominal exchange rates according to conventional wisdom industrial country floating exchange rates contain unit roots sur tests on panels of monthly group of ten g 10 log nominal rates reject the null of unit roots for various samples over the current float with significance levels from 0 5 to 15 on average in out of sample forecasts mean reversion models beat random walks significantly in some forecast periods for monthly data the range of expected usd dem appreciation rates exceeds 15 per year in the mean reversion model mean reversion places strong restrictions on international models over the sample period the g 10 had to run monetary policies consistent with stable long run nominal rates

tests for symmetric and asymmetric nonlinear mean reversion in real exchange rates new tests based on smooth transition autoregressive models for mean reversion in time series of real exchange rates are proposed one test forces mean reversion to be symmetric about the integrated process central case while the other permits asymmetry the tests are applied to monthly series of seventeen real exchange rates against the u s dollar and fourteen against the deutsche mark they reveal stronger evidence against the unit root null hypothesis than does the usual dickey fuller test

stagflationary effect of government bond financing in the transforming chinese economy a general equilibrium analysis abstract this paper studies how the method of government debt financing affects the macroeconomic performance of the transforming chinese economy the investigation is conducted within the context of an endogenous growth model that incorporates the major institutional features of the chinese economy using this framework we evaluate the effects on the growth rate of output and inflation if the chinese government relies more on bonds and less on money creation for budget deficit and debt repayment financing it is shown that although this policy change can reduce the growth rate of the money supply it can generate a stagflationary effect reducing the rate of output growth while raising the rate of inflation if the initial fraction of government deficit and debt repayment financed by bonds is sufficiently small and the tax rate on labor income is sufficiently low

small businesses and liquidity constraints in financing business investment evidence from shanghai s manufacturing sector abstract when firms experience financial hierarchy external finance if at all available is substantially more expensive than internal finance factors such as transaction costs agency problem and asymmetric information have created such a hierarchy stiglitz and weiss 1981 argue that asymmetric information between firms and potential suppliers of external finance creates adverse selection and moral hazard problems in the credit market in developed market economies this problem of a higher cost of external finance is commonly thought to be more serious for small firms because they are more disadvantaged than their larger counterparts in accessing external finance due to several factors 1 public information on small firms is generally not available and leads to the even greater problem of asymmetric information i e more severe adverse selection and moral hazard problems these information problems have excluded small firms from bond and share markets 2 due to the lack of available means of external finance small firms rely more heavily on bank loans than their larger counterparts in addition as small firms are more interested in cultivating stable relationships with a few banks in order to secure a stable supply of credit these banks become virtual monopolies by lending to small businesses and exercise their market power in lending to small firms most of existing research considers only small firms in market economies little research has been done to understand the relationship between firm size and investment financing in any economy in transition this paper makes a contribution to the literature by studying the relationship between firm size and liquidity constraints by using a firm level data of manufacturing enterprises in shanghai during the period of 1989 1992 we consider whether small manufacturing firms in shanghai are constrained by the availability of liquidity compared with their larger counterparts when they are financing their fixed investment in a transforming economy such as china or other similar transition economies external finance relies heavily on loans from banks that are fully owned by the state due to historical reasons allocations of credit are always biased in favor of state owned enterprises such a lending bias imposes an extra cost on small chinese enterprises in financing investment as the majority of them are not state owned in such an environment our empirical results show that small manufacturing firms in shanghai are actually less liquidity constrained than their larger counterparts in financing their fixed investment this surprising result is rather different from what people normally predict based on the experience in market economies we suggest three possible explanations for this peculiar finding 1 the composition of various firm size classes plays an important role in explaining the result non state enterprises which are fast growing and efficient dominate the small firm classes their successes in the markets helps them to generate enough internal funds to smooth their investment over time 2 the presence of heavy indebtedness of large state owned enterprises may deprive them of sufficient cash available for investment decision given that state owned enterprises have been making heavy losses the central and regional governments have a liquidity problem in satisfying their huge liquidity demands 3 small enterprises in non state sectors can rely on the informal credit market to obtain funds for investment although they are excluded from the state banking system however the further trade liberalization in terms of eliminating tariffs and quotas caused by china s bid of joining the wto will erode the profits of these small enterprises as imported goods will be supplied at lower prices in addition further reforms in financial sectors may also affect the supply of external finance to small enterprises in nonstate sectors the consequence may lead to a tight liquidity constraint for small enterprises in china

purchasing power parity as a long run relation dickey fuller and stock watson tests of purchasing power parity ppp as a long run proposition are provided within the cointegration framework proposed by granger since different countries use different weights to construct price indices the traditional constraint that the coefficients on the price indices should be unity in the log linear ppp relation is relaxed the absence of a general ppp relation cannot be rejected at most a ppp relation is indicated in five out of fifteen country pairs that are examined even if a long run ppp relation exists it is not found to be useful in predicting future nominal exchange rates which is consistent with efficient speculative markets

econometric testing of purchasing power parity in less developed countries fixed and flexible exchange rate regime experiences we investigate the purchasing power parity ppp hypothesis for 16 less developed countries ldcs from all over the world during their fixed and flexible exchange rate experiences over the period 1957 01 1999 12 the main contribution of this article to the empirical literature on ppp is that our study is the first to consider ppp hypothesis on alternative exchange rate regimes for ldcs the bilateral exchange rates of ldcs and the united states and their respective price levels are considered three different time series methodologies are employed unit root tests engle granger 1987 cointegration technique and johansen multivariate var methodology 1988 the cointegration techniques improve the results which allows the examination of the more frequent long run relationship between relative prices and nominal exchange rates nevertheless using each of econometric techniques we find only a few and a nearly equal evidence in favour of ppp under the alternative regimes in ldcs hence the main conc

relative ppp and the long run terms of trade for five latin american countries a cointegration approach this paper uses a cointegration approach with an error correction mechanism to examine purchasing power parity with the us for brazil colombia costa rica mexico and venezuela a relative version of purchasing power parity ppp is tested which includes the possibility of secularly declining or rising long run real terms of trade ppp explains the data fairly well for the more diversified economics of brazil and mexico but is rejected for the other three economies

the impact of cost uncertainty on the location of a distribution center abstract the location of a distribution center dc is a key consideration for the design of supply chain networks when deciding on it firms usually allow for transportation costs but not supplier prices we consider simultaneously the location of a dc and the choice of suppliers offering different possibly random prices for a single product a buying firm attempts to minimize the sum of the price charged by a chosen supplier and inbound and outbound transportation costs no costs are incurred for switching suppliers we first derive a closed form optimal location for the case of a demand populated unit line between two suppliers offering deterministic prices we then let one of the two suppliers offer a random price if the price follows a symmetric and unimodal distribution the optimal location is closer to the supplier with a lower mean price we also show the dominance of high variability the buyer can decrease the total cost more for higher price variability for any location the dominance result holds for normal uniform and gamma distributions we propose an extended model with more than two suppliers on a plane and show that the dominance result still holds from numerical examples for a line and a plane we observe that an optimal location gets closer to the center of gravity of demands as the variability of any supplier s price increases

sources of fluctuations in real and nominal exchange rates this paper attempts to distinguish empirically real versus nominal sources of fluctuations in real and nominal exchange rates the distinction is obtained by imposing the following restriction on the bivariate vector autoregression of real and nominal exchange rates over the current flexible rate period nominal shocks are required to have no permanent effect on the level of the real exchange rate given this identification scheme the author analyzes the dynamic effects and relative importance of real and nominal shocks with regards to exchange rates the findings indicate that real shocks dominate nominal shocks for both exchange rate series over short and long frequencies copyright 1992 by mit press

transitory and permanent disturbances and the current account an empirical analysis in the intertemporal framework the intertemporal models of current account determination demonstrate that in the analysis of the current account balance of a country it is important to distinguish between transitory and permanent disturbances in income and relative prices this paper attempts to decompose the observed data on income and real exchange rate into transitory and permanent components and then uses the decomposed series to test the empirical validity of the predictions of the intertemporal models evidence from the united states and japan provide very limited support for the intertemporal models in terms of the effects of transitory and permanent changes in income on current account balance for both us and japan the study finds that permanent changes in real exchange rate have significant effects on the current account balance statistical tests find no evidence of hysteresis in the trading relations of the two countries

coordination mechanisms of supply chain systems supply chain management scm has become an important management paradigm as supply chain members are often separate and independent economic entities a key issue in scm is to develop mechanisms that can align their objectives and coordinate their activities so as to optimize system performance in this paper we provide a review of coordination mechanisms of supply chain systems in a framework that is based on supply chain decision structure and nature of demand this framework highlights the behavioral aspects and information need in the coordination of a supply chain the identification of these issues points out several directions of future research in this area

diversification under supply uncertainty supply chain management is becoming an increasingly important issue especially when in most industries the cost of materials purchased comprises 40 60 of the total sales revenue despite the benefits cited for single sourcing in the popular literature there is enough evidence of industries having two three sources for most parts in this paper we address the operational issue of quantity allocation between two uncertain suppliers and its effects on the inventory policies of the buyer based on the type of delivery contract a buyer has with the suppliers we suggest three models for the supply process model i is a one delivery contract with all of the order quantity delivered either in the current period with probability or in the next period with probability 1 model ii is also a one delivery contract with a random fraction of the order quantity delivered in the current period the portion of the order quantity not delivered is cancelled model iii is similar to model ii with the remaining quantity delivered in the next period we derive the optimal ordering policies that minimize the total ordering holding and penalty costs with backlogging we show that the optimal ordering policy in period n for each of these models is as follows for x a n order nothing for vi n x a n use only one supplier and for x vi n order from both suppliers for the limiting case in the single period version of model i we derive conditions under which one would continue ordering from one or the other or both suppliers for model ii we give sufficient conditions for not using the second more expensive supplier when the demand and yield distributions have some special form for the single period version of models ii and iii with equal marginal ordering costs we show that the optimal order quantities follow a ratio rule when demand is exponential and yields are either normal or gamma distributed

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

relative ppp in the medium run abstract this paper tests the relative purchasing power parity rppp hypothesis on month by month post 1972 data and still obtains regression coefficients that are close to unity two methodological aspects have contributed to this encouraging result firstly although all rppp tests are vis a vis the usa we nevertheless exploit our a priori knowledge about the implications of these usd based equations on ppp relations between cross rates so in a sense we use all information implicit in all cross rates too secondly we selected an instrumental variable that is specifically designed to cope with lead and lag effects in non traded vs traded goods inflation our estimates indicate that most lead and lag effects seem to occur within a six month window jel f31

further results on long run purchasing power parity in the 1920s abstract we reexamine long run purchasing power parity ppp for the dollar sterling exchange rate in the 1920s using a three variable cointegration regression and the new statistics tabulated by engle and yoo 1987 consistent with taylor and mcmahon s 1988 results we reject cointegration for the dollar sterling exchange rate the u k and the u s a price levels for the sample period february 1921 to may 1925 contrary to taylor and mcmahon however we find only weak evidence of cointegration for the shorter sample period february 1921 to may 1924

commercial policy the terms of trade and the real exchange rate revisited abstract we estimate the effects of commercial policy and changes in the external terms of trade on the real exchange rate for four latin american economies using data on internal relative prices we find that the greater the elasticity of the non traded price level with respect to the price of importables the larger is the real exchange rate effect of import restrictions but the smaller is the real exchange rate effect of changes in the external terms of trade

purchasing power parity and cointegration the greek evidence from the 1920s abstract this paper presents empirical evidence which supports the purchasing power parity ppp hypothesis for three bilateral exchange rates involving the greek drachma during the 1920s using the technique of cointegration of economic time series the results are obtained for a period of high money supply growth and a high and variable rate of inflation which gave rise to large differentials in price movements between greece and the other countries the speed at which long run ppp was reached following a shock was 50 per cent per month confirming the results of other studies of ppp over the 1920s and explaining the supportive evidence for long run ppp even though data over a short period were used jel f31

the j curve effect and us agricultural and industrial trade this paper examines the j curve hypothesis for us agricultural and manufactured goods using the shiller lag model the results support the j curve effect for agricultural goods but not for manufactured goods these findings explain why many studies in the literature fail to support the j curve phenomenon there are two explanations for these findings 1 the aggregation bias of data that combine both agricultural and manufactured goods and 2 the country under study is often an industrial nation like the us or japan with a high proportion of manufactured goods in both exports and imports

the term structure of currency carry trade risk premia we nd that average returns to currency carry trades decrease signicantly as the maturity of the foreign bonds increases because investment currencies tend to have small local bond term premia the downward term structure of carry trade risk premia is informative about the temporal nature of risks that investors face in currency markets we show that long maturity currency risk premia only depend on the domestic and foreign permanent components of the pricing kernels since transitory currency risk is automatically hedged by interest rate risk for long maturity bonds our

policy convergence the exchange rate mechanism and the misalignment of exchange rates some tests of purchasing power parity and generalized purchasing power parity the paper focuses on the convergence issues and the long run credibility of the european monetary system ems and more specifically on the evaluation of the effectiveness of the exchange rate mechanism erm in generating a stabilizing effect on real exchange rates across member countries for this purpose we execute some tests of long run purchasing power parity ppp for an erm group and a non erm group of countries using both the engle and granger procedure and the more powerful johansen cointegration technique we also execute a test of generalized ppp exploiting an idea developed by enders and hurn testing for ppp in a multicountry setting may be a useful methodology to identify the optimal currency area suggested by the data generation process on the basis of the reported homogeneity of real exchange rate behaviour of the countries considered

aggregate price indexes cointegration and tests of the purchasing power parity hypothesis abstract in this paper i show that cointegration tests of ppp using aggregate price indexes are not always robust to changes in relative prices i offer a method of gauging the importance of these effects and find them to be unimportant in recent rejections of ppp

optimal replenishment and rework with multiple unreliable supply sources we study a production inventory system with multiple unreliable supply sources through inspection and rework the system can improve the quality of the units received from the supply sources there are two interleaved decisions the replenishment quantities from the sources and the inspection rework quantities among the units received we show the optimal solution to the replenishment decision can be efficiently derived from a greedy algorithm and inspection rework is optimally applied to a single source identified by the algorithm furthermore in the case of linear cost functions it is optimal to place orders from two supply sources i e dual sourcing the results extend to the infinite horizon case where an order up to policy is optimal the model also readily adapts to situations in which the supply imperfection takes the form of a reduced delivery quantity yield loss

an empirical examination of long run purchasing power parity using cointegration techniques this paper presents an empirical analysis of long run purchasing power parity ppp for five major exchange rates using recently developed econometric techniques on the cointegration of economic time series our empirical results are extremely unfavourable to the ppp hypothesis as a long run equilibrium condition even with an allowance made for measurement error and or tranportation costs in particular we are unable to reject the hypothesis of non cointegration of the exchange rate and relative prices for any of the countries concerned far from finding a stable long run proportionality between exchange rates and relative prices our results therefore suggest that they tend to drift apart without bound

post reform industrial productivity performance of china new evidence from the 1985 industrial census data i introduction during the last decade china implemented a series of economic reforms that followed what many observers agreed was a period of stagnation in industrial productivity 1 the first wave of chinese economic reforms 1978 79 following the economic opening to the west under the four modernizations began after the third plenum of the eleventh central committee of the communist party of china announced a new policy of economic modernization in december 1978 a major goal of the new policy was to improve productivity toward this end the party would 1 allow the formation of private enterprises 2 permit state owned and collective enterprises to retain a portion of their profits 3 devolve a greater degree of decision making to factory managers and drastically reduce the scope of planning 4 introduce material incentives such as bonuses to labor and 5 place increased reliance on markets for inter industry resource allocation it is important to note that at this time in the early 1980s real reform was limited to the agricultural sector as discussed in perkins 1988 the second wave of reforms occurred in 1983 84 with the announcement of sweeping changes for the urban industrial sector these reforms included four major measures 1 a reduction in the number of leadership positions in enterprises 2 a further expansion of enterprise managers authority 3 the substitution of an income tax for remission of profits to the state and 4 removal of the ceiling on bonuses naturally it is important to know whether or not these reforms improved chinese industrial productivity since the early 1980s both chinese and western economists have conducted many empirical studies on china s post reform economic performance however the results from these studies are far from conclusive for example the world bank 1983 1985 field 1984 yeh 1984 chen 1986 chen and sang 1986 pan 1986 and tidrick 1986 have reported that input accumulation accounts for nearly all of output increases in industry as a whole in the early 1980s in particular tidrick 1986 found that china s performance has been extremely disappointing total factor productivity in the state owned industrial sector declined at an annual rate ranging from 0 10 percent to 1 20 percent for the period 1978 83 in contrast more recent studies such as those by kuan et al 1988 and jefferson 1988 have found that china s post reform industrial productivity was significantly improved most notably kuan et al 1988 found that chinese industrial productivity in the state owned sector grew at an average annual rate ranging from 2 7 to 3 1 percent for 1980 84 and from 15 3 to 18 2 percent for 1984 85 this difference in the findings reported in the literature is striking and requires further investigation one explanation is that the various studies are based on different data sets time periods models and data construction methods for example tidrick 1986 used aggregate time series data for state owned industry for the period 1952 83 while kuan et al 1988 used aggregate time series data including only independent accounting units within the state owned industrial sector for the period 1953 85 perkins 1988 reviewed china s overall post reform economic performance using data at the national level he found that during 1976 85 total factor productivity in china grew at an annual rate of 3 79 percent accounting for over 40 percent of china s net material product he concluded that reform and productivity growth thus led the way to higher overall growth and that agriculture and the collectively organized small scale industrial enterprises play an important role in the accelerated productivity growth of the reform periods perkins however hastened to point out that his conclusion is based on impressionistic evidence and is in no sense definitive and suggested that disaggregated data on outputs and inputs by sector or individual industries are required to identify those sectors that accounted for most of the rise in productivity perkins 1988 628

long run purchasing power parity is it for real in this paper we re examine the purchasing power parity concept using data from the recent experience with floating exchange rates in particular we utilise the recently developed multivariate cointegration methodology to test for a long run relationship between exchange rates and relative prices and also to test for the proportionality of the exchange rate with respect to relative prices in contrast to much other research we demonstrate that there is a long run relationship between a number of bilateral u s dollar exchange rates and their corresponding relative prices the proportionality of the exchange rate to relative prices does not however receive support from the data this finding may be attributable to the use of measured price series rather than the true series

it and productivity in u s manufacturing do computer networks matter i introduction how computers affect productivity is a long standing research question many recent studies argue that information technology it particularly computers is a significant source of u s productivity the specific mechanism remains elusive detailed data on the use of computers and computer networks have been scarce this article uses new plant level data on computer networks collected by the u s census bureau to estimate the effect of computer networks on labor productivity across u s manufacturing plants the computer network use supplement cnus to the 1999 annual survey of manufactures asm focused on the use of computer networks rather than the presence of computers alone linking the cnus data to current and previous information for the same plants collected in the 1999 asm and the 1997 and 1992 census of manufactures cm allows us to examine the relationship between productivity and the use of computer networks our work differs from others in several important aspects first this is the first study linking the use of computer networks to labor productivity using data for approximately 30 000 plants representing the u s manufacturing sector most previous studies examining the link between productivity and computers or other it in the united states focus on the presence of computers using either data on the stock of computer capital or on current it or computer investment as proxies for the computer stock only one previous study mcguckin et al 1998 examined the link between productivity and how computers were used that study was limited to five u s two digit manufacturing industries covered in the 1988 and 1993 surveys of manufacturing technology smt collected by the u s census bureau and did not separate the use of computer networks from other uses of computers and advanced technologies second we extend the existing model relating it to productivity by including materials as a separate input our dependent variable is a gross output measure of labor productivity although gross output is an appropriate measure of the theoretical output particularly at the plant level most previous plant level studies for the united states use a value added measure and exclude materials as a factor input possibly making their results subject to omitted variable biases third we model the probability that a plant has a computer network as a function of its performance and conditions in prior periods this probability is of interest in its own right it also makes possible the fourth distinguishing feature of our work testing for possible endogeneity problems associated with the computer network variable if good plants are more likely to have computer networks we must account for these characteristics to get a more accurate estimate of the effect of networks our research has five principal findings first average labor productivity is higher in manufacturing plants with networks than in plants without networks second computer networks have a positive and significant effect on labor productivity after controlling for other important factors such as capital intensity and other plant characteristics third the choice of theoretical model has empirical consequences previous studies using value added models appear to overstate the effect of it on productivity by factors of two to three fourth plants with lower relative productivity in previous periods are more likely to have computer networks fifth computer networks have a positive and significant effect on labor productivity even after taking account of possible endogeneity of the computer network variable ii background computers play an important role in the strong economic performance of the u s economy according to many recent studies this role is particularly important during the surge of productivity growth in the late 1990s as discussed in oliner and sichel 2000 jorgenson and stiroh 2000 jorgenson 2001 stiroh 2001 and triplett and bosworth 2000

coordinated supply chain management abstract historically the three fundamental stages of the supply chain procurement production and distribution have been managed independently buffered by large inventories increasing competitive pressures and market globalization are forcing firms to develop supply chains that can quickly respond to customer needs to remain competitive these firms must reduce operating costs while continuously improving customer service with recent advances in communications and information technology as well as a rapidly growing array of logistics options firms have an opportunity to reduce operating costs by coordinating the planning of these stages in this paper we review the literature addressing coordinated planning between two or more stages of the supply chain placing particular emphasis on models that would lend themselves to a total supply chain model finally we suggest directions for future research

distinguished lecture on economics in government exchange rate regimes is the bipolar view correct the choice of appropriate exchange rate regime which for economies with access to international capital markets increasingly means a move away from the middle ground of pegged but adjustable fixed exchange rates towards the two corner regimes of either flexible exchange rates or a fixed exchange rate supported if necessary by a commitment to give up altogether an independent monetary policy lawrence h summers 2000 p 8

cointegration tests of purchasing power parity the case of swiss exchange rates abstract this paper tests purchasing power parity ppp as a long run equilibrium condition by examining the long run relationshiop between exchange rates and wholesale price indices using cointegration tests this paper avoids some of the problems of previous cointegration tests of ppp by using more precise data pretests and by not imposing a priori restrictions upon the cointegrating vector of the nine combinations of swiss exchange rates and price indices examined cointegration is detected in seven cases thus supporting ppp as a long run equilibrium jel f31 c32

optimal ordering policies with two suppliers when lead times and demands are all stochastic abstract splitting orders among several suppliers is a common practice earlier theoretical studies considered only the strategy of splitting an order equally among the suppliers they concentrated on the effects of order splitting on reducing the effective lead time demand and safety stocks but the effects on the overall ordering policy have not been considered this paper presents a procedure for determining the optimal order policy i e the total order quantity reorder point and proportion of split between two suppliers the optimization objective is minimize the sum of annual holding and order costs subject to a maximum stockout risk our procedure handles any stochastic form of daily demand and lead times some interesting observation from our solutions are i the major advantage of order splitting is in the reduction of cycle inventory cost whereas the safety stock reduction is usually unimportant contrary to earlier findings ii although intuitively one might use suppliers with the shortest mean lead times lower cost is actually achieved if the second supplier s mean lead time is suitably larger than the first s this often means excluding suppliers with the lowest mean lead times iii the optimal proportion of order split varies with among other factors the difference in the suppliers mean lead times

real exchange rates ppp and the relative price of nontraded goods the purchasing power parity hypothesis ppp states that nominal exchange rates move with differences in relative prices between economies the theory has received considerable attention in the economic literature since cassell 6 and is the foundation of many long run theoretical hypotheses in international finance yet its empirical validity remains in question many tests of ppp focus on the stationarity of the real exchange rate the nominal exchange rate adjusted for changes in price levels between economies if domestic and foreign price levels and the nominal exchange rate are integrated then cointegration between these variables implies the existence of both a long run equilibrium relationship and ppp the residual the real exchange rate then follows a stationary process the paper uses the multivariate cointegration methodology of johansen 16 and johansen and juselius 17 18 to examine the source of real exchange rate nonstationarity is the nonstationarity due to shifts in the domestic and foreign price of nontradeables or productivity differentials between traded and nontraded sectors or is the nonstationarity a possible outcome of difficulties in intercountry comparisons of prices movements associated with construction of these price indices most research finds the real exchange rate follows a nonstationary process due to the presence of a unit root 8 12 1 9 19 27 however the existence of a variable trend in the real exchange rate does not imply the absence of a long run relationship between relative prices levels and nominal exchange rates for two reasons first a long run relationship between price levels and nominal exchange rates may exist but not the one for one relationship implicit in the calculation of real exchange rates due to measurement differences in the construction of price indices between economies second ppp violations may occur due to the presence of permanent productivity innovations which affect the relative price of nontradeables if these shocks are not represented by measurable variables a cointegrating relationship will not exist the paper constructs traded and nontraded gdp price indices and productivity rates for 14 oecd economies and tests 1 if the variable trend the nonstationary process in the real exchange rate is due to permanent innovations in relative price of domestic and foreign nontradeables 2 if long run ppp violations are due to permanent movements in the relative price of nontradeables 3 if the nonstationarity in the real exchange rate is due to permanent innovations in domestic and foreign productivity differentials between the traded and nontraded sectors 4 if the variable trend in the relative price of nontradeables is due to permanent innovations in productivity between sectors lastly the paper constructs a cointegrating error correction model

targeting the real exchange rate theory and evidence abstract this paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate an intertemporal optimizing model suggests that in the absence of changes in fiscal policy a more depreciated level of the real exchange rate can only be attained temporarily this can be achieved by means of higher inflation and or higher real interest rates depending on the degree of capital mobility evidence for brazil chile and colombia supports the model s prediction that undervalued real exchange rates are associated with higher inflation

arima and cointegration tests of ppp under fixed and flexible exchange rate regimes real exchange rates between the united states and its major trading partners were calculated for the bretton woods and flexible exchange rate periods unit root tests indicate that purchasing power parity performed poorly in both periods tests for cointegration reveal limited instances in which it is possible to estimate the deviations from ppp as an error correcting model the estimated error correcting models indicate that foreign but not u s prices responded to deviations from ppp frenkel s 1981b finding that purchasing power parity ppp worked better during the 1920s than the 1970s caused considerable controversy for example davutyan and pippenger 1985 contend that the socalled collapse of ppp is a result of an increase in the relative importance of real versus monetary shocks they argue that the 1970s as opposed to the 1920s was characterized by real supply shocks and the international coordination of monetary policies the argument is that ppp did not fail rather there was an increase in the volatility of those factors giving rise to deviations from ppp hakkio 1984 reestimated ppp over the 1920s and 1970s using cross country tests i e sure estimates to improve the efficiency of his estimates he was able to support the hypothesis that ppp worked better in the 1970s than in the 1920s on the other hand papers by adler and lehman 1983 dornbusch 1980 frenkel 1981a junge 1985 and krugman 1978 report findings contrary to the ppp hypothesis moreover kenen and rodrik 1986 find that the volatility of real exchange rates has increased throughout the flexible rate period this paper tries to shed some light on the importance and persistence of the observed deviations from purchasing power parity under alternative exchange rate systems while it is interesting to compare ppp in the 1920s versus the 1970s it is equally useful to compare the 1960s versus the 1970s and 1980s if real supply shocks and lack of monetary coordination are characteristic of the latter period ppp should perform better in the 1960s to illustrate the issues involved consider the following econometric model of relative purchasing power

fdi trade and spillover efficiency evidence from china s manufacturing sector using firm data from the 1995 third industrial census of china this paper finds that the presence of foreign ownership has a positive and significant effect on domestic firms productivity moreover trading with more advanced countries helps china gain access to new technology and information which improves its productivity and enables it to compete in international markets it is found that china s imports from oecd and the four asian tigers and exports to oecd have positive effects on domestic firms productivity by dividing industries into high technology gap and low technology gap groups it is found that the spillover effects of fdi are larger for the low technology gap group than for the high technology gap group however the estimation results of the trade induced technology spillover effect support the technology gap learning theory and the significance of importing appropriate technology

multi country evidence on the behavior of purchasing power parity under the current float abstract using panel data for the united states and 22 other oecd countries for the current float this paper presents evidence that despite substantial short term perturbations purchasing power parity actually performed much better than commonly believed average rates of growth of real exchange rates over long horizons bear little relationship either to average rates of growth of nominal exchange rates or to average inflation differentials thus implying a close to one to one relation between average rates of growth of nominal exchange rates and average inflation differentials panel data variants of standard unit root tests suggest that the real exchange rates of these countries can be characterized as mean reverting

evidence on ppp for selected asian countries from a panel cointegration test with structural breaks the goal of this article is to examine evidence for purchasing power parity ppp for a panel of asian countries namely malaysia thailand india pakistan sri lanka and the philippines our main contribution is that for the first time in this literature we use a panel cointegration test developed by westerlund 2006 which allows us to incorporate multiple structural breaks we find that using gregory and hansen s 1996 residual based test for cointegration and pedroni s 1999 panel cointegration test without structural breaks provide weak evidence of cointegration between nominal exchange rates vis a vis the us dollar and relative prices however when we use the lagrange multiplier panel structural break cointegration test we find strong evidence of panel cointegration providing evidence for ppp

threshold cointegration and purchasing power parity in the pacific nations the paper uses a threshold cointegration methodology to explore the properties of long run purchasing power parity ppp in the pacific nations using japan and the usa as base countries it is shown that long run ppp holds for most asian countries but that the adjustment mechanism is asymmetric in contrast to symmetric error correction models it is found that asymmetric adjustments of nominal exchange rates play an important role in eliminating deviations from long run ppp

long run purchasing power parity during the recent float abstract this paper examines the relevance of long run purchasing power parity ppp which allows for measurement errors during the recent floating exchange rate period previous empirical studies generally fail to find support for long run ppp over this period in this paper in this paper the cointegration property of exchange rates and prices is examined using maximum likelihood procedure and we find significant evidence favorable to long run ppp further tests for symmetry and proportionality indicate that these two conditions are not generally with the data the results support the hypothesis of long run ppp with measurement errors in prices

beyond the purchasing power parity testing for cointegration and causality between exchange rates prices and interest rates abstract this paper reexamines the causality between the dollar and the yen in a multivariate framework with the aid of cointegration and error correcting modeling for the 1951 94 period the phillips perron tests and johansen s tests are performed while causality from interest rates to exchange rates is found in the short run no causality between prices and exchange rates is found in the short run however causality is found running from relative prices to exchange rates along with interest rates between the u s and japan in the long run which supports the long run ppp hypothesis

price behaviour in the us sweetener market a cointegration approach the sweetener market in the united states is complicated because of the substitution possibilities between high fructose corn syrup hfcs and sugar this study focuses on the relationship between raw sugar prices and the prices for high fructose corn syrup sugar and hfcs are imperfect substitutes for several industrial uses sugar can be used for all industrial uses but hfcs has limited uses this study uses cointegration analysis to examine the relationship between sugar and hfcs prices as well as the relationship between raw and refined sugar prices over time the results indicate that sugar and hfcs prices move together for the 1983 1996 period however after this time period hfcs prices no longer follow sugar prices

econometric methods and purchasing power parity short and long run ppp this paper defines the different versions of the purchasing power parity and establishes the existing relationships between them in the light of econometric techniques monthly and annual data for real exchange rates are studied through a variance ratio test unlike other authors it is found that there is not explosive behaviour in the real exchange rate when monthly data are used besides stationarity is easily accepted using annual data these results allow to reconcile the two main versions of the purchasing power parity and also explain why trade imbalances are persistent but not permanent

sole versus dual sourcing in stochastic lead time s q inventory models when supply lead times are uncertain the simultaneous procurement from two sources offers savings in inventory holding and shortage costs economies are achieved if these savings outweigh the increase in ordering costs in this paper we analyze dual sourcing in the context of the reorder point order quantity inventory model with constant demand and stochastic lead times and compare it with single sourcing two cases are studied using the uniform and the exponential distributions which may be thought of as two extreme ways of representing stochastic lead times in our two vendor model the order quantity is split equally between the two vendors and the split orders are placed simultaneously when the inventory position reaches the reorder level a comparison of the total expected costs suggests that when the uncertainty in the lead times is high and the ordering costs are low dual sourcing could be cost effective

the purchasing power parity debate originally propounded by the 16th century scholars of the university of salamanca the concept of purchasing power parity ppp was revived in the interwar period in the context of the debate concerning the appropriate level at which to re establish international exchange rate parities broadly accepted as a long run equilibrium condition in the post war period it first was advocated as a short run equilibrium by many international economists in the first few years following the breakdown of the bretton woods system in the early 1970s and then increasingly came under attack on both theoretical and empirical grounds from the late 1970s to the mid 1990s accordingly over the last three decades a large literature has built up that examines how much the data deviated from theory and the fruits of this research have provided a deeper understanding of how well ppp applies in both the short run and the long run since the mid 1990s larger datasets and nonlinear econometric methods in particular have improved estimation as deviations narrowed between real exchange rates and ppp so did the gap narrow between theory and data and some degree of confidence in long run ppp began to emerge again in this respect the idea of long run ppp now enjoys perhaps its strongest support in more than 30 years a distinct reversion in economic thought

seasonality cointegration and the long run purchasing power parity evidence for sterling exchange rates the long run purchasing power parity ppp hypothesis is tested for nine bilateral sterling exchange rates using recently developed techniques on cointegration and seasonal integration the empirical findings show that none of the exchange rates and relative prices contain seasonal unit roots but all have an autoregressive unit root the cointegration tests overwhelmingly reject the ppp hypothesis as a long run equilibrium condition for all countries concerned

on unit roots and real exchange rates empirical evidence and monte carlo analysis this paper presents some empirical evidence that real exchange rate series contain a unit root in their time series respresentation which cancels out on first differencing using the augmented dickey fuller test the power of this test is also tested using monte carlo methods and it is found to be quite powerful against a range of stationary local alternatives the findings imply the absence of any tendency of the nominal exchange rate to converge on purchasing power parity even in the long run

searching for stationarity purchasing power parity under the current float abstract using panel data methods we investigate long run purchasing power parity by testing for unit roots in real exchange rates of industrial countries under the current float the evidence against the unit root hypothesis is stronger for larger than for smaller panels for monthly than for quarterly data and when the german mark rather than the united states dollar is used as the base currency while we find that accounting for serial correlation considerably weakens the evidence against the unit root null the results as a whole are consistent with long run purchasing power parity

testing long run ppp with infinite variance returns this paper investigates the long run purchasing power parity hypothesis when exchange rate returns and inflation rates are assumed to be heavy tailed stochastic processes more specifically residual based and likelihood ratio based cointegration tests of ppp that explicitly allow for infinite variance innovations are applied to monthly data 1973 1 1999 12 for belgium canada denmark france germany italy japan the netherlands norway spain sweden and the united kingdom our test results are marginally less supportive of ppp when the innovations are assumed to be infinite variance stable processes copyright 2003 john wiley sons ltd

purchasing power parity an analysis based on the evolutionary spectrum the bulk of the literature on the empirical validation of the purchasing power parity ppp has been based on cointegration although on rare occasions band spectrum analysis has also been used the former is tied down to the use of notional time in the analysis of systems away from equilibrium and the latter is circumscribed by the slutzky yule effect both these drawbacks are sought to be remedied in the present paper which seeks to bring to bear upon the ppp a new approach derived from the concept of a time varying spectrum both absolute and relative versions of the doctrine are tested for ten advanced economies over the post 1973 period uniform rejection of the ppp occurs with the us as base but with centring on the dm the evidence seems to be supportive of the ppp in its relative version for three european countries

firm dynamics and industrialization in the chinese economy in transition implications for small business policy abstract this article first presents a review of the development of different types of domestic enterprises state owned enterprise soes collectiveowned enterprises coes and other enterprises oes which include mainly private enterprises compared with other transition economies coes are actually an important source of china s rapid economic growth they are vaguely defined cooperative without a well defined ownership structure there is no equivalent organizational structure similar to coes in western economies the purpose of this article is to study the empirical relationship between the size of domestic enterprises including state owned enterprises collective owned enterprises and other enterprises and their firm dynamics growth by investigating whether they grow according to gibrat s law the majority of coes and oes were formed after the economic reform the rapid growth of these non state enterprises especially coes is actually the driving force behind the rapid development of the industrial sector our empirical results suggest that gibrat s law does not hold for all types of enterprises the rejection is especially strong for coes moreover small enterprises are growing faster than their larger counterparts in terms of employment and output this conclusion leads to at least three implications 1 there has been little research into the dynamics of soes and coes in an economy in transition our results not only help stimulate further research in this area but also provide information for designing policies to speed up the economic reforms 2 until now the chinese government has not had a comprehensive small business policy given our empirical results there is an implication for government policy prescription to achieve china s development targets of rapid industrialization and lower unemployment or underemployment the chinese economy can reap more dynamic benefits by breaking up a giant and inefficient enterprise especially inefficient soe into a number of smaller enterprises in addition more small enterprises also improve competition in the marketplace and force other inefficient soes to improve their performance further research should be undertaken to examine the viability of this policy 3 because coes are the majority of small manufacturing enterprises the rapid growth of coes after their formation that are simply the opposite of the type of private organizations the center of the central and east european reforms is rather surprising to academics although some hypotheses like cooperative culture and moral framework for rights are put forward to explain their superior performance the validity of such hypotheses has not been empirically tested yet this is a fruitful area for further research

testing symmetry and proportionality in ppp a panel data approach purchasing power parity ppp is a proposition equating the nominal exchange rate to the ratio of the domestic to foreign price levels this article employs bayesian panel data methods to test for ppp in particular the implied symmetry and proportionality conditions using a dataset of all the organization for economic cooperation and development member countries in the post bretton woods era i do not find support for symmetry and proportionality in ppp over time and across countries