sticky prices and monetary policy evidence from disaggregated us data this paper disentangles fluctuations in disaggregated prices due to macroeconomic and sectoral conditions using a factor augmented vector autoregression estimated on a large data set on the basis of this estimation we establish eight facts 1 macroeconomic shocks explain only about 15 of sectoral inflation fluctuations 2 the persistence of sectoral inflation is driven by macroeconomic factors 3 while disaggregated prices respond quickly to sector specific shocks their responses to aggregate shocks are small on impact and larger thereafter 4 most prices respond with a significant delay to identified monetary policy shocks and show little evidence of a price puzzle contrary to existing studies based on traditional vars 5 categories in which consumer prices fall the most following a monetary policy shock tend to be those in which quantities consumed fall the least 6 the observed dispersion in the reaction of producer prices is relatively well explained by the degree of market power 7 prices in sectors with volatile idiosyncratic shocks react rapidly to aggregate monetary policy shocks 8 the sector specific components of prices and quantities move in opposite directions

information acquisition and under diversification if an investor wants to form a portfolio of risky assets and can exert effort to collect information on the future value of these assets before he invests which assets should he learn about the best assets to acquire information about are ones the investor expects to hold but the assets the investor holds depend on the information he observes we build a framework to solve jointly for investment and information choices with general preferences and information cost functions although the optimal research strategies depend on preferences and costs the main result is that the investor who can first collect information systematically deviates from holding a diversified portfolio information acquisition can rationalize investing in a diversified fund and a concentrated set of assets an allocation often observed but usually deemed anomalous copyright wiley blackwell

on the practical limits to substitution abstract this paper considers the arguments for weak vs strong sustainability the weak sustainability position held by many mainstream neoclassical economists such as solow and weitzman is that almost all kinds of natural capital can be substituted by man made capital the contrary position known as strong sustainability holds that many of the most fundamental services provided by nature cannot be replaced by services produced by humans or man made systems the paper discusses the limits of substitution from a physical point of view it concludes that while there is considerable scope for substitution in some domains the limits to substitutability in the medium term at least are real and important in effect the paper supports the strong sustainability position

real rigidity nominal rigidity and the social value of information does welfare improve when firms are better informed about the state of the economy and can thus better coordinate their production and pricing decisions we address this question in an elementary business cycle model that highlights how the dispersion of information can impede both kinds of decisions and in this sense be the source of both real and nominal rigidity within this context we develop a taxonomy for how the social value of information depends on the two rigidities on the sources of the business cycle and on the conduct of monetary policy jel d21 d82 d83 e32 e52

wage rigidities and jobless recoveries abstract real wage rigidities cause jobless recoveries suppose that a one time shock reduces the capital stock below trend if wages are flexible they decline and employment increases at the moment of the shock before both revert back to normal levels as the economy grows back to trend if wages are completely rigid and the labor market is otherwise frictionless the shock causes a proportional and permanent decline in employment capital output consumption and investment relative to trend in a search model with rigid wages the shock causes a persistent but not permanent decline in these economic outcomes a jobless recovery

rationally inattentive seller sales and discrete pricing prices tend to remain constant for a period of time and then jump in the literature this rigidity is usually interpreted to reflect a cost of adjusting prices this article shows that price rigidity can alternatively reflect optimal price setting when there are no adjustment costs namely if the seller is rationally inattentive the model generates non trivial pricing patterns that are consistent with the data and that are hard to explain with the traditional adjustment cost model in particular prices are adjusted frequently but move back and forth between a few given values hazard functions are downward sloping and responses to persistent shocks are sluggish these results are obtained in a model that implements rational inattention without simplifying assumptions on the functional forms of the processed signals

booms and busts with dispersed information abstract dispersed information can generate booms and busts in economic activity boom bust dynamics appear when firms are initially over optimistic about demand due to a noisy private news consequently they overproduce which generates a boom and depresses their markups because the news is private firms cannot relate these low markups to aggregate optimism as low markups can also signal low demand this overturns their expectations generating a bust we emphasize a novel role for imperfect common knowledge dispersed information makes firms ignorant about their competitors actions which makes them confuse high noise driven supply with low fundamental demand

characterising deindustrialisation an analysis of changes in manufacturing employment and output internationally deindustrialisation is typically conceptualised as a decline in manufacturing as a share of total employment from a kaldorian perspective deindustrialisation could have negative implications for long run growth given the special growth pulling properties of manufacturing however defining deindustrialisation purely in terms of employment share is conceptually limiting given that some of the kaldorian processes operate primarily through output rather than employment as well as blunting empirical analysis by not focussing enough on changes in manufacturing share of gross domestic product gdp this study develops a new method using decomposition techniques to analyse changes in manufacturing employment levels and shares in 48 countries over periods of deindustrialisation the analysis separates out changes in the levels and shares of employment manufacturing into components associated with changes in the share of manufacturing in gdp the growth of manufacturing value added the labour intensity of manufacturing production and economic growth the results indicate that in most cases the decline in manufacturing employment is associated primarily with falling labour intensity of manufacturing rather than an overall decline in the size or share of the manufacturing sector we suggest that deindustrialisation should appropriately be defined in terms of a sustained decline in both the share of manufacturing in total employment and the share of manufacturing in gdp copyright the author 2008 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

monetary policy for rationally inattentive economies with staggered price setting the paper examines the optimal monetary policy when firms are constrained by information processing capability and infrequent price adjustments firms information processing limit gives rise to imperfect knowledge about macroeconomic aggregates and endogenous information learning contingent on the monetary policy staggered price setting introduces the observed price duration and additional policy tradeoffs resulting from the interactions between nominal rigidities and imperfect information processing the integrated model implies an optimal policy that commits to complete price stabilization in response to natural rate shocks but not in response to markup shocks in the presence of markup shocks it is optimal for the central bank to focus on price stabilization in the initial periods following markup shocks and shifts the emphasis to output gap stabilization later moreover larger information capacity stronger complementarities and more persistent shocks require more aggressive price stabilization in the short run

kaldor s laws and spatial dependence evidence for the european regions pons novell j and viladecans marsal e 1999 kaldor s laws and spatial dependence evidence for the european regions reg studies 33 443 451 in this paper we provide an outline of kaldor s growth model and test its relevance to the economic experience of european regions during the period 1984 92 kaldor s first law asserts that manufacturing is the engine of economic growth his second proposition also known as verdoorn s law states that there is a strong positive relation between manufacturing productivity growth and manufacturing output growth kaldor s third law holds that overall productivity growth is positively related to manufacturing output growth and negatively related to employment in non manufacturing sectors the empirical results corrected for the presence of spatial autocorrelation indicate that kaldor s second and third laws are compatible with the economic growth of european regions during the period 1984 92 pons novell j et viladecans marsal e 1999 les lois de kaldor et la

the metabolic transition of a planned economy material flows in the ussr and the russian federation 1900 to 2010 abstract the study of long term historical trends in material flows has gained some prominence in ecological economics since the first studies for austria and the united kingdom were published as part of a special section in 2002 this research expands the existing knowledgebase by presenting material flows for the russian federation and its predecessor states employing a standard accounting framework the study of material flows for the russian federation provides an interesting and unique case of a planned economy and its transition to a market based form of economic organization we show that in spite of considerable differences in the physical economy the ussr developed material use patterns similar to that of western industrialized economies lower levels of consumption were more than outweighed by inefficient production the transition towards a market economy drove rapid improvements in resource productivity but also growth in metabolic rates the results indicate that the transition to an industrial metabolic profile proceeds largely irrespective of economic and political conditions an improved understanding of the evolution of socio economic systems and the material flows that fuel them is increasingly relevant for designing new systems of production and consumption and facilitating a transition towards a more sustainable industrial metabolism

the soviet energy conservation dilemma abstract we have made an extensive analysis of the structure of energy use in the ussr since 1960 based on this work we find that the opportunities for energy conservation in the ussr are truely enormous were the energy intensities of the major activities in the ussr to fall to the levels of western europe energy use in the ussr in 1985 would have been one third lower than it actually was the problems in obtaining increased efficiencies are more institutional than technical the ussr has had little economic incentive to invest in more efficient energy use energy prices are determined by a central pricing authority and have not kept pace with world energy prices or with the costs of domestic energy production the dilemma for the ussr is that energy inefficiency is really a product of all the other inefficiencies in the soviet economy and can only improve if the entire economy improves changes in the mix of goods produced could also lower soviet energy use in industry and for freight however economic reform may also bring a surge in the demand for personal mobility home comfort and greater activity in the service sector important sectors of energy growth in the west thus economic structural change in the ussr will be a two edged sword

knowing what others know coordination motives in information acquisition we explore how optimal information choices change the predictions of strategic models when a large number of agents play a game with strategic complementarity information choices exhibit complementarity as well if an agent wants to do what others do they want to know what others know this makes heterogeneous beliefs di cult to sustain and may generate multiple equilibria in models with substitutability agents prefer to difierentiate their information choices we use these theoretical results to examine the role of information choice in recent price setting models and to propose modeling techniques that ensure equilibrium uniqueness

business cycle dynamics under rational inattention we develop a dynamic stochastic general equilibrium dsge model with rational inattention and compare its predictions to data households and decision makers in firms have limited attention and optimally allocate their attention rational inattention is the only source of slow adjustment the model matches the empirical impulse responses to monetary policy shocks and aggregate technology shocks at the same time profit losses and utility losses from inattention are very small furthermore it matters whether one uses this model or a conventional dsge model for policy analysis

learning over the business cycle policy implications abstract this paper studies the policy implications of the endogeneity of information about the state of the economy the business cycle can be made less noisy and more efficient by incentivizing firms to vary their pricing and production decisions more with their beliefs about the state of the economy this calls for countercyclical taxes complemented by a monetary policy that leans against the wind the optimal policies trade off allocative efficiency for informational efficiency

information rigidity and the expectations formation process a simple framework and new facts we propose a new approach to test the full information rational expectations hypothesis which can identify whether rejections of the null arise from irrationality or limited information this approach quantifies the economic significance of departures from the null by quantifying the underlying degree of information rigidity applying this approach to u s and international data of professional forecasters and other agents yields pervasive evidence consistent with models of imperfect information furthermore the proposed approach sheds new light on policies such as inflation targeting and those leading to the great moderation affecting expectations finally we document evidence of state dependence in the expectations formation process

prospects for non opec oil supply abstract the political and economic importance which has been attached to the oil industry in recent decades relates to the rapid increase in the demand for oil over the period from 1950 1980 and to the dominant role played by the politically volatile middle east in its supply although global demand for oil has grown little over the last decade during which period the role of middle east supplies has fallen both relatively and absolutely contemporary conventional wisdom on the future of oil envisages the reestablishment of middle east supply dominance this paper will challenge the validity of this view in the context of a realistic evaluation of the longterm demand prospects for the commodity

menu costs and phillips curves this paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation sellers can change price only by incurring a real menu cost we calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new u s data set of individual prices due to klenow and kryvtsov the prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with international evidence from various studies the model is also used to conduct numerical experiments on the economy s response to various shocks in none of the simulations we conducted did monetary shocks induce large or persistent real responses

monetary policy and price responsiveness to aggregate shocks under rational inattention this paper presents a general equilibrium model that is consistent with recent empirical evidence showing that the u s price level and inflation are much more responsive to aggregate technology shocks than to monetary policy shocks the model of this paper builds on recent work by mackowiak and wiederholt 2009 who show that models of endogenous attention allocation deliver prices to be more responsive to more volatile shocks as everything else being equal firms pay relatively more attention to more volatile shocks in fact according to the u s data aggregate technology shocks are more volatile than monetary policy shocks inducing in this paper firms to pay more attention to the former than to the latter however most important this work adds to the literature by showing that the ability of the model of this paper to account for observed price dynamics crucially depends on monetary policy in particular this paper shows how interest rate feedback rules affect the incentives faced by firms in allocating attention a policy rate responding more actively to expected inflation and output fluctuations induces firms to pay relatively more attention to more volatile shocks this new mechanism of transmission of monetary policy helps rationalizing the observed behavior of prices in response to technology and monetary policy shocks and implies novel predictions about the impact of changes in taylor rules coefficients on economic fluctuations

monetary policy for inattentive economies we offer a contribution to the analysis of optimal monetary policy we begin with a critical assessment of the existing literature arguing that most work is based on implausible models of inflation output dynamics we then suggest that this problem may be solved with some recent behavioral models which assume that price setters are slow to incorporate macroeconomic information into the prices they set a specific such model is developed and used to derive optimal policy in response to shocks to productivity and aggregate demand optimal policy is price level targeting base drift in the price level which is implicit in the inflation targeting regimes currently used in many central banks is not desirable in this model when shocks to desired markups are added optimal policy is flexible targeting of the price level that is the central bank should allow the price level to deviate from its target for a while in response to these supply shocks but it should eventually return the price level to its target path optimal policy can also be described as an elastic price standard the central bank allows the price level to deviate from its target when output is expected to deviate from its natural rate

policy with dispersed information information regarding economic fundamentals is widely dispersed in society is only imperfectly aggregated through prices or other indicators of aggregate activity and cannot be centralized by the government or any other institution in this paper we seek to identify policies that can improve the decentralized use of such dispersed information without requiring the government to observe this information we show that this can be achieved by appropriately designing the contingency of taxation on ex post public information regarding the realized fundamentals and aggregate activity when information is common as in the ramsey literature or when agents have private information only about idiosyncratic shocks as in the mirrlees literature the contingency on fundamentals alone suffices for efficiency when instead agents have private information about aggregate shocks the contingency on aggregate activity is crucial an appropriate combination of the two contingencies permits the government to i dampen the impact of noise and hence reduce non fundamental volatility without also dampening the impact of fundamentals ii induce agents to internalize informational externalities and hence improve the speed of social learning iii restore a certain form of constrained efficiency in the decentralized use of information and iv guarantee that welfare increases with the provision of any additional information jel c72 d62 d82

indicator variables for optimal policy the optimal weights on indicators in models with partial information about the state of the economy and forward looking variables are derived and interpreted both for equilibria under discretion and under commitment an example of optimal monetary policy with a partially observable potential output and a forward looking indicator is examined the optimal response to the optimal estimate of potential output displays certainty equivalence whereas the optimal response to the imperfect observation of output depends on the noise in this observation

an application of a kaldorian export led model of growth to the united states a kaldorian export led model of growth is analysed using post second world war united states data the structural parameter restrictions of the model are confirmed by the estimates kaldor s model which was originally conceived to be illuminating for describing a region or a small open economy is able to describe the annual fluctuations in the growth rate of a large open economy like that of the united states with only minor adjustments

portfolio choice attention allocation and price comovement abstract this paper models the attention allocation of portfolio investors investors choose the composition of their information subject to an information flow constraint given their expected investment strategy in the next period which is to hold a diversified portfolio in equilibrium investors choose to observe one linear combination of asset payoffs as a private signal when investors use this private signal to update information about two assets changes in one asset affect both asset prices and may lead to asset price comovement the model also has implications for the transmission of volatility shocks between two assets

exogenous information endogenous information and optimal monetary policy most of the analysis of optimal monetary policy is conducted with the calvo model this paper studies optimal monetary policy when the slow adjustment of the price level is due to imperfect information by decision makers in firms we consider two models a model with exogenous dispersed information and a rational inattention model in the model with exogenous dispersed information complete stabilization of the price level is optimal after aggregate productivity shocks but not after markup shocks by contrast in the rational inattention model complete stabilization of the price level is optimal both after aggregate productivity shocks and after markup shocks moreover in the model with exogenous dispersed information there is no value from commitment to a future monetary policy by contrast in the rational inattention model there is value from commitment to a future monetary policy because then the private sector can trust the central bank that not paying attention to certain variables is optimal

manufacturing and economic growth in the united states kaldor s growth laws are applied to the post world war ii united states each variable employed in the time series analysis is smoothed with a moving average this procedure successfully mitigates the effects of short term cyclical changes and emphasizes long term economic growth indicate that kaldor s laws are compatible with the economic growth of united states

indicator variables for optimal policy under asymmetric information the optimal weights on indicators in models with partial information about the state of the economy and forward looking variables are derived and interpreted both for equilibria under discretion and under commitment the private sector is assumed to have more information about the state of the economy than the policymaker certainty equivalence holds for the optimal reaction function in state space form t he coefficients are independent of the degree of uncertainty about the state of the economy however in the case of commitment certainty equivalence does not hold for the reaction function in integrative form the policy instrument cannot be written as a distributed lag of past estimates of past states of the economy instead optimal policy will generally depend on new estimates of past states of the economy and in ways that depend on the information structure furthermore the usual separation principle does not hold since the estimation of the state of the economy is not independent of optimization and is in general quite complex we present a general characterization of optimal filtering and control in settings of this kind and discuss an application of our methods to the problem of the optimal use of real time macroeconomic data in the conduct of monetary policy

observing and shaping the market the dilemma of central banks while the central bank observes the market activity to assess economic fundamentals it shapes the market outcome through its policy interventions the more the central bank influences the market the more it spoils the informational content of economic aggregates how should the central bank act and communicate when it derives its information from observing the market this paper analyses the optimal central bank s action and disclosure under endogenous central bank s information for three operational frameworks pure communication action and communication and signaling action when the central bank takes an action it would be optimal for the central bank to be fully opaque to prevent its disclosure from deteriorating the information quality of market outcomes however in the realistic case where central bank s action is observable it may be optimal to refrain from implementing any action

growth in global materials use gdp and population during the 20th century the growing industrial metabolism is a major driver of global environmental change we present an assessment of the global use of materials since the beginning of the 20th century based on the conceptual and methodological principles of material flow accounting mfa on the grounds of published statistical data data compilations and estimation procedures for material flows not covered by international statistical sources we compiled a quantitative estimate of annual global extraction of biomass fossil energy carriers metal ores industrial minerals and construction minerals for the period 1900 to 2005 this period covers important phases of global industrialisation and economic growth the paper analyses the observed changes in the overall size and composition of global material flows in relation to the global economy population growth and primary energy consumption we show that during the last century global materials use increased 8 fold humanity currently uses almost 60 billion tons gt of materials per year in particular the period after wwii was characterized by rapid physical growth driven by both population and economic growth within this period there was a shift from the dominance of renewable biomass towards mineral materials materials use increased at a slower pace than the global economy but faster than world population as a consequence material intensity i e the amount of materials required per unit of gdp declined while materials use per capita doubled from 4 6 to 10 3 t cap yr the main material groups show different trajectories while biomass use hardly keeps up with population growth the mineral fractions grow at a rapid pace we show that increases in material productivity are mostly due to the slow growth of biomass use while they are much less pronounced for the mineral fractions so far there is no evidence that growth of global materials use is slowing down or might eventually decline and our results indicate that an increase in material productivity is a general feature of economic development

optimal monetary policy with imperfect common knowledge we study optimal nominal demand policy in a flexible price economy with monopolistic competition where firms have imperfect common knowledge about the shocks hitting the economy information imperfections emerge endogenously because firms are assumed to have finite shannon capacity to process information we then ask how policy that minimizes a quadratic objective in output and prices depends on firms processing capacity when price setting decisions of firms are strategic complements we find that policy should nominally accommodate white noise mark up shocks for a large range of capacity values this fi nding is robust to the policy maker observing shocks imperfectly or being uncertain about firms processing capacity when mark up shocks are persistent accommodation may even have to increase in the medium term but has to decrease in the long run thereby generating a hump shaped price response and a slow reduction in output instead when prices are strategic substitutes policy tends to react with nominal demand contractions to mark up shocks in addition there might exist discontinuities between common knowledge equilibria and equilibria with small amounts of imperfect common knowledge

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

information acquisition and welfare we study information acquisition in a flexible framework with strategic complementarity or substitutability in actions and a rich set of externalities that are responsible for possible wedges between the equilibrium and the efficient acquisition of information first we relate the in efficiency in the acquisition of information to the in efficiency in the use of information and explain why efficiency in the use is no guarantee of efficiency in the acquisition next we show how the acquisition of private information affects the social value of public information i e the comparative statics of equilibrium welfare with respect to the quality of public information finally we illustrate the implications of the results in a monetary economy with price rigidities and dispersed information about productivity shocks

information immobility and the home bias puzzle many argue that home bias arises because home investors can predict home asset payoffs more accurately than foreigners can but why does global information access not eliminate this asymmetry we model investors endowed with a small home information advantage who choose what information to learn before they invest surprisingly even when home investors can learn what foreigners know they choose not to investors profit more from knowing information others do not know learning amplifies information asymmetry the model matches patterns of local and industry bias foreign investments portfolio outperformance and asset prices finally we propose new avenues for empirical research

patterns of change in material use and material efficiency in the successor states of the former soviet union the successor states of the former soviet union present a unique opportunity to study the changes in the socio metabolic profile of a cohort of nations which underwent a radical and contemporaneous shift in economic system that change was from being regions within an economically integrated centrally planned whole to being independent nations left to find their own place in the global economic system the situation of these nations since the dissolution of the soviet union provides a rare experiment in which we might observe the influence of the different starting conditions of each nation on the development path it subsequently followed and the attendant socio metabolic profiles which resulted here we take the opportunity to examine patterns for the region as a whole and for three individual countries we also examine the relative importance of three different drivers of material consumption using a version of the ipat framework finally an area for follow on investigation was suggested by a significant positive correlation observed between the economic growth of individual successor states and the degree to which they improved their material productivity this latter is of potential importance in assessing whether dematerialization acts primarily to accelerate or retard economic growth

sectoral price data and models of price setting in the median sector 100 percent of the long run response of the sectoral price index to a sector specific shock occurs in the month of the shock the standard calvo model and the standard sticky information model can match this finding only under extreme assumptions concerning the profit maximizing price the rational inattention model of mackowiak and wiederholt 2009a optimal sticky prices under rational inattention american economic review 99 769 803 can match this finding without an extreme assumption concerning the profit maximizing price furthermore there is little variation across sectors in the speed of response of sectoral price indexes to sector specific shocks the rational inattention model matches this finding while the calvo model predicts too much cross sectional variation

global patterns of materials use a socioeconomic and geophysical analysis abstract human use of materials is a major driver of global environmental change the links between materials use and economic development are central to the challenge of decoupling of materials use and economic growth dematerialization this article presents a new global material flow dataset compiled for the year 2000 covering 175 countries including both extraction and trade flows and comprising four major material categories biomass construction minerals fossil energy carriers and ores industrial minerals first we quantify the variability and distributional inequality gini coefficients in international material consumption we then measure the influence of the drivers population gdp land area and climate this analysis yields international income elasticities of material use finally we examine the coupling between material flows and between income and material productivity measured in economic production per tonne material consumed material productivity is strongly coupled to income and may thus not be suitable as an international indicator of environmental progress a finding which we relate to the economic inelasticity of material consumption the results demonstrate striking differences between the material groups biomass is the most equitably distributed resource economically the most inelastic and is not correlated to any of the mineral materials the three mineral material groups are closely coupled to each other and economic activity indicating that the challenge of dematerializing industrial economies may require fundamental structural transformation our analysis provides a first systematic investigation of international differences in material use and their drivers and thus serves as the basis for more detailed future work

coarse pricing policies the muted volatility of inflation during the great recession and its aftermath has refocused attention on the constraints that firms face when adjusting prices using new empirical and theoretical results i argue that each firm s choice of how much information to acquire to set prices plays a central role in determining the patterns of pricing at the product level and the degree of aggregate price rigidity in response to shocks in support of the information channel i present product level evidence that firms price goods using coarse pricing policies that are updated infrequently and consist of a small menu of prices firms are heterogeneous in the complexity and duration of their pricing policies and this heterogeneity is reflected in differential responses to the great recession cycle with firms exhibiting more complex policies responding more aggressively i develop a theory of information constrained price setting that generates coarse pricing endogenously and quantitatively matches the discreteness duration and volatility of policies in the data the information friction dampens the responsiveness of prices to shocks and coupled with heightened volatility induces firms to keep prices relatively high to protect against losses in an uncertain environment

the physical economy of the european union cross country comparison and determinants of material consumption abstract in this paper we investigate what determines observed differences in economy wide material use among the eu 15 member states the empirical basis for our analysis is an extended and revised material flow data set for each of the eu 15 countries in time series from 1970 to 2001 this data set comprises consistent data for domestic extraction imports and exports as well as for derived material flow indicators broken down by 12 types of materials we compare the level and composition of domestic material consumption dmc in the eu 15 member states and identify determinants of the observed differences across the european union member states overall dmc per capita varies by a factor of three ranging between 12 tonnes per capita in italy and the united kingdom and 37 tonnes per capita in finland this variability of dmc in the eu 15 is in a similar order of magnitude as the variability of gdp per capita or total primary energy supply per capita linear correlation analysis reveals that national income and final energy consumption relate to material use but cannot fully account for the observed differences in material consumption by breaking down overall material flow indicators into 12 categories of materials and analysing their use patterns in detail we identified a number of factors socio economic and natural that influence the level and composition of economy wide material use many of these factors are specific for certain types of materials others are more general and quite some driving factors counteract each other regarding the direction of their influence concluding we summarize the most important driving factors for domestic material consumption stressing population density as largely neglected but important explanatory variable for material use patterns discuss issues of environmental significance aggregation and the use of different denominators in material flow accounting and suggest a re interpretation of dmc

industrial profitability and trade among the former soviet republics the break up of the soviet union claudia senik leygonie and gordon hughes this article looks at profitability and trade in the republics of the former soviet union looking at individual industries republic by republic there emerges a picture of some highly profitable sectors along with others with negative value added the most profitable industries mostly associated with oil and gas extraction are the least protected the least intensive in labour and already the most developed the least efficient industries include food processing and light industry and are the most protected ones trade patterns both within the former soviet union and with the rest of the world are unrelated to comparative advantage consequently sizable gains from trade are potentially available and the relevant industries are identified when the single trade balance constraint is replaced by constraints at the republic level it is clear that russia stands to benefit from not having to cover with its surpluses the deficits of the other republics russia again along with kazakhstan and ukraine should benefit from a shift to market based terms of trade

signalling effects of monetary policy we develop a dynamic general equilibrium model in which the policy rate signals the central bank s view about macroeconomic developments to price setters the model is estimated with likelihood methods on a u s data set that includes the survey of professional forecasters as a measure of price setters inflation expectations this model improves upon existing perfect information models in explaining why in the data inflation expectations respond with delays to monetary impulses and remain disanchored for years in the 1970s u s monetary policy is found to signal persistent inflationary shocks explaining why inflation and inflation expectations were so persistently heightened the signalling effects of monetary policy also explain why inflation expectations adjusted more sluggishly than inflation after the robust monetary tightening of the 1980s

the signaling role of policy actions abstract in an economy affected by shocks that are imperfectly known the monetary instrument takes on a dual stabilizing role as a policy response that directly influences the economy and as a vehicle for information that reveals the central bank s assessment to firms because mark up shocks cannot be neutralized by monetary policy providing firms with more information about these shocks exacerbates their reaction and creates a larger distortion recognizing the signaling role of its instrument the central bank distorts its policy response in order to optimally shape firms beliefs while providing firms with more information is always detrimental to the output gap it has a more subtle effect on price dispersion depending on whether information is provided through the transparency channel or through the signaling channel although more transparency is always detrimental to welfare the information that is conveyed by the monetary instrument improves welfare when firms coordination is highly valuable

kaldorian approach to greek economic growth in the last 30 years greece has experienced a rapid rate of economic growth which has transformed the economy and enabled it to become a member of the eec specifically greece transformed itself from an agricultural economy with virtually no industrial base to an economy with a significant industrial sector and consequently a relatively high income per capita one can explain this on the lines of a kaldorian framework in this paper we provide an outline of kaldor s growth model and test its relevance to the economic experience of greece during the 1967 1988 period the empirical results suggest that the model can adequately explain the developments in the economy to a considerable degree

efficient use of information and social value of information this paper analyzes equilibrium and welfare for a tractable class of economies games that have externalities strategic complementarity or substitutability and heterogeneous information first we characterize the equilibrium use of information complementarity heightens the sensitivity of equilibrium actions to public information raising aggregate volatility whereas substitutability heightens the sensitivity to private information raising cross sectional dispersion next we define and characterize an efficiency benchmark designed to address whether the equilibrium use of information is optimal from a social perspective the efficient use of information reflects the social value of aligning choices across agents finally we examine the comparative statics of equilibrium welfare with respect to the information structure the social value of information is best understood by classifying economies according to the inefficiency if any in the equilibrium use of information we conclude with a few applications including production externalities beauty contests business cycles and large cournot and bertrand games

optimal monetary policy when information is market generated endogenous i e market generated signals observed by firms have crucial implications for monetary policy when information is endogenous firms gather a demand signal from their market that is both real and nominal as a result the traditional surprise channel of monetary policy is absent instead monetary policy works through a signaling channel as it affects firms information through the demand signal the optimal policy is then the signaling policy i e the policy that maximizes the information content of the demand signal in our setup the signaling policy targets a positive correlation between money supply and prices which emphasizes the natural response of prices to real shocks on the contrary in the more traditional case of exogenous information optimal monetary policy would stabilize prices as it acts through the surprise channel we show that the signaling policy is optimal regardless of the amount of attention that firms pay to central bank communication

elasticity of attention and optimal monetary policy abstract optimal monetary policy depends on whether agents have exogenous endogenous inelastic or endogenous elastic attention under elastic attention optimal monetary policy induces equilibria that are not possible under the other two settings no attention to any shocks that generate inefficient economic fluctuations

changes in the united kingdom s natural relations in terms of society s metabolism and land use from 1850 to the present day abstract in this paper we present our understanding of how society and nature have interacted in the course of history in terms of society s metabolic interchange with the biophysical environment presenting a theoretical model we begin by focusing on the interface between society and nature society s natural relations as conceptualized by the idea of metabolism which draws upon marxist theory complemented by a systems approach the concept of metabolism portrays society as a system which has to establish and maintain a permanent throughput of energy and matter to produce and maintain society s material components the amount of resource flow is operationalized by using material and energy flow accounting methods empirically these methods are applied to the uk s economy in a time series approach from 1850 to the present day we discuss different aggregates of inputs such as domestic material extraction foreign trade of materials energy input and additionally give an account of land use change obviously these changing natural relations are linked to socio economic activities hence we make a first attempt to discuss different periods of socio economic development by drawing from a regulation approach and try to link them to physical indicators such as direct material and energy input and domestic material consumption dmc thereby we hope to contribute to a historical understanding of socio economically driven environmental change within the framework of ecological economics

a kaldorian approach to regional economic growth in china kaldor s engine of growth hypothesis is examined in the case of the chinese economy china has in the last decade experienced a rapid industrialization and very strong economic growth using regional data of this growth process the three kaldorian laws of economic growth are tested the empirical results support the hypothesis there seems to be an especially strong relation between productivity and industrial growth

optimal sticky prices under rational inattention this paper presents a model in which price setting firms decide what to pay attention to subject to a constraint on information flow when idiosyncratic conditions are more variable or more important than aggregate conditions firms pay more attention to idiosyncratic conditions than to aggregate conditions when we calibrate the model to match the large average absolute size of price changes observed in micro data prices react fast and by large amounts to idiosyncratic shocks but only slowly and by small amounts to nominal shocks nominal shocks have strong and persistent real effects we use the model to investigate how the optimal allocation of attention and the dynamics of prices depend on the firms environment jel e 3 e5 d8

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting

optimal monetary policy with uncertain fundamentals and dispersed information this paper studies optimal monetary policy in a model where aggregate fluctuations are driven by the private sector s uncertainty about the economy s fundamentals information on aggregate productivity is dispersed across agents and there are two aggregate shocks a standard productivity shock and a noise shock affecting public beliefs about aggregate productivity neither the central bank nor individual agents can distinguish the two shocks when they are realized despite the lack of superior information monetary policy can affect the economy s relative response to the two shocks as time passes better information on past fundamentals becomes available the central bank can then adopt a backward looking policy rule based on more precise information about past shocks by announcing its response to future information the central bank can influence the expected real interest rate faced by forward looking consumers with different beliefs and thus affect the equilibrium allocation if the announced future response is sufficiently aggressive the central bank can completely eliminate the effect of noise shocks however this policy is typically suboptimal as it leads to an excessively compressed distribution of relative prices the optimal monetary policy balances the benefits of aggregate stabilization with the costs in terms of cross sectional efficiency copyright wiley blackwell