making the same mistake again or is this time different the world faces an economic crisis of unprecedented proportions but much of the policy response has certainly not lacked for precedent national governments and international organisations including the international monetary fund imf have looked to crises of the past for solutions to the present and austerity has become a familiar theme the inability to effectively resolve the current crisis however gives rise to the question is this time different this article provides a broad overview to the origins and development of the recent economic crisis and the resort to policies of austerity although there is historical precedent for the resort to austerity such as the uk treasury view during the 1920s and 1930s this time things are different many of the current problems are deeply rooted and reflect the impact of the shift towards free market economics that started in the 1970s 2 the origins of the crisis since the beginning of the 1970s the private sector finance in particular has reorganised on an increasingly global scale it has innovated in terms of both structure and products and it has experienced significant growth as tridico 2012 this issue shows this financialisation was characterised by a ballooning of stock exchanges as many firms decided not only to list their shares but also to become involved in speculative finance in response to pressures on firms to maximise shareholder value together with the progressive erosion of worker and trade union rights and influence labour markets became more flexible and real wages stagnated concurrently profits rebounded leading to burgeoning inequality in this context aggregate demand and consumption were bolstered by easy credit and the wealth effects of speculative bubbles first in stocks and shares and then in housing

does the great recession imply the end of the great moderation international evidence in this paper we examine whether or not the great recession had a temporary or permanent effect on output growth volatility after years of low macroeconomic volatility since the early eighties based on break detection methods applied to a set of advanced countries our empirical results do not give evidence to the end of the great moderation period but rather that the great recession is characterized by a dramatic short lived effect on the output growth but not on its volatility we show that neglecting the breaks both in mean and in variance can have large effects on output volatility modeling based on garch specifications

the role of the media in fiscal consolidation programmes the case of ireland a number of european countries have implemented austerity programmes since the onset of the current economic crisis this paper focuses on fiscal consolidation a central aspect of such programmes using the case of ireland it investigates the significant role of the mass media in presenting such policies to the public a role which has so far remained unexamined conceiving of the irish experience over the past few decades as a case of neoliberalisation it uses a critical political economic conceptualisation of news organisations to consider 431 editorials and opinion articles discussing fiscal consolidation in three leading irish newspapers between 2008 and 2012 it finds that the majority of articles present viewpoints in favour of fiscal consolidation and display a preference for spending cuts over tax hikes which substantiates the claim that ireland has adopted neoliberal policies to address the crisis only a minority of articles oppose fiscal consolidation these mostly contest specific spending cuts but usually fail to criticise fiscal consolidation itself by calling for economic alternatives such as keynesian stimulus differences between newspapers are also discussed highlighting their ideological cleavages

when 2 2 is not the same as 1 3 variations in price sensitivity across components of partitioned prices abstract firms often use a pricing strategy in which the total price of a product and or service is partitioned into two or more mandatory components whereas previous research has compared partitioned with nonpartitioned pricing this article examines how partitioning the total price differently across the components affects consumer preferences in four studies the authors show that consumers reactions to price partitioning are moderated by the perceived consumption benefit of the components specifically consumers are more sensitive to the price of components that provide low consumption benefits than to the price of components that provide relatively high consumption benefits consequently when evaluating different partitions of the same total price consumers prefer partitions in which the price of the low benefit component is lower and the price of the high benefit component is higher

covariation assessment by consumers two experiments were conducted to investigate the effect of prior beliefs and information format on consumers assessment of the relationship between price and quality for four frequently purchased grocery products in these studies consumers were shown sets of data each of which presented ranks of 10 brands of a product category on price and quality contrary to prior research on illusory correlation consumers estimates of covariation were relatively accurate and unaffected by the availability of relevant prior beliefs about the nature of the relationship between price and quality for grocery products in general or by format manipulations that varied the ease or difficulty of processing the data these findings are discussed in terms of the effect of detailed instructions the availability of simple heuristics for processing rank ordered data differences between social and consumer perceptions and the stages of consumer information processing most likely to be affected by prior beliefs

long term growth and short term economic instability when learning by doing is at the origin of growth the long run growth rate should be negatively related to the amplitude of the business cycle if human capital accumulation is increasing and concave in the cyclical component of production empirical evidence strongly supports this nding for industrialized countries and european regions using the standard control variables we nd that countries and regions that have a higher standard deviation of growth and of unemployment have lower growth rates the result does not come from an e ect of instability on investment the negative relation however does not hold for non industrialized countries for which learning by doing may not to be the main engine of growth 2000 elsevier science b v all rights reserved jel classixcation o40 e32

can stabilisation policy reduce long run growth this paper presents an analysis of the long run implications of short term stabilisation policy the analysis is based on a simple stochastic model of an imperfectly competitive economy with nominal rigidities and an endogenous technology by virtue of the latter temporary shocks have permanent effects such that the cyclical and secular properties of output are related in particular smoother cyclical fluctuations may be associated with flatter secular trends implying a trade off between short term stabilisation and long term growth

nominal shocks endogenous growth and the business cycle the paper proposes a simple model of wage setting and imperfect competition that takes into account knowledge and human capital accumulation we show that given increasing returns to reproducible factors transitory disturbances to output that originate on the demand side of the economy produce permanent upward shifts in the aggregate production function this implies that the presence of a stochastic trend in the process for income may not be informative per se about the forces driving the cycle

is the end of fiscal austerity feasible in spain an alternative plan to the current stability programme 2015 2018 the spanish authorities have implemented strongly restrictive fiscal policies with a negative impact on gdp and employment especially during the recession of 2011 2013 this paper shows that the end of fiscal austerity is feasible for spain adopting a functional finance approach to fiscal policy and making a partial use of the idea of balanced budget expansion we present an alternative fiscal policy for the years 2016 2018 which is not focused on deficit reduction but on employment creation and on the development of social and structural policies aimed at a real transformation of the spanish economy the two main components of this plan are a progressive fiscal reform to increase public revenue over gdp and a simultaneous increase in the ratio of public expenditure over gdp with the aid of a three equation model this paper proves that an alternative plan to austerity can be not only expansionary but also fully compatible with fiscal sustainability the choice then lies between prioritising either the rate at which unemployment is reduced or at which public deficit is reduced

am i getting a good deal reference dependentdecision making when the reference price is uncertain models of consumer decision making commonly incorporate reference dependent preferences in these models the reference point is typically assumed to be known by the consumer however research on price recall and the reference formation process reveals that the reference price is often uncertain at the time of purchase reference price uncertainty creates ambiguity for the consumer about whether they are getting a good or bad deal this paper develops a model of consumer choice in the presence of reference dependent preferences when the reference price is uncertain data from two empirical studies that vary the product category and order of the elicitation of reference prices show that the new model generally outperforms conventional discrete choice models that either ignore reference prices or treat reference prices as certain the new model provides insights into the effect of reducing reference price uncertainty on consumer choice and reveals that high uncertainty smoothes the kink in the demand curve that is present in traditional reference price demand models

made by mistake when mistakes increase product preference mistakes are often undesirable and frequently result in negative inferences about the person or company that made the mistake consequently research suggests that information about mistakes is rarely shared with consumers however we find that consumers actually prefer products that were made by mistake to otherwise identical products that were made intentionally this preference arises because consumers perceive that a product made by mistake is more improbable relative to a product made intentionally and thus view the product as more unique we find converging evidence for this preference in a field study six experiments and ebay auction sales importantly this preference holds regardless of whether the mistake enhances or detracts from the product however in domains where consumers do not value uniqueness e g utilitarian goods the preference is eliminated

inflation output growth and nominal and real uncertainty empirical evidence for the g7 abstract we use univariate garch models of inflation and output growth and monthly data for the g7 covering the 1957 2000 period to test for the causal effect of real and nominal macroeconomic uncertainty on inflation and output growth and the effect of inflation on inflation uncertainty our evidence supports a number of important conclusions first inflation is a positive determinant of uncertainty about inflation second output growth uncertainty is a positive determinant of the output growth rate third there is mixed evidence regarding the effect of inflation uncertainty on inflation and output growth hence uncertainty about the inflation rate is not necessarily detrimental to economic growth finally there is not much evidence supporting the hypothesis that output uncertainty raises inflation

decomposing learning by doing in new plants the paper examines learning by doing in the context of a production function in which the other arguments are labor human capital physical capital and vintage as a proxy for embodied technical c

competitive price and quality under asymmetric information we present an analysis of equilibrium in markets with asymmetrically informed consumers some consumers know both price and quality of all sellers whereas others know neither but may search among sellers the equilibrium correlation between price and quality generally increases with the level of information in the market and can be negative when this level is sufficiently small a meta analysis of the available empirical studies strongly supports the model s predictions

on real and sticky price theories of the business cycle after presenting some facts about the growth of government in western industrialized countries possible causes of this development are analyzed from a public choice perspective next some empirically tested theories which seek to explain this growth are discussed finally possible consequences for efficiency and individual liberty are examined it is shown that both the number and size of interest groups age of democracy as stated by mancur olson 1982 and the increasing share of government expenditure in gdp seem to exert a negative influence on the growth rate of gdp copyright 1986 by ohio state university press

defensive marketing strategies this paper analyzes how a firm should adjust its marketing expenditures and its price to defend its position in an existing market from attack by a competitive new product our focus is to provide usable managerial recommendations on the strategy of response in particular we show that if products can be represented by their position in a multiattribute space consumers are heterogeneous and maximize utility and awareness advertising and distribution can be summarized by response functions then for the profit maximizing firm it is optimal to decrease awareness advertising it is optimal to decrease the distribution budget unless the new product can be kept out of the market a price increase may be optimal and even under the optimal strategy profits decrease as a result of the competitive new product furthermore if the consumer tastes are uniformly distributed across the spectrum a price decrease increases defensive profits it is optimal at the margin to improve product quality in the direction of the defending product s strength and it is optimal at the margin to reposition by advertising in the same direction in addition we provide practical procedures to estimate 1 the distribution of consumer tastes and 2 the position of the new product in perceptual space from sales data and knowledge of the percent of consumers who are aware of the new product and find it available competitive diagnostics such as the angle of attack are introduced to help the defending manager this article was originally published in marketing science volume 2 issue 4 pages 319 360 in 1983

real wages over the business cycle evidence from panel data one topic on which keynes did not disagree with classical economists was the cyclical behavior of real wages keynes 1936 as well as various classical writers predicted that real wages should move countercyclically quoting the general theory p 17 in general an increase in employment can only occur through the accompaniment of a decline in real wages thus i am not disputing this vital fact which the classical economists have rightly asserted as indefeasible this prediction is based on the premise of competition and a given short run capital stock increases in employment then correspond to more intensive use of capital and through diminishing product lower real wages for this reason evidence by dunlop 1938 and tarshis 1939 that real wages move procyclically was viewed as paradoxical both dunlop and tarshis based their findings on an observed positive correlation between real and money wages which given the procyclical movement of money wages implies a positive correlation between

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

quality price advertising and published quality ratings economic literature contains several sometimes contradictory hypotheses concerning the relationships among quality price and advertising we investigate the impact of published quality ratings on these relationships and find that quality and advertising are much more likely to be positively related in the presence of quality ratings

coupon value a signal for price in this article the author proposes that consumers use the value of a coupon to estimate price study 1 shows that the higher the percentage discount the higher the perceived price study 2 demon

alternative interpretations of a stateless currency crisis a number of economists warned that a political union was a prerequisite for a viable currency union this paper disputes the feasibility of such a political union a fully fledged federal union which would likely please peripheral europe is impracticable since it implies a degree of fiscal solidarity that does not exist a hayekian minimal federal state which would appeal to core europe would be refused by peripheral members since residual fiscal sovereignty would be surrendered without any clear positive economic and social return even an intermediate solution based on coordinated keynesian policies would be unfeasible since it would be at odds with german monetary mercantilism the euro area is thus trapped between equally unfeasible political perspectives in this bleak context austerity policies are mainly explained by the necessity to readdress the euro area balance of payments crisis this crisis presents striking similarities to traditional financial crises in emerging economies associated with fixed exchange regimes therefore the delayed response of the european central bank ecb to the sovereign debt crisis cannot be seen as the culprit of the euro area crisis the ecb s monetary refinancing mechanisms target 2 and the ecb s belated outright monetary transactions intervention impeded a blow up of the currency union but could not solve its deep causes the current combination of austerity policies and moderate ecb intervention aims to rebalance intra eurozone foreign accounts and to force competitive deflation strategy

business cycle models with endogenous technology this paper compares real and monetary business cycle models with and without endogenous technical change if technology is endogenous the properties of these models change significantly in particular both real and monetary models yield very similar output processes if growth is endogenous and changes in aggregate demand can result in permanent changes in productivity employment and output the effect of depreciation of technology is examined and the pattern of real wage movements over the cycle when money wages are fixed but technology is changing is briefly considered copyright 1990 by american economic association

the quality double whammy this research focuses on how consumers perceive the quality level of a complex stimulus in our case a service encounter and how this perception affects consumers overall assessment of the quality level of the firm as such it should be of interest to consumer behavior theorists as well as to those involved in marketing management issues we start our presentation by developing a normative bayesian data integration and updating model somewhat similar to that put forth by rust et al 1999 the major constructs of interest in this model are the person s belief about the overall service quality level of a firm and what will happen on the next service encounter two major results following from this baseline normative model are that the updated means of these two beliefs are identical to the dynamic updating equations put forth by boulding et al 1993 and that an underlying assumption of this model is that consumers form unbiased perceptions of the complex stimulus next based on substantial empirical evidence from the behavioral literature we incorporate into this baseline model a process by which consumers form nonrandom perceptions specifically we postulate that a person s perception of a complex service encounter is a blend of the objective dimensions of the service encounter and the person s prior overall belief about the quality level of the firm the relative weights placed on these two factors are determined at least in part by the experience level of the customer and the complexity of the service encounter we then use this expanded model to compare and test different models of service quality and provide deeper insights into the process by which consumers form perceptions of both the service transaction and the overall service quality level of a firm we test this model using data from two different experiments in each experiment we manipulate the service provided and the person s initial will and should expectations using both obtrusive and unobtrusive measures of the underlying constructs of our model we employ multiple tests to determine the veracity of our expanded model relative to the baseline model these tests support the expanded model specification as found previously and as predicted by a bayesian updating process consumers prior beliefs influence their cumulative overall opinion of service quality e g anderson and sullivan 1993 bolton and drew 1991 boulding et al 1993 rust et al 1999 perhaps more importantly these prior beliefs also influence their perceptions of the data themselves which in turn affect their new updated overall opinion these two different influences of prior beliefs on cumulative evaluations of quality constitute the double whammy referred to in the title this double whammy effect has major managerial significance specifically we see from our model development that all activities of a firm will be perceived in light of a person s prior beliefs and that these priors will be double counted relative to our baseline model thus any marketing action taken by a firm will be perceived more positively or negatively depending on the person s prior belief about the quality level of the firm as such our model provides a formal explanation for the notion of brand equity as differential leverage in marketing activities as proposed by keller 1993

real versus monetary business cycle theory and the statistical characteristics of output fluctuations abstract doubt has been cast on the ability of monetary models to explain output fluctuations adequately for conventional monetary models cannot account for non stationarity or the permanence of output innovations this note shows that purely monetary models can account for these characteristics once we allow technology to be endogenous so that recent statistical work does not constitute a refutation of monetary models of the business cycle

the permanent effects of fiscal consolidations abstract the global financial crisis has permanently lowered the path of gdp in all advanced economies at the same time and in response to rising government debt levels many of these countries have been engaging in fiscal consolidations that have had a negative impact on growth rates we empirically explore the connections between these two facts by extending to longer horizons the methodology of blanchard and leigh 2013 regarding fiscal policy multipliers our results provide support for the presence of strong hysteresis effects of fiscal policy the large size of the effects points in the direction of self defeating fiscal consolidations as suggested by delong and summers 2012 attempts to reduce debt via fiscal consolidations have very likely resulted in a higher debt to gdp ratio through their long term negative impact on output

axe the tax taxes are disliked more than equivalent costs abstract tax collection is critical for the proper functioning of society however many people strongly dislike paying taxes although this distaste could be rational on economic grounds the authors show that this attitude extends beyond simply disliking the costs incurred and affects behavior in counternormative ways they demonstrate the phenomenon of tax aversion a desire to avoid taxes per se that exceeds the rational economic motivation to avoid a monetary cost across five experiments the authors provide evidence that people have a stronger preference to avoid tax related costs than to avoid equal sized or larger monetary costs unrelated to taxes tax aversion affects consumer preferences in a variety of domains including standard store purchases financial investments and job selection furthermore this tendency is most prevalent among people who identify with political parties that generally favor less taxation finally encouraging participants who identify with antitax parties to cons

long dark shadows or innovative spirits the effects of smoothing business cycles on economic growth a survey of the literature abstract it is argued that fiscal policy can play a part in preventing a possible downward spiral or be instrumental in achieving a higher long term path of growth never before has this argument been advanced as frequently as in the current economic crisis however the economic literature an overview of which is given here does not provide an unambiguous answer either theoretically or empirically to the question of the relationship between the smoothing of cyclical fluctuations and long term growth in this context two main contrasting explanatory paradigms can be identified schumpeter s concept of creative destruction and the learning by doing hypothesis even if it were possible to identify the relationship more clearly on this basis it is important not to lose sight of the problems associated with the real time assessment of the current economic situation time lags and political economic incentives even in difficult times

debt cycles instability and fiscal rules a godley minsky synthesis wynne godley and hyman minsky were two macroeconomists who saw the crisis coming this paper develops a simple macrodynamic model that synthesises some key perspectives of their analytical frameworks the model incorporates godley s financial balances approach and postulates that private sector s propensity to spend is driven by a stock flow norm the target net private debt to income ratio that changes endogenously via a minsky mechanism it also includes two fiscal rules a maastricht type fiscal rule according to which the fiscal authorities adjust the government expenditures based on a target net government debt ratio and a godley minsky fiscal rule which links government expenditures with private indebtedness following a counter cyclical logic the analysis shows that i the interaction between the propensity to spend and net private indebtedness can generate cycles and instability ii instability is more likely when the propensity to spend responds strongly to deviations from the stock flow norm and when the expectations that determine the stock flow norm are highly sensitive to the economic cycle iii the maastricht type fiscal rule is destabilising while the godley minsky fiscal rule is stabilising iv the paradox of debt can apply both to the private sector and the government sector

policy theory and the cycle the paper sets out some simple statistical models and shows that they are capable of generating the ob served characteristics of classical cycles in three countries australia the united kingdom and the united states both analytical and simulation work is used for this purpose these models emphasize the fact that to generate a realistic business cycle requires some deterministic trend growth near unit root behaviour in the deterministically detrended data and innovations of a certain magnitude with this information we examine some popular models of the cycle asking how they produce these features and then explore the implications of the analysis for economic policy

economic relations between germany and southern europe two interpretations have been advanced to account for persistent german current account surpluses that translate into equally persistent deficits of countries in the european periphery according to the first the german surplus is the expression of a virtuous savings behaviour to be extended to the periphery the second maintains that the increase in net exports reflects the stagnation of german domestic demand the paper argues that differences in price competitiveness are only part of the explanation of the disequilibria and that an expansion of german internal demand albeit necessary would not suffice to provide a viable response to the long term sustainability of the euro area adopting a multilevel perspective the paper argues that to understand the persistence of deficits in the european periphery the main features of the reorganisation of the german economic system including its income redistribution and demand implications should be considered three elements are singled out the effects of eastward enlargement the impoverishment of the productive matrix of peripheral countries and the quality composition of trade flows this analysis it is argued is a crucial premise for devising trade and industrial policies targeted on redressing the increasing skewness of eu trade especially through greater trade among the deficit countries copyright oxford university press

ethical products less strong how explicit and implicit reliance on the lay theory affects consumption behaviors many consumers implicitly associate sustainability with lower product strength this so called ethical less strong intuition elsi poses a major threat for the success of sustainable products this article explores this pervasive lay theory and examines whether it is a key barrier for sustainable consumption patterns even more importantly little is known about the underlying mechanisms that might operate differently at the implicit and explicit levels of the consumer s decision making to fill this gap three studies examine how the implicit judgments that consumers activate automatically shape their consumption behaviors in concert with their more controlled explicit beliefs about sustainable products the main study investigates the elsi s imprint on actual shopping patterns and disentangles the implicit and explicit mechanisms of the lay theory this paper also asks how this negative influence can be attenuated by examining whether the consumer s interest in sustainable consumption reduces reliance on the elsi two follow up studies confirm the robustness from different methodological and practical perspectives implications for companies and policy makers are derived

aggregate demand conflict and capacity in the inflationary process this paper focuses on an alternative perspective on inflation to that of the non accelerating inflation rate of unemployment nairu it indicates that there are no automatic forces leading to a level of aggregate demand consistent with constant inflation inflationary pressures arise from conflict over income shares and from cost elements with the price of raw materials especially oil being the most important there are supply side factors impinging on the inflationary process which arise from the level of productive capacity relative to aggregate demand the supply side constraints are viewed as arising from capacity constraints rather than from the operation of the labour market copyright 2005 oxford university press

reexamining latitude of price acceptability and price thresholds predicting basic consumer reaction to price behavioral pricing research has shown consumers to have lower and upper price thresholds represented by an inverted u shaped price acceptability function we propose another basic reaction to price namely lower price is better represented by a decreasing acceptability function without a lower price threshold a set of variables is hypothesized to predict consumer reaction to price price consciousness price quality relation and product involvement are shown to influence the shape of the price acceptability function a procedure and model to scale price acceptability and obtain acceptability functions are introduced and applied the cumulative results suggest reliable acceptability scales along with evidence for convergent and construct validity

functional income distribution and aggregate demand in the euro area an increase in the wage share has contradictory effects on the subaggregates of aggregate demand private consumption expenditures ought to increase because wage incomes typically are associated with higher consumption propensities than capital incomes investment expenditures ought to be negatively affected because investment will positively depend on profits net exports will be negatively affected because an increase in the wage share corresponds to an increase in unit labour costs and thus a loss in competitiveness therefore theoretically aggregate demand can be either wage led or profit led depending on how these effects add up the results will crucially depend on how open the economy is internationally the paper estimates a post kaleckian macro model incorporating these effects for the euro area and finds that the euro area is presently in a wage led demand regime implications for wage policies are discussed

productivity growth and the structure of the business cycle abstract over the recent years opportunity cost oc models of growth have argued that recessions are times when firms engage in productivity improving activities because of intertemporal substitu tion this paper tests whether this approach is correct the technique used to disentangle the trend from the cycle is semi structural vector autoregression the results are mildly supportive of the oc theory there tends to be a negative impact of demand shocks on productivity both in the short run and in the long run and the short run impact is stronger in those countries where fluctuations are more transitory however there is no significant response of r d to demand shocks

an empirical analysis of latitude of price acceptance in consumer package goods scanner panel data analyses for sweetened and unsweetened drink categories with four brands in each support the presence of a region of price insensitivity around a reference price the analyses also suggest that consumers with higher average reference price have a wider latitude of price acceptance consumers with a higher frequency of purchase i e shorter average interpurchase time interval are found to have a narrower latitude of price acceptance because they are more aware of the range of price distributions finally consumers with a higher average brand loyalty have a wider latitude of price acceptance demonstrating greater tolerance of price fluctuations

choice experiments are not conducted in a vacuum the effects of external price information on choice behavior abstract consumers carry a wealth of external knowledge and experience into a study that may affect choices in even the most well crafted experiment we derive a conceptual model showing how the level and variability of price perceptions outside the task at hand might affect choice behavior and we conduct an experiment to test the model by manipulating information provided to respondents in a way to alter the outside the experiment perceptions mixed logit error component models show that reference dependent models best describe the choice data and we find that consumer choice is significantly affected by the experiment manipulations the predictions of the model are borne out in the data as expected price sensitivity is generally higher for price changes above a price reference point than below also as predicted exogenously increasing external reference prices and exogenously reducing the variability in references prices both serve to increase the probability of making a purchase and reduce the probability of choosing none these results have important implications for the design and practice of choice experiments as they show that consumer choice is affected by perceptions of the level and variability of prices outside the experiment more generally the results highlight the need to understand the formation and distribution of reference prices when predicting consumer choice

demand shocks and firm financed r d expenditures business cycles might affect firms ability and incentive to perform r d firms finance most r d activities out of cash flow so when cash flow decreases the funds available for r d also decreases this limits the ability of firms to perform r d potentially leading to reduced r d expenditures during recessions however business cycles also influence the incentive to perform r d the opportunity cost of funds devoted to r d falls during recessions since the return on production will likely be lower than during an expansion during recessions this provides firms with an incentive to redistribute an existing pool of funds away from production and towards r d projects this paper tests whether the business cycle influences the incentive and ability of firms to engage in r d activities in particular examining whether the response is symmetric across the business cycle

a simple model of three economies with two currencies the eurozone and the usa this paper presents a keynesian model which describes three countries trading merchandise and financial assets with one another it is initially assumed that all three countries have independent fiscal policies but that two of the countries share a currency hence the model can be used to make a preliminary analysis of the conduct of economic policy in the eurozone vis a vis the rest of the world the usa the main conclusion will be that if all three countries do indeed operate independent fiscal policies the system will work under a floating currency regime but only so long as the european central bank is prepared to modify the structure of its assets by accumulating an ever rising proportion of bills issued by any weak euro country

adjusting to technological change the subject of my address is adjusting to technological change something that a lot of people are doing nowadays the revolution in information and communication technologies and the transition to a knowledge based economy are inducing people in every sector to change how they work and do business what i want to emphasize is that these changes constitute a social process that involves more than the sum of our individual struggles with inanimate nature people are adjusting not only to changes in technology but to changes that others are making to technology adjustments in one sector induce unexpected adjustments and innovations in other sectors in a complex process that none of the participants can possibly comprehend the process is governed by social institutions particularly by the business enterprises that organize almost all economic transactions in a modem economy and at the same time it is transforming those institutions a graphic account of how peoples lives are being tossed about by the winds of change might be too depressing for this occasion so to keep it light i am simply going to talk about macroeconomic theory if there is one profession that has not yet seen much of the darker side of technological change it is macroeconomic theory in fact the recent resurgence of interest in growth and technological change seems to have had a calming effect on the profession by diverting attention from the issues of unemployment inflation and aggregate demand management that have been the subjects of the furious controversies since the keynesian revolution peaceful coexistence has emerged between previously opposing schools now united by the

production growth and business cycles ii new directions abstract this paper outlines new directions for investigations of real business cycle models consideration of stochastic growth of exogenous and endogenous forms analysis of suboptimal outcomes arising due to externalities of distorting taxes and implications of labor market heterogeneity

if you tourist behave irrationally i ll find you abstract when departures from rational behavior can potentially be expected modeling should allow for their identification and their quantification in this regard prices in tourism might have effects that may not be as apparent as economic theory predicts this article incorporates the sticker shock formulation into the mixed logit model without imposing consistency with consumer theory to accommodate any possible positive or negative price effects by allowing the parameters of price and sticker shock term to take any value negative or positive we detect abnormal behaviors in the tourist demand not only is the negative relationship between price and demand inverted for some people but also some tourists might be willing to accept higher than expected prices the non well behaved groups shares are estimated

the role of market efficiency intuitions in consumer choice a case of compensatory inferences abstract the authors examine consumer inferences about product attributes that are unobservable at the time of the decision extant research predicts that in the absence of an explicit correlation between product attributes consumers will infer that the brand that is superior on the observable attributes is also superior on the unobservable attributes the authors propose an alternative inference strategy that makes the counterintuitive prediction that the apparently superior brand is inferior on the unobservable attributes the authors refer to these inferences as compensatory inferences and assert that they are associated with consumers intuitive theories about the competitive nature of a market in a series of four experiments the authors examine the occurrence of compensatory inferences and compare them with other inference strategies

output growth and its volatility the gold standard through the great moderation this study examines the relationship between u s output growth and its volatility over the period 1876 i to 2012 ii we adjust the data for outliers and structural breaks we employ generalized autoregressive conditional heteroskedasticity garch and exponential garch egarch specifications normality and homoskedasticity appear only in the garch or egarch model that corrects for the outliers when including the break in the mean equation high volatility persistence remains after also accommodating the breaks in the variance equation the integrated garch effect proves spurious either for the symmetric or the asymmetric model finally our empirical results suggest that the finding of higher output growth volatility stimulating output growth and higher output growth reducing its volatility obtained from the symmetric garch in mean garch m model also proves spurious as a result of the emergence of an asymmetric effect our more appropriately specified asymmetric egarch m model suggests positive volatility in mean and level effects in the long period real gross national product series

wage led growth in the eu15 member states the effects of income distribution on growth investment trade balance and inflation this paper estimates a multi country demand led growth model for eu15 countries a decrease in the share of wages in national income in isolation leads to lower growth in finland france germany greece italy luxembourg netherlands portugal spain sweden and the united kingdom whereas it stimulates growth in austria belgium denmark and ireland however a simultaneous decline in the wage share leads to an overall decline in eu15 gdp hence eu15 as a whole is a wage led economy furthermore austria and ireland also experience negative effects on growth when they decrease their wage share along with their trading partners the results indicate that a decline in the wage share has had significant negative effects on growth in the eu15 countries and supports the case of wage coordination we present different wage led recovery scenarios taking into account further effects of a change in the wage share on prices nominal unit labour costs investment and net exports

logit demand estimation under competitive pricing behavior an equilibrium framework discrete choice models of demand have typically been estimated assuming that prices are exogenous since unobservable to the researcher product attributes such as coupon availability may impact consumer utility as well as price setting by firms we treat prices as endogenous specifically prices are assumed to be the equilibrium outcomes of nash competition among manufacturers and retailers to empirically validate the assumptions we estimate logit demand systems jointly with equilibrium pricing equations for two product categories using retail scanner data and cost data on factor prices in each category we find statistical evidence of price endogeneity we also find that the estimates of the price response parameter and the brand specific constants are generally biased downward when the endogeneity of prices is ignored our framework provides explicit estimates of the value created by a brand i e the difference between consumers willingness to pay for a brand and its cost of production we develop theoretical propositions about the relationship between value creation and competitive advantage for logit demand systems and use our empirical results to illustrate how firms use alternative value creation strategies to accomplish competitive advantage

taxation risk taking and growth a continuous time stochastic general equilibrium analysis with labor leisure choice abstract this paper investigates the equilibrium relationship between taxation portfolio choice risk taking and capital accumulation specifically it examines how taxes affect risk taking and capital accumulation we extend the existing literature by relaxing two crucial assumptions in modelling risk taking behavior i that the investment opportunity set is fixed and ii that there is no distinction between attitudes towards risk and behavior towards intertemporal substitution we extend the investment opportunity set of individuals through optimally determined human capital and distinguish intertemporal substitution from attitudes towards risk via a recursive utility function in the presence of these extensions the paper successfully derives a closed form solution to the stochastic growth model with stochastic wage income

the uk s coalition government and heterodox economics the uk coalition government s economic policy was primarily aimed at reducing the large fiscal deficit that it inherited mainly by cutting expenditure this was considered irrational by heterodox economists on the grounds that it would harm employment and output politicians influenced by this tradition advocated a plan b experience has shown that the coalition government s policy was not irrational employment reached record heights and economic growth resumed the paper draws attention to the implications of these facts for heterodox economics and economic policy it is concluded that just as mainstream economics had to rethink after the economic crisis of 2008 09 so heterodox economics has to rethink after the recovery of 2014 15

sampling data for covariation assessment the effect of prior beliefs on search patterns two experiments were conducted to investigate the effect of prior beliefs on consumers information search strategies in estimating covariation relationships consumers were asked to sample four sets of products to determine whether price was related or unrelated to quality for each one those consumers who believed that price and quality are positively related elected to sample higher priced products than consumers who believed that there is little relationship between price and quality this effect was observed across products sources of prior beliefs own experience or experimenter manipulated and costs of search high search costs however also affected the average price of products picked for the search task the range of prices sampled study 1 and the number of products chosen to decide whether price and quality were related study 2 these findings are discussed in terms of the process of covariation judgment persistence and consumer information search

endogenous growth and stochastic trends abstract this paper shows that in a cross section of countries there exists a strong positive correlation between long term growth rates and the persistence of output fluctuations we argue that the traditional explanation of persistence an rbc model with exogenous productivity shocks cannot account for this correlation what is required is a model where the stochastic nature of the trend is endogenous and growth dynamics is an important component of the transmission of business cycles we present a stylized endogenous growth model with exogenous cyclical shocks where despite the cyclical nature of the shocks output fluctuations are persistent and the degree of persistence is an increasing function of long term growth rates

the influence of prior beliefs frequency cues and magnitude cues on consumers perceptions of comparative price data a widespread practice in grocery store advertising is to compare the advertised store s prices to a competitor s prices on multiple items an important but largely unexplored issue is how this information is processed and used in conjunction with prior beliefs to influence price perceptions in our initial studies we manipulated prior beliefs and two data based cues frequency of price advantage and magnitude of price advantage to determine their relative influence on consumer price perceptions results indicate that prior beliefs affected price perceptions but that the frequency cue exerted a dominating influence several follow up studies demonstrate the robustness of this phenomenon across a variety of presentational and instructional conditions

economic growth the harrod foreign trade multiplier and the hicks super multiplier as we saw in chapter 2 the post keynesian view of economic growth denies that the postwar economic performance of the majority of the advanced countries has been seriously constrained by the growth of factor supplies even during the long boom of 1950 73 when the growth of output of the advanced countries in aggregate was double that of the historic norm labour shortages were never a limiting factor there was either sufficient disguised unemployment in the non manufacturing sectors or enough immigration to satisfy the demand for labour kindleberger 1967 the rate of capital accumulation is never a long run constraint on economic growth as investment is as much a result of the expansion of output as its cause kaldor 1970 the evidence in support of these conditions has been summarised in chapter 2

cyclical uncertainty precautionary saving and economic growth this paper studies the interaction between cyclical uncertainty precautionary saving and economic growth in a stochastic endogenous growth model the analysis provides insight into the potential connection between technological uncertainty of the sort popularized in real business cycle models and the determinants of economic growth in a stochastic version of a popular model of endogenously determined economic growth the magnitude of the link between cyclical uncertainty and growth is quantified and found to be small in terms of its effect on the growth rate but possibly large in terms of its effect on levels of macroeconomic variables moreover the welfare costs of reduced cyclical uncertainty can be substantial owing to the lower historical rate of capital accumulation induced by a decrease in precautionary saving the chief implications of the model are found to be roughly consistent with the postwar experience of several countries although the predictions of the model with regard to growth rates are too small to explain much of the variation in growth rates across time or across countries

the tragedy of uk fiscal policy in the aftermath of the financial crisis the evolving response of the uk fiscal authorities to the financial crisis and recession are briefly outlined with a focus on the fiscal austerity programme introduced by the incoming coalition government during 2010 the reasoning for that programme is critically examined and largely dismissed it is argued that the drive for major cuts in public expenditure comes from seeking to achieve a balanced structural budget and reductions in estimated potential output the significance of the latter are discussed the paper is completed by a brief consideration of alternatives

correlates of price acceptability the cognitive tradeoff between price and product quality is used as a basis for hypothesizing interrelationships between two individual difference variables and two price related responses results of a correlational study support the hypothesis of an inverse relationship between price consciousness and product involvement and the hypotheses that price consciousness and product involvement have opposite implications for several price related constructs results also indicate a positive relationship between price acceptability level and the width of the latitude of price acceptance

the link between macroeconomic performance and variability in the uk abstract this paper examines the link between inflation output growth and their respective variabilities we employ a bivariate garch model which incorporates mean and level effects to investigate in a unified empirical framework all the possible interactions between the four variables we show that not only does variability affect performance but the latter influences the former as well specifically inflation has a positive impact on both variabilities

the cleansing effect of recessions the authors investigate industry response to cyclical variations in demand production units that embody the newest process and product innovations are continuously being created and outdated units are being destroyed although outdated units are the most likely to turn unprofitable and be scrapped in a recession they can be insulated from the fall in demand by a reduction in creation the structure of adjustment costs plays a determinant role in the responsiveness of those two margins the calibrated model matches the relative volatilities of the observed manufacturing job creation and destruction series and their asymmetries over the cycle copyright 1994 by american economic association

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

fooled by heteroscedastic randomness local consistency breeds extremity in price based quality inferences in some product categories low priced brands are consistently of low quality but high priced brands can be anything from terrible to excellent in other product categories high priced brands are consistently of high quality but quality of low priced brands varies widely three experiments demonstrate that such heteroscedasticity leads to more extreme price based quality predictions this finding suggests that quality inferences do not only stem from what consumers have learned about the average level of quality at different price points through exemplar memory or rule abstraction instead quality predictions are also based on learning about the covariation between price and quality that is consumers inappropriately conflate the conditional mean of quality with the predictability of quality we discuss implications for theories of quantitative cue learning and selective information processing for pricing strategies and luxury branding and for our understanding of the emergence and persistence of erroneous beliefs and stereotypes beyond the consumer realm

cross country evidence on the link between volatility and growth this paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations in a sample of ninety two countries as well as a sample of oecd countries the authors find that countries with higher volatility have lower growth the addition of standard control variables strengthens the negative relationship the authors also find that government spending induced volatility is negatively associated with growth even after controlling for both time and country fixed effects copyright 1995 by american economic association

europe s hunger games income distribution cost competitiveness and crisis the dominant view both on the mainstream right and on the left holds that the eurozone crisis is a crisis of labour cost competitiveness with trade imbalances and hence foreign indebtedness being driven by divergences in relative unit labour costs rulcs between surplus and deficit countries to re balance eurozone growth the mainstream solution is a deflationary policy of internal devaluation i e cutting the wage share by as much as 30 in the deficit countries the progressive view holds that the surplus countries should adjust by raising their wage shares we argue that both sides of this debate are wrong and unhelpful europe s trade imbalances are determined by domestic and world demand whilst rulc divergences play only a negligible role eurozone growth can only be revived when eurozone demand growth is restored not by lowering wages here and or raising them there the current deflationary adjustment forced on the wage led economies of greece italy portugal and spain is self destructive it is a confidence killer not only deepening the free fall of southern european incomes but also damaging their productive base and productivity growth the outlook is depressing further increases in already high unemployment rates inequality measures and poverty rates inconceivable in prosperous europe just a few years ago and arguably dystopian

how inferences about missing attributes decrease the tendency to defer choice and increase purchase probability most purchases involve choices among options with incomplete attribute information in such situations consumers often have the option not to choose any of the alternatives to avoid uncertainty alternatively consumers can make inferences about the missing attributes these inferences may occur spontaneously or they may be strategically prompted in five studies it is shown that both explicitly and implicitly prompting consumers to make inferences about the missing attributes reduces the tendency to select the no choice option and increases the likelihood of making a purchase decision in parallel consumers who generate spontaneous inferences are also less likely to defer their choices