a new test of money income causality this paper investigates the prima facie causal relationship between money and income employing a methodology the multiple rank f test the results of which are invariant to monotonic transformations of all variables and robust over alternative distributions of the errors in contrast to prior functional form dependent parametric analyses evidence of prima facie causality between money and income is found for the 1970 88 time period this evidence is consistent with an elementary theoretical framework in which the direction and strength of causality is dependent upon the definition of money copyright 1992 by ohio state university press

forecasting wheat exports do exchange rates matter a vector autoregression is fit to recent u s data on wheat prices wheat export sales wheat export shipments and exchange rates forecast error decompositions and out of sample forecasts indicate that exchange rates have little influence on wheat sales and shipments

on the casual relationship between government expenditures and national income a research strategy is suggested that separates the issue of inference from the problems of prediction or of quantitative policy analysis of an empirical parametric model and illustrates a new methodology that enables this in a test for prima facie causality unlike the conventional parametric test the more powerful multiple rank f test is invariant to monotonic transformations of the variables and independent of the error distribution employing this test the wagnerian hypothesis supported by conventional parametric analysis is rejected and the conventional keynesian theory is accepted copyright 1990 by mit press

an empirical oligopoly model of a regulated market abstract we model a three firm oligopoly the spanish fertilizer industry from 1976 to 1988 which was subject to price regulation in the form of price ceilings a theoretical and econometric model is developed in order to identify simultaneously the behaviour of the firms and the degree to which regulation constrained the price the collusive market sharing arrangements involving asymmetric firms and the less collusive outcomes of cournot and stackelberg together with their constrained counterparts are considered as particular behavioural hypotheses the estimation of an aggregated and a disaggregated version of the model by general method of moments techniques leads us to identify the regulation constrained stackelberg equilibrium as the most likely outcome given the observed data

cost padding in regulated monopolies abstract this paper considers the regulated monopoly that pads or falsifies its costs to increase the cost reimbursement it receives from the regulator contrary to the standard literature on cost regulation the firm engages in cost reducing investment before it enters into a regulatory contract this pre contractual investment in cost reduction determines the firm type at the contracting stage the paper derives both the optimum incentive compatible falsification contract and the equilibrium type distribution with the distribution of cost types determined endogenously by the pre contractual investment choice an increase in the cost of falsification has two effects first there is a direct effect that reduces cost padding because it becomes more expensive to do so second there is an indirect effect that increases cost padding because the firm responds by choosing lower investments and lower investments are associated with more cost padding it is demonstrated that the direct effect will dominate and both expected levels of cost padding and expected costs for falsification will be reduced however the indirect effect increases real costs and despite the reduction in cost padding the net effect can reduce welfare it is determined that these conclusions are significantly different from those obtained when the distribution of cost types is exogenously fixed

the impact of deregulation on the production structure of the motor carrier industry empirical analysis of the motor carrier industry pre and post regulatory reform reveals that deregulation resulted in significant changes in firm production structure and lower real average costs translog cost functions for firms operating in 1977 and 1983 were estimated and compared for other specialized commodity carriers fitted average costs were computed from these functions the results indicate significant differences in the cost functions and real costs that cannot be attributed to technological changes but rather suggest efficiency gains the results also suggest that it is inappropriate to predict outcomes of deregulation using empirical analyses of firms in the regulated environment

evaluating the integration of contiguous discontinuous markets this paper applies the concepts of structural models of markets market integration and market discontinuity to show that discontinuous markets alter the integration characteristics of continuous markets when analyzing systems of contiguous markets some of which are discontinuous it appears that the continuous markets are less well integrated when the discontinuous markets are operating than when they are not operating

the dynamics of fertility family planning and female education in a developing economy unlike most empirical works on fertility analysis this study is the first attempt to analyse the dynamics of fertility and its determinants with a particular focus on the role played by female education and family planning programmes in the context of a traditional society the analysis is based on the application of the following dynamic time series techniques in a multivariate context cointegration vector error correction modelling and variance decompositions these dynamic tools are recently developed and hitherto untried in fertility analysis in the context of a poor developing economy such as india the results based on the above most recently developed methodology broadly indicate that in the complex dynamic interactions the importance of conventional structural hypothesis as a granger causal factor in bringing fertility down in the longer term cannot be denied however overall in the short to long term the findings appear to be more consistent with the recent ideational hypothesis

an econometric analysis of changes in the cost and production structure of the trucking industry 1953 1982 a cost function is estimated using a time series cross section database for the trucking industry covering the time period from 1953 through 1982 i e after the implementation of the motor carrier act of 1980 which essentially deregulated the industry two conclusions emerge first similarities between early periods of regulation and deregulation are greater than between early and late periods of regulation second a comparison of the regulated and deregulated cost functions indicates that the heaviest burden of regulation was borne by those firms which faced the highest costs copyright 1988 by mit press

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

public education supply and student performance this paper develops a model of public exchange whereby voters and education policy makers exchange with one another within school districts because school district consolidation lowers alternatives to voters parents consolidation is hypothesized to raise public education spending because weakened intergovernmental competition allows policy makers to promote their own utility rather than that of constituents models of public education spending and academic performance are estimated over 1988 1990 while evidence indicates little support for the traditional treatment of the leviathan hypothesis that greater competition lowers public spending this paper argues that education spending by itself does not fully provide a valid test of the leviathan hypothesis since spending by itself does not necessarily indicate the quality of public education programmes empirical evidence indicates that greater numbers of schools and school districts promote higher student achievement as evidenced by higher math and v

inflation and the distribution of price changes across markets a causal analysis recent advances in time series methodology are applied to the investigation of causal relationships between monthly changes in the consumer price index and changes in its dispersion across different consumption categories this dispersion is associated with the degree to which relative prices are changing past inflation rates seem useful in forecasting changes in relative prices but not vice versa there is also a significant contemporaneous correlation between these series hence it is concluded that fluctuations in the inflation rate help cause fluctuations in relative prices but not vice versa unless the entire effect occurs within a month the analysis also serves to illustrate a new way to implement the granger causality concept

behavior of the firm under regulatory constraint a recent article in this review by averch and johnson 3 on the fair rate of return regulation in public utilities industries or more generally regulated industries attracted the attention of many economists in essence averch johnson argues that the introduction of an active constraint of a fair rate of return type would induce the firm to invest more than the original profit maximizing value of capital and this would create an inefficient allocation of inputs in addition to frequent citations in verbal arguments it has invited some thieoretical extensions by economists such as wvestfield 8 and klevorick 5 all of the writers seem to accept the basic theoretical foundations set by averch and johnson for example klevorick 5 recently proposed that the fair rate of return should be inversely related to the size of the capital of a firm the intuitive basis for this is apparent for it in effect creates a penalty as the amount of capital used by the firm increases however it seems to me that averchjohnson s original arguments are sketchy and contain somewhat ambiguous logic at several important points although their conclusion for which they tried to find empirical support that a firm will tend to increase its investment with the introduction of an active constraint seems to be correct it does not follow from their arguments in particular there seems to be a serious error which arises from confusing movements along a curve and shifts of a curve in section ii we clarify those ambiguities and if necessary correct the mistakes in the third section of this paper we shall provide a new formulation of the problem we shall find that the new formulation will give the same answer as averchjohnson namely that a firm will tend to invest more with the iiltroductioin of an active constraint it should be noted however that while the conclusion happens to be the same this was not the necessity for we needed a completely new formulation to obtain the old conclusion

regulation and industrial organization this paper examines the effects on firm behavior and industry structure of industry wide price regulation by the state such regulation wherein regulators set prices with regard to an industry wide aggregate performance measure has been and still is widely used and is shown to induce inefficiencies in firm operation in general such regulation can result in setting prices high enough to maintain inefficient firms and it encourages to inefficient firm operation due to incentives to inflate costs and averch johnson effects

half lives of currencies and aggregation bias we revisit the exchange rate half life issue and demonstrate that observed half lives can be reduced significantly by modelling relative currency rates rather than exchange rates we show that the average observed half life for relative currency rates around a measure of central tendency is about 1 55 years and this drops to 1 30 years when the us dollar is excluded we also show that a standard exchange rate model exhibits aggregation bias

contributions of neoclassical economics to public utili iy analysis neoclassical economics the dominant economics paradigm has influenced and been influenced by developments in regulated industries we identify major theoretical and empirical accomplishments discuss the impactofthese accomplishmentsonpolicydevelopment andlist the channelsthrough which the impacts are madepossible we then discuss regulatorypolitics lack ofresearchperspective an overly narrow focus on economic efficiency and the academic profession as factors limiting the impact of neoclassical economics on public policy

relative prices and money a vector autoregression on brazilian data recent data on brazilian agricultural prices industrial prices and money supply are analyzed in a vector autoregression the empirical findings show strong one way granger type causality from money supply to agricultural prices while feedback is observed between industrial prices and money supply under the usual monetarist ordering of contemporaneous innovation covariance agricultural prices do not adjust faster than industrial prices to a shock in the money supply

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

uniformity versus differentiation in regulating externalities abstract in the regulation of pollutant emissions a regulator may treat different sources with different costs and environmental damage as though they were the same for institutional informational or transaction cost reasons this may occur despite the efficiency gains from regulatory differentiation of sources this issue has been a source of much controversy in the environmental economics literature and is examined here from a theoretical perspective using a two pollutant economy emissions and net social benefits are compared for the case of efficient differentiated regulation and the case of uniform undifferentiated regulation of the aggregate of the two pollutants we show when aggregate emissions will be greater than equal to or less than efficient emissions and we derive conditions for each of these three possibilities further we show that when marginal costs and benefits become more steeply sloped the inefficiency associated with undifferentiated regulation increases