financial markets and growth the last five years have witnessed a resurgence of interest in the relationship between financial intermediation and economic growth this issue had been extensively studied nearly two decades earlier by goldsmith 1969 mckinnon 1973 shaw 1973 and others who produced considerable evidence that financial development correlates with growth but their work though insightful lacked analytical foundations in traditional growth theory financial intermediation could be related to the level of the capital stock per worker or to the level of productivity but not to their respective growth rates the latter were ascribed to exogenous technical progress the recent revival of interest in the link between financial development and growth stems mainly from the insights and techniques of endogenous growth models which have shown that there can be self sustaining growth without exogenous technical progress and that the growth rate can be related to preferences technology income distribution and institutional arrangements this provides the theoretical underpinning that early contributors lacked tinancial intermediation can be shown to have not only level effects but also growth effects the resulting models have offered important insights into the effect of financial development on growth and vice versa they have also provided new impetus to empirical research on these issues this paper reviews the ground covered so far on the theoretical and empirical front and points to some still unresolved issues

generating real persistent effects of monetary shocks how much nominal rigidity do we really need abstract this paper attempts to assess whether money can generate persistent economic fluctuations in dynamic general equilibrium models of the business cycle we show that a small nominal friction in the goods market can make the response of output to monetary shocks large and persistent if it is amplified by real wage rigidity in the labor market we also argue that for plausible levels of real wage rigidity a small degree of nominal stickiness is sufficient for money to produce economic fluctuations as persistent as those observed in the data

a moral hazard trap to growth this paper studies the consequences of asymmetric information in the investment sector upon economic growth in this paper the information asymmetry generates a moral hazard problem this moral hazard problem restricts financial arrangements it is shown that these restrictions make even the long run competitive equilibrium income dependent upon history this result also holds in case there is perfect capital mobility however when there is capital mobility the government may be able to intervene in a pareto improving way copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

financial intermediation and endogenous growth an endogenous growth model with multiple assets is developed agents who face random future liquidity needs accumulate capital and a liquid but unproductive asset the effects of introducing financial intermediation into this environment are considered conditions are provided under which the introduction of intermediaries shifts the composition of savings toward capital causing intermediation to be growth promoting in addition intermediaries generally reduce socially unnecessary capital liquidation again tending to promote growth

stock markets and development this paper asks if financial development especially stock market development affects the level and or the growth rate of economic activity it finds a substantial effect on both current wisdom suggests that the growth effects of financial intermediation could be either permanent or transitory for instance the greenwood jovanovic 1990 henceforth gj model has an ak stucture with no diminishing returns to the reproducible factor and a permanent exogenous improvement in financial structure would cause a permanent increase in the rate of growth on the other hand if the returns to the reproducible factor did diminish better intermediation could lead only to level effects since one should not a priori exclude either growth effects or level effects we shall look for both our search for growth effects will use the gj model our search for level effects will rely on an amended version of the mankiw romer and weil 1992 henceforth mrw structure

optimal monetary policy responses to relative price changes abstract an optimizing model with a flexible price sector and a sticky price sector is presented to analyze the effects of relative price changes on inflation fluctuations the relative price of the flexible price good represents a shift parameter of the new keynesian phillips curve the optimal monetary policy is to target sticky price inflation rather than a broad inflation measure although stabilizing the relative price around its efficient value is one of the appropriate goals of the central bank stabilizing sticky price inflation is sufficient for achieving this goal an optimal monetary policy for a small open economy is also discussed

global land use implications of first and second generation biofuel targets recently an active debate has emerged around greenhouse gas emissions due to indirect land use change iluc of expanding agricultural areas dedicated to biofuel production in this paper we provide a detailed analysis of the iluc effect and further address the issues of deforestation irrigation water use and crop price increases due to expanding biofuel acreage we use globiom an economic partial equilibrium model of the global forest agriculture and biomass sectors with a bottom up representation of agricultural and forestry management practices the results indicate that second generation biofuel production fed by wood from sustainably managed existing forests would lead to a negative iluc factor meaning that overall emissions are 27 lower compared to the no biofuel scenario by 2030 the iluc factor of first generation biofuels global expansion is generally positive requiring some 25 years to be paid back by the ghg savings from the substitution of biofuels for conventional fuels second generation biofuels perform better also with respect to the other investigated criteria on the condition that they are not sourced from dedicated plantations directly competing for agricultural land if so then efficient first generation systems are preferable since no clear technology champion for all situations exists we would recommend targeting policy instruments directly at the positive and negative effects of biofuel production rather than at the production itself

sectoral comovement monetary policy shocks and input output structure the comovement of output across the sector producing nondurables i e nondurable goods and services and the sector producing durables is well established in the monetary business cycle literature however standard sticky price models that incorporate sectoral heterogeneity in price stickiness i e sticky nondurables prices and flexible durables prices cannot generate this feature we argue that an input output i o structure provides a solution to this problem here we develop a two sector model with an i o structure which is calibrated to the u s economy in the model each sector s output affects those of the others by acting as an intermediate input this connection between the sectors provides a channel through which sectoral comovement is induced

sectoral price rigidity and aggregate dynamics abstract this paper studies the business cycle implications of sectoral heterogeneity in price rigidity using a highly disaggregated multi sector model the model is estimated by the simulated method of moments using a mix of aggregate and sectoral u s data the frequencies of price changes implied by our estimates are consistent with those reported in micro based studies we show that heterogeneity in price rigidity is the primary factor explaining the heterogeneity in the responses of sectoral output and inflation to a monetary policy shock we also find that ignoring sectoral heterogeneity in price rigidity leads to the mismeasurement of the relative importance of aggregate and sector specific shocks in aggregate and sectoral fluctuations

climate threshold financial hoarding and economic growth we use an iterative finite difference method to establish theoretical models that reflect the relationships among climate threshold financial hoarding and economic growth we build a simultaneous equations model to conduct an empirical analysis based on china s statistical data from 1979 to 2012 our study yields the following results china s climate threshold has shown a zigzag shaped rising trend since 1979 the main reasons for the rapid expansion of financial hoarding were high savings rate savings leakage higher marginal efficiency of financial hoarding compared to capital efficiency or higher internal creativity of the financial sector there were positive cumulative effects between financial hoarding and economic growth which were significantly inhibited by climate threshold the climate threshold had discrepant influences on different industries to achieve a balanced economy more money should be invested in the real sector to appropriately reduce the rate of savings leakage the financial s

valuing nature lessons learned and future research directions this paper critically reviews the literature on environmental valuation of ecosystem services across the range of global biomes the main objective of this review is to assess the policy relevance of the information encompassed by the wide range of valuation studies that have been undertaken so far published and other studies now cover most ecosystems with aquatic and marine contexts attracting the least attention there is also a predominance of single function valuation studies studies valuing multiple functions and uses and studies which seek to capture the before and after states as environmental changes take place are rare by and large it is the latter types of analyses that are most important as aids to more rational decision taking in ecosystem conservation versus development situations involving different stakeholders local national and global aggregate global scale estimates of ecosystems value are problematic given the fact that only marginal values are consistent with conventional decision aiding tools such as economic cost benefit analysis in general valuation data provide prima facie support for the hypothesis that net ecosystem service value diminishes with biodiversity and ecosystem loss balmford et al 2002 science 297 p 950 future research effort should include complementary research on multiple ecosystem services that seeks to capture the temporal disturbance profile and its causal factors the explicit recognition of multiple interdependent ecosystem services and values poses both conceptual and empirical research challenges it would serve to transform the practice of research in this sub field via the a priori assumption of multiple and inter dependent use instead of independent single use this line of reasoning can then be extended to the institutional arrangements that determine which values are captured new institutional processes and arrangements are probably required in order to best realise benefit streams from multiple ecosystem use and non use provision across a range of different stakeholders

real and nominal propagation of nominal shocks the role of real and nominal propagation mechanisms in generating persistent real effects of nominal shocks is analysed analytically in a fully specified intertemporal general equilibrium model while neither a real propagation mechanism capital acccumulation with one period nominal contracts nor nominal propagation staggered nominal contracts in the absence of any real propagation can generate plausible impulse responses with strong persistence it is shown that the two mechanisms interact so as to strengthen persistence possibly unit roots and generate more plausible impulse responses

inflation and productive activity in a multiple matching model of money abstract this paper investigates the relationship between money growth inflation and productive activity in a dynamic general equilibrium multiple matching framework where trade frictions are manifested by limited consumption variety productive activity and matching in the goods market are endogenized by a time allocation decision of work and search effort we find that a high degree of complementarity between participation in the labor and goods markets creates a channel by which inflation can positively influence production and output this feature arises when household preferences for consumption variety is sufficiently large and it can also lead to the multiplicity of monetary equilibria

search for a monetary propagation mechanism abstract this paper examines a monetary propagation mechanism in an economy where exchanges in goods and labor markets involve costly search it is shown that an increase in the money growth rate increases steady state employment and output when the money growth rate is low but reduces steady state employment and output when the money growth rate is already high the model produces persistent hump shaped responses in employment and output to money growth shocks even when the shocks have no persistence the model also generates desirable features in job vacancy sales inventory and the velocity of money all these features emerge here in an economy with perfectly flexible prices and wages journal of economic literatureclassification numbers e40 e30

persistency in sticky price models abstract nominal rigidities imply that nominal shocks have an impact effect which may be propagated by standard mechanisms however the nominal adjustment process may in itself be a propagation mechanism causing persistent effects of nominal shocks this may be caused by inertia in nominal wage and price adjustment arising due to input output networks or multiperiod nominal contracting as captured in models with staggered price wage decisions it has recently been contested whether staggering can account for persistency of any quantitative importance this paper reviews the theory and empirical evidence on this issue and it is concluded that staggering may be a quantitative important propagation mechanism

the role of monetary shocks in equilibrium business cycle theory three examples abstract we study three equilibrium business cycle models that differ according to the mechanism through which monetary growth shocks affect the economy these include models with inflation tax effects with staggered nominal wage contracts and with unanticipated inflation effects we review some monetary features of business cycles in postwar us data and compare these with the same properties computed for the artificial economies our goal is to identify the features of the business cycle that these mechanisms help to explain the features that remain puzzling and how the form of the mechanism matters

some evidence on factor intensity and price rigidity abstract this paper establishes a new empirical finding the degree of labor intensity and the degree of price flexibility are negatively correlated across industrial sectors in the u s economy this finding suggests that varying factor intensity can potentially generate different degrees of price stickiness across sectors and remove the need to exogenously impose the latter of course labor intensity is just one more feature in addition to others like the durability of goods produced and the degree of competition that can explain some of the heterogeneity in price durations across sectors

the transmission of monetary policy in a multisector economy this article constructs and estimates a sticky price dynamic stochastic general equilibrium model with heterogeneous production sectors firms in different sectors vary in their price rigidity production technology and the combination of material and investment inputs in particular firms buy inputs from all sectors using the actual input output matrix and capital flow table of the u s economy by relaxing the standard assumption of symmetry this model allows idiosyncratic sectoral dynamics in response to monetary policy shocks the model is estimated by the generalized method of moments using sectoral and aggregate u s time series

inventory theoretic money demand and relative price dynamics we construct a two goods inventory theoretic money demand model and find that the model implies in a monetary contraction the decline in the prices of low cash intensity goods durables or luxuries outpaces that of high cash intensity goods nondurables or necessities using u s data we show that our model s predictions are consistent with the data

sticky price and limited participation models of money a comparison abstract we provide new evidence that models of the monetary transmission mechanism should be consistent with at least the following facts after a contractionary monetary policy shock the aggregate price level responds very little aggregate output falls interest rates initially rise real wages decline by a modest amount and profits fall we compare the ability of sticky price and limited participation models with frictionless labor markets to account for these facts the key failing of the sticky price model lies in its counterfactual implications for profits the limited participation model can account for all the above facts but only if one is willing to assume a high labor supply elasticity 2 percent and a high markup 40 percent the shortcomings of both models reflect the absence of labor market frictions such as wage contracts or factor hoarding which dampen movements in the marginal cost of production after a monetary policy shock 1997 elsevier science b v

sluggish inflation and optimizing models of the business cycle abstract many researchers have added sticky prices to quantitative business cycle models i simulate several of these models in order to evaluate their success at reproducing two features of us data the lagged reaction of inflation to monetary growth and the persistence of inflation

sticky price models and durable goods the inclusion of a durable goods sector in sticky price models has strong and unexpected implications even if most prices are flexible a small durable goods sector with sticky prices may be sufficient to make aggregate output react to monetary policy as though most prices were sticky in contrast flexibly priced durables with sufficiently long service lives can undo the implications of standard sticky price models in a limiting case flexibly priced durables cause monetary policy to have no effect on aggregate output our analysis suggests that durable goods prices are the most relevant data for calibrating price rigidity jel e21 e23 e31 e52

phasing out of environmentally harmful subsidies consequences of the 2003 cap reform abstract subsidies linked to production have been classified as environmentally harmful by the oecd a core element of the eu 2003 common agricultural policy cap reform is to decouple income support from production this paper estimates the environmental consequences of this policy reform an agricultural sector model using a modified version of the positive mathematical programming method depicts the complex natural structural and political relationships of austrian farming changes in management measures can be analyzed with respect to their environmental effects by using appropriate indicators simulation results show that the 2003 cap reform will reduce the average cost of production and may improve environmental conditions regarding soil water and greenhouse gases when compared to a scenario without reform thus the new cap is likely to bring about outcomes which the previous reform agenda 2000 promised but did not deliver

economic growth and global warming a model of multiple equilibria and thresholds abstract we presume a simple endogenous growth model where global warming affects economic growth and analyze the dynamics of the competitive economy and of the social optimum our regulatory instrument is an emission tax rate we demonstrate that for certain values of the emission tax ratio the competitive economy exhibits multiple equilibria and a threshold may exist that separates the domains of attraction for the growth paths there exist paths to high growth rates and low temperature and low growth rates and high temperature for the planner s problem the long run equilibrium is unique unless the damage of global warming is very small

biological conservation in dynamic agricultural landscapes effectiveness of public policies and trade offs with agricultural production article i nfo land use change and land management intensification are major drivers of biodiversity loss especially in agricultural landscapes that cover a large and increasing share of the world s surface incentive based agri environmental policies are designed to influence farmers land use decisions in order to mitigate environmental degradation this paper evaluates the effectiveness of agri environmental schemes for biological conservation in a dynamic agricultural landscape under economic uncertainty we develop a dynamic ecological economic model of agricultural land use and spatially explicit population dynamics we then relate policies subsidies to grassland taxation of agricultural intensity to the ecological outcome probability of persistence of a species of interest we also analyze the associated trade offs between agricultural production in value and biological conservation in probability of persistence at the landscape scale

ecosystem services and agriculture cultivating agricultural ecosystems for diverse benefits crop and rangelands are over 25 of the earth s land area and they are expanding agricultural ecosystems rely on a suite of supporting ecosystem services to provide food fiber and fuel as well as a range of accompanying but non marketed ecosystem services es ecosystem services from agriculture include regulation of water and climate systems aesthetic and cultural services as well as enhanced supporting services such as soil fertility many of these es are appreciated by people but they lack markets so they lack the incentives for provision that come with prices for public policy decisions to take them into account non market valuation techniques are needed such as travel cost contingent valuation hedonic valuation and cost based or factor income approaches this article offers an overview of es from agriculture and non market valuation methods as it introduces the articles in this special section on ecosystem services and agriculture understanding how ecological functions generate es is fundamental to management but so too is understanding how humans perceive and value those services research is required both to design cost effective incentives to provide es and to measure which kinds of es could provide the greatest overall welfare benefits to society agricultural ecosystems offer newly recognized potential to deliver more diverse ecosystem services and mitigate the level of past ecosystem disservices this special section of ecological economics conveys both how these are becoming possible and the challenges to science and public policy design of turning that potential into reality

the responses of prices at different stages of production to monetary policy shocks this paper examines the responses of prices at different stages of production to monetary policy shocks in aggregate price analysis the var of christiano et al 1996a 1996b is used to identify the policy shock as the federal funds rate innovation and trace out the responses of prices in disaggregate price analysis the adjustment of prices is examined by comparing inflation before and after a recent policy tightening identified by romer and romer 1989 1992 at early stages of production a monetary tightening causes input prices to fall more rapidly and by a larger amount than output prices

key currency status an exorbitant privilege and an extraordinary risk abstract what are the costs and benefits of the dollar s status as the key currency in the international monetary system here we present a calibrated two country model in which all exports are invoiced in the key currency and government bonds denominated in the key currency are held internationally to facilitate trade and as official reserve assets we show that the exorbitant privilege accruing to the key currency country comes from three sources 1 a bond seigniorage that we estimate to be worth about a half a percent of consumption per period to the united states 2 asymmetric responses to exogenous shocks that are worth an additional quarter of a percent of consumption per period and 3 a macroeconomic hegemony in monetary and fiscal policy reflecting the fact that the key currency s policy instruments are more potent but there is also an exorbitant risk to being the key currency country we show that the costs of a potential dumping of key currency bonds are also substantial moreover there appear to be no obvious monetary or fiscal policy responses that would lower the costs significantly

ecosystem services and economic development in austrian agricultural landscapes the impact of policy and climate change scenarios on trade offs and synergies we have developed an integrated modeling framework imf to quantify indicators for ecosystem services es and economic development ed in agricultural landscapes austria serves as a case study in which impacts trade offs and synergies of es and ed are assessed for different agricultural policy pathways and regional climate change scenarios agricultural intensification and incentivized use of provisioning es e g biomass production lead to higher macro economic output e g gdp but usually reduce es related to regulation and maintenance e g ecological integrity climate regulation as well as cultural services landscape diversity we revealed both synergies for certain es e g biomass production and soil organic carbon stocks as well as large spatial deviations from the national mean across the heterogeneous agricultural landscapes in austria climate change scenarios i lead to substantial variation in es and ed indicators and ii usually amplify trade offs by stimulating land use intensification our findings depict the complex relationship between different es and ed indicators as well as the importance of considering spatial heterogeneity and regional climate change this assessment can help to improve targeting of agri environmental schemes in order to provide a more balanced and efficient supply of es and to foster rural development

regional energy autarky potentials costs and consequences for an austrian region local actors at community level often thrive for energy autarky to decrease the dependence on imported energy resources we assess the potentials and trade offs between benefits and costs of increasing levels of energy autarky for a small rural region of around 21 000 inhabitants in austria we use a novel modeling approach which couples a regional energy system model with a regional land use optimization model we have collected and processed data on the spatial distribution of energy demand and potentials of biomass photovoltaics and solar thermal resources the impacts of increasing biomass production on the agricultural sector are assessed with a land use optimization model that allows deriving regional biomass supply curves an energy system model is subsequently applied to find the least cost solution for supplying the region with energy resources model results indicate that fossil fuel use for heating can be replaced at low costs by increasing forestry and agricultural biomass production however autarky in the electricity and the heating sector would significantly increase biomass production and require a full use of the potentials of photovoltaics on roof tops attaining energy autarky implies high costs to consumers and a decline in the local production of food and feed

cost effective policy instruments for greenhouse gas emission reduction and fossil fuel substitution through bioenergy production in austria abstract climate change mitigation and security of energy supply are important targets of austrian energy policy bioenergy production based on resources from agriculture and forestry is an important option for attaining these targets to increase the share of bioenergy in the energy supply supporting policy instruments are necessary the cost effectiveness of these instruments in attaining policy targets depends on the availability of bioenergy technologies advanced technologies such as second generation biofuels biomass gasification for power production and bioenergy with carbon capture and storage beccs will likely change the performance of policy instruments this article assesses the cost effectiveness of energy policy instruments considering new bioenergy technologies for the year 2030 with respect to greenhouse gas emission ghg reduction and fossil fuel substitution instruments that directly subsidize bioenergy are compared with instruments that aim at reducing ghg emissions a spatially explicit modeling approach is used to account for biomass supply and energy distribution costs in austria results indicate that a carbon tax performs cost effectively with respect to both policy targets if beccs is not available however the availability of beccs creates a trade off between ghg emission reduction and fossil fuel substitution biofuel blending obligations are costly in terms of attaining the policy targets

nominal inertia and shock persistence in uk business cycles a structural var methodology is used for uk data to identify and map out the effects of innovations in the money supply employment output wages and prices moreover bands of two standard errors are computed for the impulse response functions so that comment may be made on the significance of the dynamic responses of the variables to the simulated shocks this allows conclusions to be drawn on the persistence of shocks results suggest that output variation is largely determined by aggregate demand shocks over the business cycle frequency importantly evidence is also found of rigidities in the form of price inertia and nominal wage stickiness

the effects of real and monetary shocks in a business cycle model with some sticky prices an established characteristic of macroeconomic fluctuations is the strong positive correlation between variations in the money stock and variations in production income and employment at business cycle frequencies this finding has motivated an enormous literature that has studied the effects of monetary policy disturbances on the real economy and in particular the role of money in business cycles several classes of monetary business cycle models have been developed that feature different channels through which monetary policy can have real effects one model that has been used widely is the keynesian model in which monetary shocks can have important effects on allocations because there are nominal rigidities in prices and or wages the keynesian assumption of sticky nominal prices is often motivated by reference to studies that have analyzed the frequency of nominal price changes the broad conclusion that emerges from this literature is that there are a number of goods that have prices that appear to change infrequently for example carlton 1989 has reported slow changes in nominal transactions prices for producers goods even without long term relationships between buyers and sellers and has documented that delivery lags and other product characteristics frequently change before nominal prces change similarly blinder s survey 1991 of firms shows that prices for many goods change only about once per year while this evidence

sticky prices the impact of regulation abstract this paper finds that approximately one third of the items in the cpi are governed by price regulations that can slow and add noise to the response of prices to changes in cost or demand conditions consequently regulation is a possible partial explanation of sticky prices in the overall rate of inflation and delayed response to changes in the money supply a survey is used to decompose the cpi into freely determined and regulated sub components evidence is provided that prices in the regulated sector of the economy respond approximately two quarters after prices in the freely determined sector thereby contributing a source of stickiness in overall inflation and in the response of inflation to monetary policy