market share and price rigidity abstract survey evidence shows that the main reason why firms keep prices stable is that they are concerned about losing customers or market share we construct a general equilibrium model in which firms care about the size of their customer base firms and customers form long term relationships because consumers incur costs to switch sellers in an environment with sectoral productivity shocks we show that cost pass through is a non monotonic function of the size of switching costs specifically prices tend to become more stable as the fraction of repeat customers increases and the elasticity of the customer base falls

competition and the number of firms in a market are duopolies more competitive than atomistic markets this paper uses a variant of the standard search model to examine market equilibrium and the consequences for market equilibrium of an increase in the number of firms if marginal search costs increase with the number of searches then the demand curve facing any firm will be kinked with the elasticity of demand with respect to price decreases being less than with respect to price increases prices may not change in response to changes in marginal costs as the number of firms increases the maximum price that is consistent with equilibrium increases to the monopoly price but the minimum price decreases on the other hand if marginal search costs decrease with the number of searches equilibrium if it exists is characterized by a

asymmetric price adjustment and economic fluctuations this paper considers a possible explanation for asymmetric adjustment of nominal prices the authors present a menu cost model in which positive trend inflation causes firms relative prices to decline automatically between price adjustments in this environment shocks that raise firms desired prices trigger larger price responses than shocks that lower desired prices the authors use this model of asymmetric adjustment to address three issues in macroeconomics the effects of aggregate demand the effects of sectoral shocks and the optimal rate of inflation copyright 1994 by royal economic society

rockets and feathers understanding asymmetric pricing prices rise like rockets but fall like feathers this stylized fact of most markets is con rmed by many empirical studies in this paper i develop a model with competitive rms and rational partially informed consumers where such asymmetric response to costs by rms emerges naturally in contrast to public opinion and past work collusion is not necessary to explain such result using a rich dataset of retail gasoline prices i nd the observed price dispersion pattern to be consistent with the model s prediction

price response information and asymmetry of price dispersion abstractin this study we examine how differently gasoline prices in 25 regions of seoul korea respond to asymmetric information between retailers and consumers we estimate the region specific li

retail fuel price adjustment in germany a threshold cointegration approach abstract consumers in germany often complain that retail fuel prices usually adjust quickly to crude oil price increases than decreases and characterize this pricing pattern as market power exploitation in this paper we use both weekly national and daily city specific berlin hamburg munich and cologne data to investigate the extent to which retail fuel prices in germany adjust to changes in the international crude oil price at the national level with weekly prices we find positive asymmetries for both gasoline and diesel within the period 2003 2007 reflecting that retail prices react more swiftly to crude oil price increases than decreases in contrast for 2009 2013 we observe symmetric adjustment and negative asymmetry for retail diesel and gasoline prices respectively the city level analysis supports our findings in the latter time period thus regulatory measures aimed at the retail fuel market over recent years seem to have been effective and contrary to consumers perception we find no evidence for excessive market power or collusion

the big push natural resource booms and growth a simple application of big push reasoning suggests that natural resource booms can be important catalysts for development in poorer countries in this paper we present evidence from seven latin american countries that natural resource booms are sometimes accompa nied by declining per capita gdp we present a model with natural resources increasing returns in the spirit of big push models and expectations to clarify some of the reasons this may happen q 1999 elsevier science b v all rights reserved

optimal monetary policy in a small open economy with home bias we analyze optimal monetary policy in a small open economy characterized by home bias in consumption peculiar to our framework is the application of a ramseytype analysis to a model of the recent open economy new keynesian literature we show that home bias in consumption is a su cient condition for inducing the monetary policy maker of an open economy to deviate from a strategy of strict markup stabilization and contemplate some optimal degree of exchange rate stabilization we focus on the optimal setting of policy both in the case of rms setting prices one period in advance and in a gradual fashion subject to adjustment costs while the rst setup allows us to analytically highlight home bias as an independent source of equilibrium

asymmetric price adjustments a supply side approach using a model of dynamic price competition we provide an explanation from the supply side for the well established observation that output prices react faster in response to input cost increases than to decreases when costs decline the opportunity of profitable storing in anticipation of higher future costs allows competitive firms to coordinate on prices above current marginal costs the initial price response is only partial and profitable storing relaxes competition conversely when costs rise storing is not beneficial in anticipation of lower future costs and firms immediately adjust their prices to current marginal costs which entails the standard bertrand outcome our results shed new light on the empirical evidence about asymmetric pricing and can stimulate further empirical investigation on this puzzle

excessive volatility in capital flows a pigouvian taxation approach this paper analyzes prudential controls on capital flows to emerging markets from the perspective of a pigouvian tax that addresses externalities associated with the deleveraging cycle it presents a model in which restricting capital inflows during boom times reduces the potential outflows during busts this mitigates the feedback effects of deleveraging episodes when tightening financial constraints on borrowers and collapsing prices for collateral assets have mutually reinforcing effects in our model capital controls reduce macroeconomic volatility and increase standard measures of consumer welfare

the resource curse analysis of the applicability to the large scale export of electricity from renewable resources abstract the resource curse has been analyzed extensively in the context of non renewable resources such as oil and gas more recently commentators have expressed concerns that also renewable electricity exports can have adverse economic impacts on exporting countries my paper analyzes to what extent the resource curse applies in the case of large scale renewable electricity exports i develop a comprehensive model that integrates previous works and provides a consolidated view of how non renewable resource abundance impacts economic growth deploying this model i analyze through case studies on laos mongolia and the mena region to what extent exporters of renewable electricity run into the danger of the resource curse i find that renewable electricity exports avoid some disadvantages of non renewable resource exports including i shocks after resource depletion ii macroeconomic fluctuations and iii competition for a fixed amount of resources nevertheless renewable electricity exports bear some of the same risks as conventional resource exports including i crowding out of the manufacturing sector ii incentives for corruption and iii reduced government accountability i conclude with recommendations for managing such risks

search with learning understanding asymmetric price adjustments in many retail markets prices rise faster than they fall we develop a model of search with learning to explain this phenomenon of asymmetric price adjustments by extending our static game analysis to the dynamic setting we demonstrate that asymmetric price adjustments arise naturally when a positive cost shock occurs all the searchers immediately learn the true state the search intensity and hence the prices fully adjust in the next period when a negative cost shock occurs it takes longer for nonsearchers to learn the true state and the search intensity increases gradually leading to slow falling of prices

empirical studies of gasoline retailing a guide to the literature abstract this paper surveys the empirical literature on gasoline retailing which has been growing rapidly over the last three decades possibly in response to antitrust and regulatory concerns and increased availability of pricing data studies of both pricing and non price decision variables are considered in general it is found that crude oil prices are the primary driver of national price movements over time however market structure has been identified as playing a role in price dynamics equilibrium selection and price differentials across markets and stations the economic literature emphasizes the importance of heterogeneity across stations and coordination problems faced by retailers several directions for future work are suggested including the development of theory and demand estimation using high frequency station level data

monetary policy and exchange rate volatility in a small open economy we lay out a small open economy version of the calvo sticky price model and show how the equilibrium dynamics can be reduced to a simple representation in domestic inflation and the output gap we use the resulting framework to analyse the macroeconomic implications of three alternative rulebased policy regimes for the small open economy domestic inflation and cpi based taylor rules and an exchange rate peg we show that a key difference among these regimes lies in the relative amount of exchange rate volatility that they entail we also discuss a special case for which domestic inflation targeting constitutes the optimal policy and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with the suboptimal rules

rockets and feathers the asymmetric speed of adjustment of uk retail gasoline prices to cost changes abstract the paper develops a quadratic quantity adjustment model to test the hypothesis put forward in the recent monopolies and mergers commission report that the speed of adjustment of uk retail gasoline prices to cost changes is more rapid when costs rise than when they fall and that the adjustment path is more concentrated around the mean value on the upswing using data from 1982 to 1989 evidence of faster and more concentrated responses to cost increases were found

monetary policy choices in emerging market economies the case of high productivity growth we develop a general equilibrium model of an emerging market economy where productivity growth differentials between tradable and non tradable sectors result in an equilibrium appreciation of the real exchange rate the so called balassa samuelson effect the paper explores the dynamic properties of this economy and the welfare implications of alternative policy rules we show that the real exchange rate appreciation limits the range of policy rules that with a given probability keep inflation and exchange rate within predetermined numerical targets we also find that the b s effect raises by an order of magnitude the welfare loss associated with policy rules that prescribe active exchange rate management

spurious welfare reversals in international business cycle models several papers have documented spurious welfare reversals incompletemarkets economy produces a higher level of welfare than the completemarkets economy this paper first demonstrates how conventional linearization can generate approximation errors that can result in welfare reversals using a two country production economy we argue that spurious welfare reversals are not only possible but also plausible under reasonable values for model parameters this paper then proposes an approximation method that modifies the conventional linearization by a bias correction this method can be easily implemented and approximates welfare as accurately as a second order perturbation method

capital controls monetary policy and balance sheets in a small open economy we develop a small open economy new keynesian model that incorporates a financial accelerator in combination with liability dollarization applying a ramsey type analysis we compare the welfare implications of an optimal monetary policy under flexible exchange rates and an optimal capital control policy under fixed exchange rates in an economy without the financial accelerator an optimal monetary policy under flexible exchange rates is superior to an optimal capital control policy under fixed exchange rates in contrast in an economy with the financial accelerator an optimal capital control under fixed exchange rates yields higher welfare than an optimal monetary policy under flexible exchange rates jel e44 e52 f32 f38 f41

what causes rockets and feathers an experimental investigation prices usually adjust much faster when costs increase than when costs decrease in spite of the many empirical studies confirming this rockets and feathers phenomenon for different industries the mechanism driving it is not well understood we use simple experimental markets with and without search frictions and either privately or publicly observed cost shocks to study how sensitive the rockets and feathers phenomenon is to changes in search costs and information conditions in contrast to standard theoretical predictions we observe price dispersion and spontaneous asymmetric price adjustments in all treatments neither search costs nor private information on cost shocks are indispensable for prices to adjust asymmetrically in the short term the initial asymmetry quickly disappears if the direction of the cost shocks are publicly known while it persists in both treatments with private information

resource curse or not a question of appropriability this thesis presents three self contained essays focusing on empirical questions in growth and development economics each article addresses specific questions on why countries perform differently in particular i analyse the effect of democracy on economic development the relationship between natural resources and growth and the efficiency of foreign development assistance in the first essay democracy consolidation and growth i analyse the effect of democracy on economic growth in this context i argue that an important aspect to consider is how consolidated political systems are put simply i find that it is not only a question of how democratic countries are but also how long they have been democratic in other words economic performance tends to improve with the duration of uninterrupted democracy the performance of autocracies on the other hand tends to deteriorate over time however for newly established political systems there seems to be a cost of being democratic this implies that democracies only bear their fruit after some time the analysis has important policy implications to overcome initial straits international assistance focused on democratic consolidation may be important and a very good investment in fostering long run development the second essay resource curse or not a question of appropriability together with anne boschini and jesper roine is concerned with the relation between natural resources and economic development for most laymen as well as for most economists it would seem reasonable that countries richly endowed in natural resources also benefit from this wealth however a large literature has found a systematic negative effect of natural resource abundance on economic growth we suggest that this so called resource curse is not determined by resource endowments alone but rather by the interaction between the type of resources a country possesses and the quality of institutions in the country this combination of factors determines what we call the appropriability of a resource the concept of appropriability captures the likelihood of natural resources leading to rentseeking corruption or conflicts which in turn will harm economic development our results suggest that if institutions are good enough the curse may be turned into a blessing this may explain why some countries such as norway and botswana tend to benefit from their resources while others such as angola and sierra leone do not the third and final essay of this thesis foreign sectoral aid fungibility growth and poverty reduction is a contribution to the aid efficiency literature which is concerned with the question of whether aid helps or hinders economic development foreign development assistance is often targeted on specific public expenditure sectors if this aid is not used in the sector for which it was granted e g health education it is said to be fungible and donors may end up financing something completely different from what they intended e g military expenditures the major concern about sectoral fungibility is that the alternative use of aid may be less productive or less socially useful however measuring fungibility is not sufficient to determine whether foreign sectoral aid fungibility is actually harmful what is important is how the funds treated as fungible are used the essay starts by obtaining estimates of fungibility for 57 countries the results suggest that sectoral aid is indeed largely treated as fungible by recipient countries next to assess the economic and health effects of fungibility these estimates are incorporated into an empirical model of aid and growth as well as into a model of aid and infant mortality altogether i find no evidence of more fungible sectoral aid leading to worse performance

asymmetric cost pass through empirical evidence on the role of market power search and menu costs abstract we estimate cost pass through rates based on data for store level retail prices and wholesale costs for up to 90 different brands of milk sold in 327 retail stores across germany the abundance of the data allows us to identify heterogeneity in pass through across retailers and relate it to underlying explanatory factors such as retailer market power measures of consumer search and menu costs results from a threshold error correction process clearly provide empirical support for the rockets and feathers phenomenon prices increase more quickly than they decrease in contrast to much of the existing literature which explains the rockets and feathers phenomenon as a result of retailers exercising market power we find the opposite result the degree of asymmetry in prices is negatively related to market power decreases with the lerner index our measure of cross product search costs does not account for observable differences in asymmetric cost pass through rates between products the rockets and feathers observation is better explained by product specific differences in menu costs mistake costs and costs associated with stock outs which can lead to a loss of consumer goodwill

market structure and the nature of price rigidity evidence from the market for consumer deposits panel data on consumer bank deposit interest rates reveal asymmetric impacts of market concentration on the dynamic adjustment of prices to shocks banks in concentrated markets are slower to raise interest rates on deposits in response to rising market interest rates but are faster to reduce them in response to declining market interest rates thus banks with market power skim off surplus on movements in both directions since deposit interest rates are inversely related to the price charged by banks for deposits the results suggest that downward price rigidity and upward price flexibility are a consequence of market concentration

search with learning and price adjustment dynamics we present a model of consumer search with learning in which cost shocks have different short and long range effects on prices in the short run consumers confuse general cost shocks common to all firms in the industry with firm specific shocks in the case of a general cost increase this promotes an excessive propensity to search restraining the amount by which prices increase in the short run conversely in the case of an idiosyncratic cost increase consumers search too little causing the prices of high cost firms to overshoot

rent seeking and resource booms abstract this paper develops a model of rent seeking in which the opportunity cost of rent seeking is foregone entrepreneurship it provides conditions under which resource booms tend to lead to an increase in rent seeking activity and those in which they induce entrepreneurship we identify an important difference between the two activities which leads resource booms to bias gains in favour of rent seeking over entrepreneurship but we also show that this bias depends on the nature of the initial equilibrium

prices rise faster than they fall output prices tend to respond faster to input increases than to decreases this tendency is found in more than two of every three markets examined it is found as frequently in producer goods markets as in consumer goods markets in both kinds of markets the asymmetric response to cost shocks is substantial and durable on average the immediate response to a positive cost shock is at least twice the response to a negative shock and that difference is sustained for at least five to eight months unlike past studies which documented similar asymmetries in selected markets gasoline agricultural products etc this one uses large samples of diverse products 77 consumer and 165 producer goods accordingly the results suggest a gap in an essential part of economic theory as a start on filling this gap the study finds no asymmetry in the resonse of an individual decision maker a supermarket chain to its costs but it finds above average asymmetry where a cost shock is filtered through a fragmented w

human capital and growth abstract this paper describes a growth model with the property that human capital accumulation can account for all observed growth the model is shown to be consistent with evidence on individual productivities as measured by census earnings data the central hypothesis is that we learn more when we interact with more productive people

search with learning from prices does increased inflationary uncertainty lead to higher markups aggregate cost uncertainty arising from real shocks or unanticipated inflation reduces the informativeness of prices by scrambling relative and aggregate variations but when agents can acquire additional information such increased noise may in fact lead them to become better informed and price competition will intensify we examine these issues in a model of search with learning where consumers search optimally from an unknown price distribution while firms price optimally given consumers search rules we show that the decisive factor in whether inflation variability increases or reduces the incentive to search and thereby market efficiency is the size of informational costs

rational buyers search when prices increase abstract we develop a dynamic pricing model motivated by observed patterns in business to business and some business to customer transactions seller costs are perfectly correlated and evolve according to a markov process in every period each buyer observes for free the price set by their current supplier but not the other sellers prices or the sellers common cost level by paying a cost s the buyer becomes active and benefits from bertrand competition among sellers we show that there exists a semi separating equilibrium whereby sellers increase price immediately when costs increase and otherwise decrease price gradually moreover buyers become active when prices increase but not otherwise in sum we deliver a theory whereby buyers become active search if and only if their supplier increases price

monetary policy in emerging markets can liability dollarization explain contractionary devaluations abstract in emerging markets external debt is denominated almost entirely in large developed country currencies such as the u s dollar this liability dollarization offers a channel through which exchange rate variation can lead to business cycle instability when firms assets are denominated in domestic currency and liabilities are denominated in foreign currency an exchange rate depreciation worsens firms balance sheets which leads to higher capital costs and contractions in capital spending to illustrate this i construct a quantitative sticky price small open economy model in which a monetary policy induced devaluation leads to a persistent contraction in output in this model fixed exchange rates offer greater stability than an interest rule that targets inflation

inflation and asymmetric output adjustments by firms i introduction recent empirical research has rejuvenated interest in the idea that output responds asymmetrically to monetary shocks cover 1988 found that in the usa during the post wwii period positive shocks to the money supply had no effect on output whereas negative shocks reduced output his results have been corroborated by de long and summers 1988 and morgan 1993 using different time periods and measures of monetary shocks results from karras 1996a b suggest output asymmetry may be an international phenomenon the reasons for output asymmetry remain unclear they may be due to asymmetries anywhere in the transmission of monetary shocks to output asymmetric price adjustment by firms is one possible explanation but to date the evidence concerning price asymmetry has been mixed using data from 38 countries karras 1996b finds no evidence of price asymmetry in response to money supply shocks whereas studies of the effect on inflation of aggregate output gaps by laxton meredith and rose 1995 and turner 1995 imply that money supply shocks are more inflationary as an economy approaches full capacity and less inflationary when an economy approaches low capacity the aim of this paper is to test whether output responds asymmetrically to shocks and to evaluate the role of firm pricing behavior our approach is different from previous studies in several respects we use micro level firm data we evaluate both output and price asymmetry for a common sample of firms and we evaluate the influence of inflation the only previous empirical work examining the influence of inflation on output asymmetry is rhee and rich 1995 who find that the asymmetric relationship between monetary shocks and aggregate output revealed by cover is influenced by inflation we use individual firm data obtained by a survey of new zealand manufacturing firms to estimate a model of output and price change based on a theoretical model of price and output asymmetry developed by ball and mankiw 1994 they consider a situation in which firms make regularly scheduled price changes and by paying a menu cost can also make special adjustments in response to shocks to desired price the presence of menu costs of price adjustment implies a zone of no price change over which shocks to desired price will not result in a change in actual price inflation affects the opportunity cost of not changing price and therefore the position of this zone of no price change asymmetries in the response of prices to shocks therefore arise naturally when there is positive trend inflation and are predicted to be more pronounced at higher rates of inflation ball and mankiw suggest that a corollary of price asymmetry is output asymmetry at high inflation prices are predicted to be more responsive to positive shocks than to negative shocks and output more responsive to negative shocks than to positive shocks as inflation falls these asymmetries are predicted to become less pronounced we evaluate output and price asymmetry and the influence of inflation in two ways first we estimate the zone of no price change and the zone of no output change and evaluate how inflation affects the position of these zones second we evaluate how the response of prices and output to positive and to negative cost and demand shocks vary with inflation using ordered probit analysis we find evidence of output asymmetry and price asymmetry which are systematically related to inflation furthermore the relative behavior of output and prices is consistent with price asymmetry being an explanation for output asymmetry the remainder of the paper is structured as follows the second section explains why firm prices and output may respond asymmetrically to shocks and the potential role of inflation in this process the third section explains the survey data used to test for asymmetry at different rates of inflation

do gasoline prices respond asymmetrically to crude oil price changes the authors test and confirm that retail gasoline prices respond more quickly to increases than to decreases in crude oil prices among the possible sources of this asymmetry are production inventory adjustment lags and market power of some sellers by analyzing price transmission at different points in the distribution chain the authors attempt to shed light on these theories spot prices for generic gasoline show asymmetry in responding to crude oil price changes which may reflect inventory adjustment effects asymmetry also appears in the response of retail prices to wholesale price changes possibly indicating short run market power among retailers

corruption inequality and fairness bigger governments raise the possibilities for corruption more corruption may in turn raise the support for redistributive policies that intend to correct the inequality and injustice generated by corruption we formalize these insights in a simple dynamic model a positive feedback from past to current levels of taxation and corruption arises either when wealth originating in corruption and rent seeking is considered unfair or when the ability to engage in corruption is unevenly distributed in the population this feedback introduces persistence in the size of the government and the levels of corruption and inequality multiple steady states exist in some cases

price transmission and local market power empirical evidence from the austrian gasoline market we analyse the impact of local market power on price margins and different dimensions of price adjustment dynamics speed and asymmetry of price transmission using data for a large number of indiv

thinking big politics progress and security in the management of asian and european energy megaprojects this article examines four energy megaprojects two in europe and two in asia for each region a large natural gas pipeline project and an international project involving solar power from the desert is studied the natural gas projects are the nabucco project in europe and the trans asean gas pipeline network in asia the solar power from the desert projects are desertec in europe and gobitec in asia the article probes explanations of megaproject failure along social technical economic political and psychological dimensions we find that these projects though they are very different in nature and pertain to different regions all suffer from a similar set of problems too many stakeholders and stakeholder fragmentation cost overruns and the risk of accidents and attacks massive externalization of costs to third party stakeholders concentration of wealth and corruption and inflated expectations and biased projections we conclude by reflecting on lessons for not only the involved institutions and investors but energy analysts and the public at large

asymmetric price adjustments in us gasoline markets impacts of spatial dependence on the rockets and feathers hypothesis gasoline retail prices show sometimes wild asymmetric fluctuations over time we explore the impact of spatial dependence on gasoline retail price formation by using for the first time an asymmetr

optimal simple and implementable monetary and fiscal rules welfare maximizing monetary and fiscal policy rules are studied in a model with sticky prices money and distortionary taxation the ramsey optimal policy is used as a point of comparison the main findings are the size of the inflation coefficient in the interest rate rule plays a minor role for welfare it matters only insofar as it affects the determinacy of equilibrium optimal monetary policy features a muted response to output interest rate rules that feature a positive response to output can lead to significant welfare losses the welfare gains from interest rate smoothing are negligible optimal fiscal policy is passive the optimal monetary and fiscal rule combination attains virtually the same level of welfare as the ramsey optimal policy

rule of law and the resource curse abundance versus intensity we examine the resource curse using new data on historic resource stocks and an improved econometric methodology the paper distinguishes between resource abundance stocks and extractive intensity flows focusing on relationships between resources and rule of law previously unavailable information on past resource stocks is estimated we find that economically large initial natural resource stocks are associated with subsequent lower levels of rule of law and do not directly affect growth while raw resource exports do not have a significant effect on rule of law when stocks are included in the analysis but do affect average growth rates sample size is maximized through the use of an emis expectation maximization with importance sampling algorithm to replace missing data minimizing the bias and inefficiency associated with listwise deletion which commonly eliminates half or more of the available data in this setting

price setting in the euro area some stylized facts from individual producer price data this paper summarizes the microevidence on the setting of producer prices in the euro area the main findings are i 21 of producer prices are adjusted each month ii producer prices are changed more frequently and by smaller amounts than consumer prices even after controlling for product characteristics iii price decreases are relatively frequent iv inflation correlates positively with the difference between the frequency of price increases and decreases and v there is substantial variation in price flexibility across sectors which can be explained in part by differences in the cost structure the degree of competition and the level of sectoral inflation

sticky prices new evidence from retail catalogs this paper presents new results on the size frequency and synchronization of price changes for twelve selected retail goods over the past 35 years three basic facts about the data are uncovered first nominal prices are typically fixed for more than one year although the time between changes is very irregular second prices change more often during periods of high overall inflation third when prices do change the sizes of the changes are widely dispersed both large and small changes occur for the same item and the sizes of these changes do not closely depend on overall inflation

price transmission and asymmetric adjustment in the u s beef sector the u s livestock sector has experienced numerous structural changes in recent years for example the meatpacking industry has experienced many mergers and acquisitions leading to significant increases in industry concentration in particular the four firm concentration ratio for steer and heifer slaughter a frequently cited statistic and an important indicator of industry concentration increased from 35 7 in 1980 to 79 8 in 1997 usda there have also been significant regional shifts in livestock production and changes in marketing practices with decreased use of public markets in many areas for some products traditional auction markets have been largely replaced by contract production and sales cattle inventories have also trended downward over the last two decades this has been accompanied by decreases in the number of producers and in some cases with significant increases in the scale of operations the vertical transmission of shocks among various levels of the market is an important characteristic describing the overall operation of the market of course price is the primary mechanism by which various levels of the market are linked the extent of adjustment and speed with which shocks are transmitted among producer wholesale and retail market prices is an important factor reflecting the actions of market participants at alternative market levels the nature speed and extent of adjustments to market shocks may also have important implications for marketing margins spreads and mark up pricing practices an extensive literature has examined mar

the role of oil prices in the forecasts of south african interest rates a bayesian approach this paper considers whether the use of real oil price data can improve upon the forecasts for the nominal interest rate in south africa we employ bayesian vector autoregressive models that make use of various measures of oil prices and compare the forecasting results of these models with those that do not make use of this data the real oil price data is also disaggregated into positive and negative components to establish whether this would improve upon the forecasting performance of the model the full dataset includes quarterly measures of output consumer prices exchange rates interest rates and oil prices where the initial in sample period extends from 1979q1 to 1997q4 we then perform recursive estimations and one to eight step ahead forecasts over the out of sample period 1998q1 to 2014q4 the results suggest that the models that include information relating to oil prices outperform the model that does not include this information when comparing their out of sample properties in addition the model with the positive component of oil price tends to perform better than other models over the short to medium horizons then lastly the model that includes both the positive and negative components of the oil price provides superior forecasts over longer horizons where the improvement is large enough to ensure that it is the best forecasting model on average hence not only do real oil prices matter when forecasting interest rates but the use of disaggregate oil price data may facilitate additional improvements

natural resources education and economic development economic growth since 1965 has varied inversely with the share of natural capital in national wealth across countries four main channels of transmission from abundant natural resources to stunted economic development are discussed a the dutch disease b rent seeking c overconfidence and d neglect of education public expenditure on education relative to national income expected years of schooling for girls and gross secondary school enrolment are all shown to be inversely related to the share of natural capital in national wealth across countries natural capital appears to crowd out human capital thereby slowing down the pace of economic development

natural resources rent seeking and welfare abstract a new and very simple mechanism to explain why natural resource abundance may lower income and welfare is developed in a model with rent seeking a greater amount of natural resources increases the number of entrepreneurs engaged in rent seeking and reduces the number of entrepreneurs running productive firms with a demand externality it is shown that the drop in income as a result of this is higher than the increase in income from the natural resource more natural resources thus lead to lower welfare

institutions and the resource curse countries rich in natural resources constitute both growth losers and growth winners we claim that the main reason for these diverging experiences is differences in the quality of institutions more natural resources push aggregate income down when institutions are grabber friendly while more resources raise income when institutions are producer friendly we test this theory building on sachs and warner s influential works on the resource curse our main hypothesis that institutions are decisive for the resource curse is confirmed our results contrast the claims of sachs and warner that institutions do not play a role

business as usual a consumer search theory of sticky prices and asymmetric price adjustment abstract empirical evidence suggests that prices are sticky with respect to cost changes moreover prices respond more rapidly to cost increases than to cost decreases we develop a search theoretic model which is consistent with this evidence and allows for additional testable predictions our results are based on the assumption that buyers do not observe the sellers costs but know that cost changes are positively correlated across sellers in equilibrium a change in price is likely to induce consumer search which explains sticky prices moreover the signal conveyed by a price decrease is different from the signal conveyed by a price increase which explains asymmetry in price adjustment

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

the varieties of resource experience natural resource export structures and the political economy of economic growth many oil mineral and plantation crop based economies experienced a substantial deceleration in growth following the commodity boom and bust of the 1970s and early 1980s this article illustrates how countries dependent on point source natural resources those extracted from a narrow geographic or economic base such as oil and minerals and plantation crops are predisposed to heightened economic and social divisions and weakened institutional capacity this in turn impedes their ability to respond effectively to shocks which previous studies have shown to be essential for sustaining rising levels of prosperity analysis of data on classifications of export structure controlling for a wide array of other potential determinants of governance shows that point source and coffee and cocoa exporting countries do relatively poorly across an array of governance indicators these governance effects are not associated simply with being a natural resource exporter countries with natural resource exports that are diffuse relying primarily on livestock and agricultural produce from small family farms do not show the same strong effects and have had more robust growth recoveries

exchange rates and monetary policy in emerging market economies this paper investigates the effects of exchange rate regimes and alternative monetary policy rules for an emerging market economy that is subject to a volatile external environment in the form of shocks to world interest rates and the terms of trade in particular we highlight the impact of financial frictions and the degree of exchange rate pass through in determining the relative performance of alternative regimes in stabilizing the economy in the face of external shocks our results are quite sharp when exchange rate pass through is high a policy of non traded goods inflation targeting does best in stabilizing the economy and is better in welfare terms when exchange rate pass through is low however a policy of strict cpi inflation targeting is better in all cases a fixed exchange rate is undesirable in addition financial frictions have no implications for the ranking of alternative policy rules

state dependent or time dependent pricing does it matter for recent u s inflation in the 1988 2004 micro data collected by the u s bureau of labor statistics for the cpi price changes are frequent every 4 7 months depending on the treatment of sale prices and large in absolute value on the order of 10 the size and timing of price changes varies considerably for a given item but the size and probability of a price change are unrelated to the time since the last price change movements in aggregate inflation reflect movements in the size of price changes rather than the fraction of items changing price due to offsetting movements in the fraction of price increases and decreases neither leading time dependent models taylor or calvo nor 1 st generation state dependent models match all of these facts some 2 nd generation state dependent models however appear broadly consistent with the empirical patterns

the magnitude of menu costs direct evidence from large u s supermarket chains we use store level data to document the exact process of changing prices and to directly measure menu costs at five multistore supermarket chains we show that changing prices in these establishments is a complex process requiring dozens of steps and a nontrivial amount of resources the menu costs average 105 887 year per store comprising 0 70 percent of revenues 35 2 percent of net margins and 0 52 price change these menu costs may be forming a barrier to price changes specifically 1 a supermarket chain facing higher menu costs due to item pricing laws that require a separate price tag on each item changes prices two and one half times less frequently than the other four chains 2 within this chain the prices of products exempt from the law are changed over three times more frequently than the products subject to the law in principle fixed costs of changing prices can be observed and measured in practice such costs take disparate forms in different firms and we have no data on their magnitude so the theory can be tested at best indirectly at worst not at all alan blinder 1991 p 90

beliefs and consumer search in a vertical industry this paper studies vertical relations in a search market as the wholesale arrangement between a manufacturer and its retailers is typically unobserved by consumers their beliefs about who is to be blamed for a price deviation play a crucial role in determining wholesale and retail prices the common assumption in the consumer search literature is that consumers exclusively blame an individual retailer for a price deviation we show that in the vertical relations context predictions based on this assumption are not robust in the sense that if consumers assign just a small probability to the event that the upstream manufacturer is responsible for the deviation equilibrium predictions are qualitatively di erent for the robust beliefs the vertical model can explain a variety of observations such as retail price rigidity or alternatively low cost pass through non monotonicity of retail prices in search costs and seemingly collusive retail behavior the model can be used to study a monopoly online platform that sells access to nal consumers

the role of information in retail gasoline price dispersion abstract collecting information on prices is a costly endeavor the cost depends on the relative ease with which those prices can be collected and in many retail gasoline markets there is a substantial divide in the ease of collecting information with regular grade gasoline on one side of the divide and midgrade and premium grade gasoline on the other regular grade prices are prominently displayed on large signboards in front of gasoline stations while the prices of higher octane grades except where required by law are rarely displayed in this article the effects of differential by grade price information on search and gasoline price dispersion are examined a rank reversal test is used to test whether the observed grade specific price dispersion is consistent with search or non search related causes and finding the former a series of tests are presented to test for the effect of price information and other leading hypotheses a significantly concave curvature in the price dispersion coefficients across the three grades supports a price information hypothesis detailed socioeconomic data on consumers spatially matched to the stations they are most likely to patronize shows that income is a secondary factor implications for policy are discussed

heterogeneity in price rigidity evidence from a case study using microlevel data we combine two data sets to study price rigidity the first consists of weekly time series of retail wholesale and spot prices for twelve products these time series contain two exogenous cost shocks we find that prices exhibit more rigidity in response to the second shock than the first the second data set consists of all publicly available information about the shocks content analysis of these information reveals that the first shock is larger and more persistent and the market has more information on it than the second we conclude therefore that prices are more flexible in response to cost shocks that are larger that are more persistent and on which market participants have more information

price response asymmetric information and competition we compare predictions from a theoretical model based on the structure of the main outdoor retail market in jerusalem with the results of an empirical analysis of price response to changes in cost we find that firms without adjacent competition exhibit both upward and downward price rigidity an outcome we ascribe to asymmetric information between the consumer and the firm given that previous studies have focused on downward price rigidities of firms with market power our findings highlight the importance of accounting for transitory information asymmetries between the consumer and the firm when studying price rigidity

how firms construct price changes evidence from restaurant responses to increased minimum wages we use price data underlying the consumer price index to assess how restaurants whose prices are generally quite sticky respond to minimum wage increases aggregate prices rise quickly by amounts reflecting the increase in costs and they rise more among fast food outlets and in low wage locations but restaurants do not construct price increases by raising all their prices by amounts reflecting the increase in wages instead they raise only some prices but by larger amounts prices at cluster points are less likely to be changed and prices that were recently increased decreased are less more likely to be raised

retail price asymmetries in local gasoline markets the experience of the salt lake city retail gasoline market during the 1989 to 1993 period suggests that there was asymmetric adjustment wholesale and retail price data unique to the salt lake market are used to test for the existence of three types of price asymmetry during this period with respect to the magnitude of the pass through of wholesale price changes evidence of price asymmetry during periods of average weekly wholesale price changes is found however during market shocks the evidence points in the direction of retail price symmetry evidence of asymmetry with respect to the timing and pattern of the retail price response is found for periods of both average and market shock changes since gasoline is purchased by the consumer in local markets conclusions reached by studies of market pricing behaviour that rely on national data may not be relevant for local policy decisions this appears to be the case for the salt lake city market

bubble thy neighbor portfolio effects and externalities from capital controls we use changes in brazil s tax on capital inflows from 2006 to 2013 to test for direct portfolio effects and externalities from capital controls on investor portfolios we find that an increase in brazil s tax on foreign investment in bonds causes fund managers to significantly decrease their portfolio allocations to brazil in both bonds and equities fund managers simultaneously increase allocations to other countries that have substantial exposure to china and decrease allocations to countries viewed as more likely to adjust their capital controls much of the effect of capital controls on portfolio allocation appears to occur through signalling i e changes in investor expectations about future policies rather than the direct cost of the controls this evidence of significant externalities from capital controls suggests that any assessment of controls should consider their effects on portfolio flows to other countries

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

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

rockets and feathers meet markup margins applications to the oil and gasoline industry this article investigates the existence of asymmetric price transmission between crude oil rack wholesale and retail gasoline prices a threshold cointegration technique is used with regime switches being triggered by the size of the markup margin there is consistent evidence of band tar in which the crude rack and retail prices are free to diverge until the markup margin is squeezed or stretched beyond a lower or upper critical threshold this finding indicates that abnormally high markup margins cannot be sustained which provides evidence against market power exertion the threshold error correction models indicate that there is no systematic relationship between the speed of adjustment back to the long run relationship and the markup margin which rules out the existence of rockets and feathers

the elusive curse of oil abstract our goal is to show that contrary to the claims made in several recent papers the effect of a large endowment of oil and other mineral resources on long term economic growth of countries has been on balance positive moreover the claims of a negative effect of oil and mineral wealth on the countries institutions are called into question