the canadian border and the us dollar the impact of exchange rate changes on us retailers this paper provides a micro level investigation into the impact of changes in the uscanada nominal exchange rate on retailers in us regions lying close to the uscanada border using a large data set on product level retail prices and sales in the united states over a nine year period we explore the links between changes in exchange rates cross border travel and the price and quantity responses of us retailers this allows us to assess the importance of geography and distance in affecting the pass through of exchange rate changes into prices and quantities at the level of the consumer we develop a two stage theoretical model of cross border travel and industry equilibrium for retail sales at the border our empirical results accord well with the implications of the model

strategy not tactics drives aggregate planning the aggregate planning model supposedly shows how manufacturers cope with seasonally biased sales unfortunately industry has failed to embrace any of the sophisticated algorithms that were developed to solve the corresponding resources allocation problem this paper reveals why such methods have proven so unattractive aggregate planning is a chimera in practice planners construct the master production schedule directly in line with a preferred production strategy a chase plan is the most popular choice when this option proves infeasible management plumps for another predetermined strategy the resultant stockpiling brings certain financial risks however companies take various measures to reduce their exposure

the extensive margin and monetary policy abstract the creation of new firms referred to as the extensive margin is a significant but overlooked dimension of monetary policy a monetary var documents that monetary policy has significant effects on firm creation an analytically tractable model combining sticky prices and firm entry shows that entry alters the transmission of monetary policy innovations acting much like a type of investment in more standard models monetary policy rules that offset the uncertainty of productivity shocks can raise the mean level of entry and thereby welfare suggesting a new motivation for stabilization policy

on the impact of order volatility in the european automotive sector order volatility is an unfortunate fact of life facing most suppliers of both products and services in this paper we are concerned with establishing the magnitude of the problem faced by the european automotive sector the evidence has been acquired via the site based quick scan audit methodology qsam production scheduler strategy is thereby classified according to a new five set schema as observed via individual value stream volatilities system variables have then been codified and correlated with customer order volatility powerful statistically significant relationships emerge from this evidence this generally but not wholly supports intrinsic views on what constitutes good practice a specific interface between supplier and oem shows the existence of a positive loop that acts as a vicious circle to create unnecessary volatility in material flow

the electoral budget cycle on municipal waste collection expenditure abstractthis article analyses the determinants of municipal waste collection expenditure specifically the effects of electoral cycles on municipal waste collection expenditure we use a database with information on spanish municipalities with more than 1000 inhabitants for the period 2002 2011 our results reveal that incumbents adopt an opportunistic behaviour increasing spending on waste in the preelection year and reducing it in the election and post election years therefore we confirm an electoral budget cycle on waste collection expenditures in spain additionally we find that the levels of income unemployment and upper level governments transfers have a positive impact on waste collection spending finally population density level of urbanization average age of the population of the municipality and less fragmented governments negatively influence waste collection spending

international prices costs and markup differences relative cross border retail prices in a common currency comove closely with the nominal exchange rate using product level prices and wholesale costs from a grocery chain operating in the united states and canada we decompose this variation into relative costs and markup components the high correlation of nominal and real exchange rates is driven mainly by changes in relative costs national borders segment markets retail prices respond to changes in costs in neighboring stores within the same country but not across the border prices have a median discontinuous change of 24 percent at the border and 0 percent at state boundaries jel f31 l11 l81

sticky price models of the business cycle can the contract multiplier solve the persistence problem we construct a quantitative equilibrium model with firms setting prices in a staggered fashion and use it to ask whether monetary shocks can generate business cycle fluctuations these fluctuations include persistent movements in output along with the other defining features of business cycles like volatile investment and smooth consumption we assume that prices are exogenously sticky for a short time persistent output fluctuations require endogenous price stickiness in the sense that firms choose not to change prices much when they can do so we find that for a wide range of parameter values the amount of endogenous stickiness is small thus we find that in a standard quantitative model staggered price setting alone does not generate business cycle fluctuations

demand and distance evidence on cross border shopping while many studies have documented deviations from the law of one price in international settings evidence is scarce on the extent to which consumers take advantage of price differentials and engage in cross border shopping we use data from 287 swedish municipalities to estimate how responsive alcohol sales are to foreign prices and relate the sensitivity to the location s distance to the border typical results suggest that the elasticity with respect to the foreign price is around 0 4 in the border region moving 200 400 kilometers inland reduces it to 0 2 0 1 given that cross country price differences for alcohol and other products are often caused by taxes our evidence has implications for the debate on tax competition harmonization

should generational accounts replace public budgets and deficits the author assesses the concept of generational accounts and the specific accounts constructed by alan auerbach jagadeesh gokhale and laurence kotlikoff 1991 although these accounts support the assertion of present orientation in fiscal policy they rest on numerous assumptions based on judgments that are open to question these involve the treatment of the public budget constraint the benefits from public exhaustive expenditures economic and population projections the discount rate and fiscal incidence alternative and equally reasonable assumptions could yield radically different conclusions the author concludes that the auerbach gokhale and kotlikoff accounts should not replace the annual public budget as they argue

searching for political business cycles in germany one reslt of the revitalised literature on political business cycles is that there are signs in german data that elections and ideology have an impact however using monthly data for the period 1950 1989 and standard methods of time series analysis we reject both the nordhaus hypothesis of opportunistic cycles and the partisan approaches by hibbs ans alesina we show that some results are sensitive to the assumption of stationarity there are signs of policy cycles in m1 it is hard though to bring this in line with the rogoff hypothesis of rational opportunistic cycles because of the german institutional setting

the ricardian approach to budget deficits persistent budget deficits have increased economists interest in theories and evidence about fiscal policy this paper develops the ricardian approach and contrasts it with standard models the discussion considers from major theoretical objections to ricardian equivalence finite lifetimes imperfect capital markets uncertainty about future taxes and incomes and the distorting effects of taxation the paper then considers empirical evidence on interest rates consumption and saving and current account deficits the conclusion is that the ricardian approach is a useful first order approximation and that this approach will probably become the benchmark model for assessing fiscal policy this abstract was borrowed from another version of this item

new directions for stochastic open economy models the paper develops a simple stochastic new open economy macroeconomic model based on sticky nominal wages explicit solution of the wage setting problem under uncertainty allows one to analyze the effects of the monetary regime on welfare expected output and the expected terms of trade despite the potential interplay between imperfections due to sticky wages and monopoly the optimal monetary policy rule has a closed form solution to motivate our model we show that observed correlations between terms of trade and exchange rates are more consistent with our traditional assumptions about nominal rigidities than with a popular alternative based on local currency pricing 2000 elsevier science b v all rights reserved

fiscal adjustment in eu countries a balance sheet approach abstract several european union countries have recently implemented or are envisaging fiscal operations which improve budgetary figures but have no structural impact on government finances we evaluate some of these measures using a balance sheet approach in particular we examine the degree to which reductions in government debt in eu countries has been accompanied by a decumulation of government assets in the runup to maastricht we find a strong correlation between changes in government liabilities and government assets and larger declines in government assets in countries starting from higher public debt levels

trade in financial services capital flows and the value at risk of countries in light of the recent financial crises in the emerging markets the coming into force of the financial services agreement under the gats has been considered a success while the agreement provides for little new liberalization but rather formalizes the status quo it was feared that governments could even backtrack on previous commitments in the belief that more open markets could increase the degree of susceptibility by undermining financial stability strengthening the financial system s ability to evaluate and manage risk has therefore been identified as a precondition for more ambitious liberalization efforts in the future dobson and jacquet 1998 encouragingly in some countries banks have begun to implement value at risk approaches as a tool to assess their balance sheet vulnerability as this paper argues such an approach could also play a useful role in determining the extent of market risk on the macroeconomic level with potentially important implications regarding trade in financial services capital account convertibility and international crisis management

the effect of ownership structure on prices in geographically differentiated industries i analyze how ownership structure and market geography jointly influence fast food prices i estimate a model of demand and supply that accounts for the market geography and run counterfactual experiments that demonstrate how mergers affect prices i find that the impact of mergers can be large that this impact decreases as the merging outlets are farther apart that mergers among market leaders generally increase prices more than mergers among weaker firms and that mergers can increase prices even if the outlets are so far apart that neither outleti s presence affects prices at the other before the merger

good bad or ugly on the effects of fiscal rules with creative accounting abstract do fiscal rules lead to fiscal adjustment or do they encourage the use of creative accounting this question is studied with a model in which fiscal rules are imposed on measured fiscal variables which can differ from true variables because there is a margin for creative accounting the probability of detecting creative accounting depends on its size and the transparency of the budget the model studies the effects on fiscal policy of a budget rule separating structural from cyclical effects and examines how these effects depend on the underlying fiscal distortion and on the degree of transparency of the budget

heterogeneity in the tax pass through to spirit retail prices evidence from belgium abstract on 1st november 2015 the belgian government increased the excise tax on alcoholic beverages for spirits with 40 of alcohol and bottle size of 70 cl this tax change is equivalent to an amount of 2 43 per bottle of spirits this paper studies the impact of this tax reform at the store level on the posted retail price of six major brands of spirits using a difference in differences method the estimation is based on a balanced panel of scanner data from a major supermarket chain with a 33 market share and uses the retail prices of the same brands sold in france by the same supermarket chain as a control group having information on each store location we show spatial variations in the tax pass through for homogeneous products we find that these variations are strongly related to the intensity of local competition and to a lesser extent to the proximity to the borders mainly with luxembourg which is the low price country we find that the tax was quickly passed through during the first month of tax implementation and that it was mostly over shifted however we also find that both the border and the competition effects are not instantaneous but arise several months after the tax reform these findings have important implications for alcohol control policies as they highlight that the incidence of alcohol taxation can vary greatly across space and affect differently households depending on where they live

defining the government s debt and deficit although the budget deficit and the public debt feature prominently in political debate and economic research there is no agreement about how they should be measured they can b e defined for different sets of public institutions including the nested sets corresponding to central government general government and the public sector and for any definition of government there are many measures of the debt and deficit including those generated by four kinds of accounts cash financial full accrual and comprehensive which can be derived from four nested sets of assets and liabilities each debt and deficit measure says something about public finances but none tells the whol e story each is also vulnerable to manipulation and is likely to be manipulated if it is subject to a binding fiscal rule or target narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of governme nt narrow definitions of debt and deficit encourage operations involving off balance sheets assets and liabilities while broad measures are susceptible to the mismeasurement of on balance sheet assets and liabilities reviewing the literature on these is sues the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships

structural factors associated with primary fiscal balances in developing countries the study explores the conditions under which a government in a developing country is likely to run a balanced or surplus budget we contend that primary fiscal deficits are likely to persist where the economy is too saving constrained to raise private sector investment to conduct the investigation a logit model is applied to a sample of developing countries to see whether the saving constraints are associated with the fiscal stance of governments accordingly income level growth external current account balance and foreign direct investment are used as indicators of the saving constraint with the exception of economic growth positive developments in these variables turned out to be significant to the likelihood of the government adopting a surplus budget

competition in large markets this paper develops a simple and robust implication of free entry followed by competition without substantial strategic interactions increasing the number of consumers leaves the distributions of producers prices and other choices unchanged in many models featuring non trivial strategic considerations producers prices fall as their numbers increase hence examining the relationship between market size and producers actions provides a nonparametric tool for empirically discriminating between these distinct approaches to competition to illustrate its application i examine observations of restaurants seating capacities exit decisions and prices from 224 u s cities given factor prices and demographic variables increasing a city s size increases restaurants capacities decreases their exit rate and decreases their prices these results suggest that strategic considerations lie at the heart of restaurant pricing and turnover

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

seigniorage dollarization and public debt the lebanese civil war and recovery experience 1982 97 abstract the paper develops theoretical frameworks to explain the phenomena of seigniorage dollarization and public debt and then applies them to the lebanese macroeconomic situation over 1982 97 more specifically it analyzes the implications of seigniorage and dollarization to see what extent they were responsible for the inflation and exchange rate depreciations during the civil war period it also studies the sustainability of postwar debt the conclusions that emerge from the analysis are that budget deficits were only one of the reasons behind the war inflation and depreciations dollarization could still impose some problems for macroeconomic stability and tax reforms are essential for fiscal balance

income maximization and the selection and sorting of international migrants abstract two prominent features of international labor movements are that the more educated are more likely to emigrate positive selection and more educated migrants are more likely to settle in destination countries with high rewards to skill positive sorting using data on emigrant stocks by schooling level and source country in oecd destinations we find that a simple model of income maximization can account for both phenomena results on selection show that migrants for a source destination pair are more educated relative to non migrants the larger is the absolute skill related difference in earnings between the destination country and the source results on sorting indicate that the relative stock of more educated migrants in a destination is increasing in the absolute earnings difference between high and low skilled workers we use our framework to compare alternative specifications of international migration estimate the magnitude of migration costs by source destination pair and assess the contribution of wage differences to how migrants sort themselves across destination countries

staggering and synchronization in price setting evidence from multiproduct firms theoretical work on price setting behavior focuses on the single product case while in reality a single price setter sells many products the authors use retail store level multiproduct pricing data to learn about price dynamics they find that while the timing of a product s price changes is staggered across stores selling the same product the timing of the price changes of different products sold within the same store is highly synchronized this finding validates the usual assumption that decisions are staggered across price setters and suggests that price rigidity is due mostly to mechanical reasons and not to informational asymmetries copyright 1996 by american economic association

explaining armington what determines substitutability between home and foreign goods for decades trade economists have modeled imperfect substitution between home and foreign goods in consumption often called the armington assumption with little analysis of what explains the wide variation in these substitution elasticities across sectors using a varying coefficients model the authors estimate armington elasticities between u s domestic and foreign goods across over one hundred industrial sectors from 1980 to 1988 and examine the role of product industry political and home bias factors as determinants they find strong support that the presence of foreign owned affiliates affects armington elasticities in important ways and some support that entry barriers and union presence have an effect

a pragmatic approach to the design of bullwhip controllers it is well known that forecasting mechanisms can greatly increase bullwhip demand variance amplification of orders as processed by both human and algorithmic decision makers this paper is concerned with the application of the well established apiobpcs decision support system a variant of the order up to rule in such circumstances it has two feedback controls based on the inventory and the orders in pipeline respectively with gains set equal according to the deziel eilon rule there is one feed forward control based on exponential forecasting although this is not a restriction on the application of this system we consider the pragmatic role of apiobpcs in the situation where the echelon decision maker may be handling a wide range of sku s in a non altruistic environment where upmarket information may either be withheld or simply unavailable under such circumstances it has been established via site based studies that the decision makers output the orders reflect a wide range of strategies or maybe ignorance three strategies may be regarded as appropriate i e pass orders along demand smoothing and level scheduling depending on context apiobpcs can be adapted to each of these modus operandi in the first case with the added capability of smoothing the sharp edges with a modicum of inventory variation and in the last case with the advantage of built in trend detection players in non altruistic supply chains must be able to cope with added uncertainties due to lead time variations we show that apiobpcs may be well matched to such situations and is hence copable as well as capable the paper includes recommended parameter settings according to desired decision making policies

cross country price dispersion in the euro era a case study of the european car market impact of the euro this paper investigates the effects of the european monetary union on cross country price differences in the european car market the analysis utilizes disaggregate bi annual data on the prices of almost all car models sold in the 15 countries of the european union over 1993 2003 the data refer to identical models with identical specifications and options to identify the euro s effect we exploit the fact that out of the 15 countries in our sample 12 joined euroland at the beginning of 1999 and officially adopted the euro as their national currency at the beginning of 2002 while 3 countries remained outside the monetary union we investigate whether there is a systematic difference in the evolution of cross country price dispersion between euroland members and non members after 1999 our analysis distinguishes between phase i monetary union with national currencies preserved 1999 2001 and phase ii official adoption of the euro as a national currency in 2002 we examine the evolution of both the absolute price differentials across countries and the speed with which deviations from the long term cross country differentials are eliminated we find that in the pre euro era countries that later joined euroland exhibited lower price differentials relative to the base country of the netherlands by approximately 6 the monetary union further reduced these differentials by a small but significant percentage about 1 5 between 1999 and 2001 this reduction happened while the price differentials in non euroland countries increased the price differentials in euroland countries further decreased following the official euro adoption in 2002 however we cannot attribute this decline to the euro as we witness an even faster decrease of price differentials in non euroland countries over the 2002 2003 period despite these reductions cross country price differences remain large even among members regarding the speed of convergence we find that even before 1999 the half life of price shocks was shorter in euroland countries compared to non euroland countries 0 65 versus 1 year however we do not find any evidence that the emu further affected the speed of convergence in a significant manner overall our results suggest a big role for exchange rate stability in reducing international price dispersion and a smaller role for a common currency the surprisingly high remaining international price differentials after the euro suggest the need for additional measures towards integration e g liberalization of the distribution system reduction of high registration taxes in particular countries pinelopi koujianou goldberg and frank verboven

overtime vs regular shift planning decisions in packing shops abstract consideration is given to a planning problem arising at the packaging stage of production in several industries i e the packing shop this termed economic manpower shift planning with overtime emsp o seeks the manpower and overtime to be planned at each available workday shift so that production targets are met within a given time horizon at minimum cost starting with a practical planning dilemma on the use of overtime we explore the optimal planning policy together with the performance of two practical policies an ilp model of emsp o is developed and used for determining the optimal policy since the problem is shown to be np hard optimal policies were found using a commercial ilp optimiser the optimal setting of the practical policies was obtained by existing heuristics the results show that effective use of overtime leads to workforce reductions and improved utilisation in many cases an all or nothing property relates overtime and workforce utilisation at optimum finally it is shown that when indiscriminately used practical planning policies may have serious cost consequences

how far for a buck tax differences and the location of retail gasoline activity in southeast chicagoland abstract we exploit variation in gasoline and cigarettes taxes in adjacent political jurisdictions for northern illinois and indiana to examine consumers trade off between prices and travel we develop a model that relates activity in the retail gasoline industry around the tax borders to consumer locations our results indicate that the willingness of a typical chicagoland consumer to travel an additional mile to buy gasoline corresponds to about 0 065 to 0 084 per gallon according to our estimates the observed area of chicago the jurisdiction with the highest taxes is missing approximately 40 of the capacity that would exist were taxes equalized

real exchange rate fluctuations and the dynamics of retail trade industries on the u s canada border consumers living near the u s canada border can shift their expenditures between the two countries so real exchange rate fluctuations can act as demand shocks to border areas retail trade industries using annual county level data we estimate the effects of real exchange rates on the number of establishments and their average payroll in border counties for four retail industries in three of the four industries we consider the number of operating establishments responds either contemporaneously or with a lag of one year to real exchange rate movements for these industries the response of retailers average size is less pronounced the rapid response of net entry is inconsistent with any model of persistent deviations from purchasing power parity that depends on retailers costs of changing nominal prices

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

the rigidity of prices this paper uses evidence on individual transaction prices to analyze price behavior the evidence shows that for many transactions pricesremain rigid for periods exceeding one year the rigidity of price ispositively correlated with industry concentration for several productsthe correlation of price changes across buyers is low the paper alsoinvestigates the relationship between price rigidity price change andthe length of time a buyer and seller have been doing business together the author interprets the evidence as emphasizing the importance of nonprice rationing and the inadequacy of models in whichprice movements alone clear markets copyright 1986 by american economic association

optimal taxation with private government information the ramsey model of fiscal policy implies that taxes should be smooth in the sense of having small variances in contrast empirical labour tax processes are smooth in the sense of being random walks they provide prima facie evidence for incomplete government insurance this paper considers whether private government information might lie behind such incomplete insurance it shows that optimal incentive compatible policies exhibit limited use of state contingent debt and greater persistence in taxes and debt and it argues that they are better approximations to empirical fiscal policies than those implied by the ramsey model the paper also establishes that optimal incentive compatible allocations converge to allocations such that the government s incentive compatibility constraint no longer binds generally these limiting allocations are ones in which the government is maximally indebted their credibility and the interaction of incentive compatibility and credibility is briefly discussed

how does trade openness influence budget deficits in developing countries abstract this paper analyses the effects of trade openness on budget balances by distinguishing the effects of natural openness from those of trade policy revealed indicators of natural openness and trade policy are computed using gmm system estimator the econometric analysis focuses on 66 developing countries over 1974 98 the results show that trade openness increases a country s exposure to external shocks this enforces the negative impact on budget balances of terms of trade instability additionally trade openness influences budget balances through several other channels corruption income inequalities etc then natural openness and trade policy have opposite effects the former deteriorates budget balances whereas the latter enhances them

accounting for u s real exchange rate changes this study measures the proportion of u s real exchange rate movements that can be accounted for by movements in the relative prices of nontraded goods the decomposition is done at all possible h

what do deficits tell us about debt empirical evidence on creative accounting with fiscal rules in the eu fiscal rules such as the excessive deficit procedure and the stability and growth pact sgp aim at constraining government behavior milesi ferretti 2003 develops a model in which governments circumvent such rules by reverting to creative accounting the amount of this depends on the reputation cost for the government and the economic cost of sticking to the rule we provide empirical evidence of creative accounting in the european union we find that the sgp rules have induced governments to use stock flow adjustments a form of creative accounting to hide deficits the tendency to substitute stock flow adjustments for budget deficits is especially strong for the cyclical component of the deficit as in times of recession the cost of reducing the deficit is particularly large

charles k rowley william f shughart ii and robert d tollison eds the economics of budget deficits the international library of critical writings in economics 153 ed by mark blaug cheltenham u k and northampton ma u s a edward elgar 2002 2 vols 1 112 pages usd 370 00 gbp 245 00 cloth

defining the government s debt and deficit defining the government s debt and deficit although the budget deficit and the public debt feature prominently in political debate and economic research there is no agreement about how they should be measured they can be defined for different sets of public institutions including the nested sets corresponding to central government general government and the public sector and for any definition of government there are many measures of the debt and deficit including those generated by four kinds of accounts cash financial full accrual and comprehensive which can be derived from four nested sets of assets and liabilities each debt and deficit measure says something about public finances but none tells the whole story each is also vulnerable to manipulation and is likely to be manipulated if it is subject to a binding fiscal rule or target narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of government narrow definitions of debt and deficit encourage operations involving off balance sheets assets and liabilities while broad measures are susceptible to the mismeasurement of on balance sheet assets and liabilities reviewing the literature on these issues the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships

the economics of cross border travel abstract we model the decision to travel across an international border as a trade off between benefits derived from buying a range of products at lower prices and the costs of travel we estimate the model using microdata on canada united states travel price differences motivate cross border travel a 10 home appreciation raises the propensity to cross by 8 to 26 the larger elasticity arises when the home currency is strong a result predicted by the model distance to the border strongly inhibits crossings with an implied cost of 87 cents per mile geographic differences can partially explain why american travel is less exchange rate responsive