the economics of guilds occupational guilds in medieval and early modern europe offered an effective institutional mechanism whereby two powerful groups guild members and political elites could collaborate in capturing a larger slice of the economic pie and redistributing it to themselves at the expense of the rest of the economy guilds provided an organizational mechanism for groups of businessmen to negotiate with political elites for exclusive legal privileges that allowed them to reap monopoly rents guild members then used their guilds to redirect a share of these rents to political elites in return for support and enforcement in short guilds enabled their members and political elites to negotiate a way of extracting rents in the manufacturing and commercial sectors rents that neither party could have extracted on its own first i provide an overview of where and when european guilds arose what occupations they encompassed how large they were and how they varied across time and space i then examine how guild activities affected market competition commercial security contract enforcement product quality human capital and technological innovation the historical findings on guilds provide strong support for the view that institutions arise and survive for centuries not because they are efficient but because they serve the distributional interests of powerful groups

adaptive estimation of cointegrated models simulation evidence and an application to the forward exchange market the paper reports simulation and empirical evidence on the finite sample performance of adaptive estimators in cointegrated systems adaptive estimators are asymptotically efficient even when the shape of the likelihood function is unknown we consider two representations of cointegrated systems triangular cointegrating regressions and error correction models the motivation for and advantages of adaptive estimators in such systems are discussed and their construction is described we report results from the estimation of a forward exchange market unbiasedness regression using the adaptive and competing estimators and provide related monte carlo simulation evidence on the performance of the estimators copyright 1999 john wiley sons ltd

estimating shocks and impulse response functions this paper examines the issue of how to identify the shocks in a cointegrated var when the following assumptions are made the variables can be classified as endogenous or exogenous there are as many cointegrating relations as endogenous variables the cointegrating vectors are identified and they contain at least one exogenous variable it is shown that with these assumptions it is possible to identify the shocks without the use of further restrictions on the covariance matrix of the disturbances or the short run dynamics if the long run parameters are known the whole model can be estimated by ols the analysis is extended to allow the var to have both stationary and non stationary variables an illustration of the method is provided using the traditional benchmark var model involving us data on output prices interest rates and money a liquidity effect is not found using this var methodology

are the roots of the modern lex mercatoria really medieval this article analyzes how trade was conducted between the tenth and thirteenth centuries we claim that as most exchange was simultaneous differences between law codes did not pose a substantial problem and that mercantile guilds developed not to provide institutions comparable to the modem lex mercatoria but rather to supply physical security the development of nonsimultaneous exchange was made possible predominantly by the emergence of urban autonomy and urban law applicable to all merchants trading within town so it appears that the importance of universally accepted commercial institutions in the middle ages has hitherto been vastly overrated

the smoot hawley tariff a quantitative assessment in the two years after the imposition of the smoot hawley tariff in june 1930 the volume of u s imports fell over 40 to what extent can this collapse of trade be attributed to the tariff itself versus other factors such as declining income or foreign retaliation partial and general equilibrium assessments indicate that the smoot hawley tariff itself reduced imports by 4 8 ceteris paribus although the combination of specific duties and deflation further raised the effective tariff and reduced imports an additional 8 10 a counterfactual simulation suggests that nearly a quarter of the observed 40 decline in imports can be attributed to the rise in the effective tariff i e smoot hawley plus deflation

an asymmetric error correction model of uk consumer spending this paper augments the granger and lee journal of applied econometrics 4 1989 non symmetric error equilibrium correction model to assess the possibility that in the aggregate consumers respond differently to different types of disequilibrium error this idea is illustrated using an engle granger implementation of the davidson hendry srba and yeo dhsy economic journal 80 1978 model the disequilibrium error is endogenously determined by the long run empirical model and a binary dummy variable captures two alternative states above and below equilibrium spending interaction of the dummy variable with key variables in a short run dynamic model of uk consumer spending augments the dynamics of the dhsy model income elasticities inflation elasticities and speeds of adjustment are all seen to change significantly depending on whether the disequilibrium error is positive or negative and is suggestive of asymmetric behaviour on the part of consumers moreover the asymmetrically augmented mode

disease and development the effect of life expectancy on economic growth we exploit the major international health improvements from the 1940s to estimate the effect of life expectancy on economic performance we construct predicted mortality using preintervention mortality rates from various diseases and dates of global interventions predicted mortality has a large impact on changes in life expectancy starting in 1940 but no effect before 1940 using predicted mortality as an instrument we find that a 1 percent increase in life expectancy leads to a 1 7 2 percent increase in population life expectancy has a much smaller effect on total gdp however consequently there is no evidence that the large increase in life expectancy raised income per capita

have north south growth linkages changed abstract this paper provides econometric evidence suggesting that the traditional tradebased business cycle linkages between the north and the south have changed many countries in the south particularly in asia appear to have become more resilient to cyclical movements in the north and play a more significant role in sustaining global activity a number of factors may have contributed to these changes improved domestic policies and more open trade and exchange regimes closer financial linkages with the north and a substantial increase in capital flows a marked rise in intraregional trade and greater diversification of the exports of the south

productivity differentials the relative price of non tradables and real exchange rates abstract this paper reconciles the apparent contradiction between recent panel unit root tests of real exchange rates and the productivity differential model proposing an alternative view that explains the coexistence of such findings real exchange rates and the relative price of non tradables reflect the gradual adjustment of mean reverting and endogenously competing factors supply and demand shocks as well as traded goods arbitrage granger causality and variance decomposition results indicate substantial simultaneity and feedback effects between real exchange rates the relative price of non tradables and productivity differentials

taxes and growth in a financially underdeveloped country evidence from the chilean investment boom this paper argues that taxation of retained profits is particularly distortionary in an economy with good growth prospects and poorly developed financial markets because it primarily reduces the investment of financially constrained firms investment that has marginal product greater than the after tax market real interest rate contrarily taxes on distributed profits or capital gains primarily reduce the investment of financially unconstrained firms chile experienced a banking crisis over the period from 1982 to 1986 and in 1984 reduced its tax rate on retained profits from 50 percent to 10 percent we show that consistent with our theory there was a large increase in aggregate investment after the reform which was entirely funded by an increase in retained profits further we show that investment grew by more in industries that depend more on external financing according to the rajan and zingales 1998 measure finally we present some weak evidence from comparisons of investment rates across firms for several different measures of their likelihood of being financially constrained

have absolute price levels converged for developed economies the evidence since 1870 abstract we compare price level and income convergence since 1870 for eleven developed economies using implicit price deflators derived from the gdp data of maddison 1995 2001 2003 we find that sigma and beta convergence for prices occurs later and to a lesser extent than income price levels converge after 1950 while income convergence begins in the 1880s we find no evidence for stochastic price convergence or for club price convergence

measuring market power for some industrial sectors in austria this paper applies an oligopoly model which parameterizes the degree of market power for two industrial sectors glass industry non electrical machinery in austria in contrast all other paper in the new empirical indsutrial organization literature we account for the non stationarity characteristics of the data series a dynamic specification procedure which assumes structural long run equilibrium relationships is therefore applied since a simultaneous system with non linear cross equation restrictions is implied by the economic model a full information maximum likelihood method is used the data reveal a higher degree of market power for the glass industry than for non electrical machinery this hierarchy is in line with the position of these industries for concentration rates and herfindahl indices

regression direction and weak exogeneity abstract the absence of testing for weak exogeneity in money demand has often led to stark conditioning claims regarding the validity of price equations this paper uses the johansen procedure to explore the conditioning properties of money demand systems for nonborrowed reserves m1 and m2 our results show that irrespective of the specification of the cointegrating relation a feedback mechanism enters the equation for money the opposite however is not true for the price equations the results also cast a warning for single equation models of money demand in that weak exogeneity is sensitive to how the system is defined

structural change in a multisector model of growth we study a multi sector model of growth with differences in tfp growth rates across sectors and derive sufficient conditions for the coexistence of structural change characterized by sectoral labour reallocation and constant aggregate growth path the conditions are weak restrictions on the utility and production functions commonly applied by macroeconomists we present evidence from us two digit industries that is consistent with our predictions about structural change and successfully calibrate the historical shift from agriculture to manufacturing and services we show quantitatively that reasonable deviations from our conditions do not have a big impact on the properties of the model

exchange rate of the us dollar and the j curve the case of oil exporting countries abstract this study examines the effects of changes in the exchange rate of the us dollar on the trade balances of three oil exporting countries namely iran venezuela and saudi arabia an exchange rate pass through model is applied to allow changes in the exchange rate of the dollar to affect prices of traded goods then the impact of changes in prices on the quantities of imports and exports of these economies is estimated the results suggest a partial exchange rate pass through to these countries import and export prices in terms of the us dollar while the three countries raise the price of their primary export namely crude oil in response to a depreciation of the dollar saudi arabia s long run pricing strategy in securing a larger market share stands in contrast to that of the two other opec members the sum of the estimated long run price elasticities of demand for imports and exports is found to exceed unity for iran and venezuela but less than unity for saudi arabia

modeling u s households demands for liquid wealth in an era of financial change money demand models overpredicted m2 growth in the united states from 1990 to 1993 the authors examine this overprediction using a model of households demands for liquid wealth the model is a dynamic generalization of the aids model of angus deaton and john muellbauer 1980 the authors find that the own price elasticity of money rose substantially after 1990 they also find important cross price elasticities of money with respect to other liquid financial assets notably with respect to mutual funds incorporating these and other features helps explain nearly 50 percent of the shortfall in m2 growth over the period in question

understanding domestic savings an empirical approach abstractthere are two unusual and important features in the evolution of the savings rate in chile first the economy increased the average savings rate by 11 percentage points in the period 1985

does trade cause capital to flow evidence from historical rainfall abstract we use a historical quasi experiment to estimate the causal effect of trade on capital flows we argue that fluctuations in regional rainfall within the ottoman empire capture the exogenous variation in exports from the empire to germany france and the u k during the period of 1859 1913 the identification is based on the following historical facts first only surplus production was allowed to be exported from the empire provisionistic policy second different products grown in different regions were subject to variation in regional rainfall third different bundles of products were exported to germany france and the u k by the empire using the export bundle weighted regional rainfall as an instrument for ottoman exports to each country our instrumental variable regression suggests the following when a given region of the empire received more rainfall than others the resulting surplus production was exported more to countries that historically imported more of those products and this leads to higher foreign investment by those countries in the empire our findings support theories predicting complementarity between trade and finance in which causality runs from trade to capital flows

growth outside the stable path lessons from the european reconstruction abstract this paper exploits a natural experiment the large destruction of capital in continental europe during world war ii to characterize the transitional dynamics of an economy that begins with a capital stock below its steady state level we use these regularities as a benchmark to discriminate among competing growth specifications a model that combines non separabilities in preferences with a technology that restricts the degree of substitutability between inputs outperforms the widely used ak and cobb douglas specifications with time separable preferences our results suggest that policy evaluations based in growth models that overlook non separabilities in preferences or impose strong restrictions on the technological structure might be grossly misleading

a positive theory of agricultural protection the present paper analyses the political economy of agricultural protection in a general equilibrium framework rational politicians offer protectionist policies in return for political support from their constituency individuals in the economy have different factor endowments politicians exploit these differences in establishing redistributive policies when maximizing political support changes in economic variables such as the urban rural income gap capital intensity the share of agriculture in total output and total employment and the share of food in consumer expenditures affect the political equilibrium policy the analysis concludes that the observed correlation between economic development and agricultural protection is caused by a multiplicity of factors

money demand in euroland abstract this paper explores the determinants of alternative monetary aggregates in euroland a sample consisting of quarterly data covering the 1980 1 1998 4 period is considered we are interested whether a conventionally defined money demand equation is stable in some aggregates as opposed to others both long run and short run relationships are considered in this paper overall the results indicate that broad narrow money demand in euroland is a stable unstable function of euroland wide income and interest rates

political instability and savings in less developed countries evidence from sub saharan africa a four equation model is used to investigate the effects of political instability pi on the savings rate in sub saharan africa utilising a comprehensive measure of pi we find that political instability has a deleterious effect on the savings rate both directly and indirectly through a reduction in investment and economic growth the negative effects of pi on savings rate occurs contemporaneously as well as with a lag we also find that economic growth has a stabilising effect on the political system and that not accounting for these effects through a simultaneous equations model results in biased coefficient estimates these relationships are robust with respect to model specification the implication of our results is that economic factors alone cannot explain the development process in less developed countries

predatory versus productive government the case of u s agricultural policies this essay will argue that agricultural policy in the united states has led to both the enhancement of efficiency through productive policies and the transfer of wealth and income to special interests through redistributive or predatory policies these two activities can be labeled as pests and perts pest policies or political economic seeking transfers are meant to redistribute wealth from one social group to another and are not explicitly concerned with efficiency in contrast perts or political economic resource transactions are intended to correct market failures or to provide public goods these policies have neutral distributional effects at least in design a review of the history of public policy in agriculture reveals not only tension between the pert and pest roles of the public sector but also some coordination between these two types of activities as different interest groups pressure the political process the government trades off pests and perts in its attempts to acquire balance and secure political power at times this has led to combinations of programs that appear incoherent in such a world the challenge for economists is to design and advocate policies that are both economically productive and politically sustainable

the gains from agricultural research under distorted trade abstract this paper explores the gains from research issue within the framework of a product which is traded with the aid of export subsidies because of the taxpayer burden associated with increased exports it is quite possible for the returns to research to be negative a decline in the rate of protection through a rising world market leads to a linear increase in the gains from research while a rise in the internal support price will cause a non linear and negative response if the supply shift is pivotal and a linear and negative response if it is parallel finally global returns to research will be higher than individual country returns and will always be positive in a free trade environment

is the united states really underinvesting in agricultural research that the level of public investment in u s agricultural research is too low is widely accepted this paper argues that there are two important limitations to the evidence assembled in support of the underinvestment hypothesis a many authors have compared the social rate of return to public investments with the private rate of return to private investments b costs of public expenditures on agricultural research have been underestimated by a failure to account for the marginal excess burden of the tax collection system taking these two factors into account evidence in support of the underinvestment hypothesis is weakened considerably

stock watson dynamic ols dols and error correction modelling approaches to estimating long and short run elasticities in a demand function new evidence and methodological implications from an application to the demand for coal in mainland china in this paper robust elasticity estimates of coal demand for china are derived using annual data 1953 92 in so doing we illustrate the use of a powerful yet practically convenient and recently developed modelling procedure devised by stock and watson known as dynamic ols dols who provide evidence based on monte carlo simulations of this estimator being superior in small samples compared to a number of alternative estimators as well as being able not only to accommodate higher orders of integration but also to account for possible simultaneity within regressors of a potential demand system furthermore cointegration and error correction methods are employed to derive short run price and income elasticities estimated results are quite robust not only in terms of statistical prowess but also in terms of economic intuition and indicate that over the long run both price and income elasticities are close to unity while short run price and income elasticities are less in absolute value than their long run counterparts there seems to be some divergence in short run parameters from a subsample analysis overall results seem to imply that for china coal consumption should remain relatively constant as future modernization strategies for economic development are pursued in addition the study has clear methodological implications for estimating the long and short run elasticities in a demand function in general and in a wide variety of fields in future applied research

the unbiased forward rate hypothesis re examined abstract this paper examines the unbiased forward rate hypothesis using an error correction model ecm previous tests have utilized mainly two specifications differences and levels the advantage of the ecm is that the parameters of the level specification appear in the error correction term and hence the ecm provides a direct link to the levels specification in this paper we fully exploit this link and demonstrate that both specifications yield essentially the same results when the ecm is explicitly derived from a levels specification and the levels parameters are estimated simultaneously with other parameters of the ecm

structural changes and the us money demand function previous literature on the stability of the us money demand function suggests mixed results in this article we study the stability of the money demand function from the standpoint of structural changes in the function we first investigate if a stable money demand function can be found for the us for the period from the first quarter of 1959 to the fourth quarter of 2000 the results show that a stable long run money demand function does not exist for the sample period under consideration we then estimate unknown structural break points in the variables of the money demand function using bai and perron s 1998 method and test if there is a stable relationship in each sub sample period of the break points the results show that a stable relationship exists for each sub sample period the estimated income elasticity and interest rate semi elasticity are relatively smaller than ball s 2001 estimates but consistent with his argument

modeling the demand for narrow money in the united kingdom and the united states abstract despite the importance of well specified empirical money demand functions for inference forecasting and policy problems in modeling have arisen concerning the economic theories of money demand the data institutional frameworks financial innovation and econometric implementation by developing constant data coherent m 1 demand equations for the u k and the u s we investigate these issues and explain such puzzles as missing money the great velocity decline and the recent explosion in m 1 the endogeneity of money the lucas critique and the non invertibility of our m 1 models are also discussed

recessions growth and banking crises abstract we examine the relationship of banking crises with economic growth and recessions our data cover 21 economies from around the world most from 1870 to 2009 with the rest starting in 1901 or earlier the data include capital investment and human capital formation we have two major findings first there is very large heterogeneity in growth of gross domestic product gdp and capital investment after banking crises most strikingly twenty five percent of counties experience no decrease in real gdp per capita in the year of the crisis or the following two years some countries see an increase in long run growth after a crisis while others see a fall with no clear overall pattern second we find clear evidence consistent with zarnowitz s law if there is a contraction in economic activity after a banking crisis larger decreases in real gdp per capita are followed by faster subsequent growth

japan s financial deregulation and linkage of the gensaki and euroyen deposit markets summary this paper examines whether japan s financial deregulation weakened the linkage between the euroyen and gensaki markets it defines and analyses the linkage of the two markets in terms of the persistence and predictability of yield spreads as well as cross market causality by using johansen tests and an error correction model this paper shows first cross market causality before and after deregulation and second one common trend in interest rates substantial gensaki euroyen yield spreads and a slower response of the one month gensaki euroyen yield spread to a shock after deregulation

evaluating threshold effects in consumer sentiment 1 introductionthe consumer sentiment index published by the university of michigan hereafter the um index is one of the two most commonly monitored measures of consumer sentiment in the united states the other one being the consumer confidence index issued by the conference board sentiment indexes which are constructed from answers to survey questions are popular with the media newspaper articles and commentaries abound following their release the analysis often confers a primary role to consumer sentiment in determining economic fluctuations the view among economists however is more equivocal as early as 1965 adams and green found that the information contained in the um index encompasses the information included in standard government statistics on employment and financial conditions many economists think that consumer sentiment is endogenous and is a reflection of current macroeconomic conditions other economists in line with keynes notion of animals spirits argue that psychological factors which are not captured by economic variables can influence consumers decisions thus the willingness to consume may be an important factor affecting consumption few studies have found that sentiment indexes have significant explanatory power once fundamental economic factors are taken into account garner 1991 and throop 1992 however performed event studies and suggested that these indexes could be helpful during major economic or political events as they then tend to diverge from a path consistent with other macroeconomic variables drawing on this literature our study provides a new evaluation of consumer sentiment as a predictor of aggregate consumer spending periods of high economic or political uncertainty are usually associated with increased volatility of consumer sentiment suggesting that large swings in sentiment could influence consumption we provide a formal assessment of this possibility by estimating a consumption function in which only large variations of sentiment affect spending we find that consumer sentiment is a statistically important determinant of consumption in periods of high uncertainty even after controlling for other determinants of consumption this article is organized as follows section 2 describes two views of consumer behavior section 3 reviews the relevant empirical literature section 4 introduces our econometric model data and estimation methods section 5 summarizes the estimation and forecasting results section 6 evaluates the predictive power of the um index within the campbell mankiw campbell and mankiw 1990 framework section 7 concludes 2 theorythis section briefly reviews the theory of consumer behavior and discusses possible links to consumer sentiment the permanent income hypothesis pih states that consumers expenditures depend on their permanent income permanent income is defined as the present value of wealth formula omitted see article image where at is the real value of the individual s nonhuman wealth at the beginning of period t is the discount factor ylt is real disposable labor income and et is the expectation operator conditional on information available to the individual at time t campbell and mankiw 1990 test hall s 1978 random walk hypothesis by separating consumers into two groups a proportion of households rule of thumbers simply set consumption equal to income in each period while a fraction 1 life cyclers behave according to the pih in this framework the only reason any lagged variable could have predictive power for current consumption growth is because that variable has predictive power for current income growth and the consumers do not spend that income until it arrives in that context the usefulness of consumer sentiment should come from the fact that it captures information about expected future income

terms of trade and real exchange rates the canadian evidence abstract this paper presents empirical evidence linking the canada us real exchange rate with the terms of trade using recently developed econometric methods for nondashstationary data we find that the real exchange rate is cointegrated with terms of trade variables and that causality runs from the terms of trade to the exchange rate we then construct a simple exchange rate equation that satisfies several specification tests and performs better than a random walk in post sample forecasting experiments the results suggest that much of the variation in the real exchange rate is attributable to movements in the terms of trade and that the influence of monetary factors is secondary

reforming pensions lessons from economic theory and some policy directions pension systems have wide ranging and important effects they influ ence the living standards of older people and hence the welfare of both older people and their children they can also affect national economic performance through potential effects on the labor supply and saving the design of pensions therefore matters in discussing the topic this paper draws on two of our earlier works 1 it starts by setting out some central lessons from economic theory the second section derives some policy implications of particular relevance to latin america the policy chapters in our two earlier books focus particularly on two countries in which we have worked china which is important because of its size and chile which is important because its 1981 reforms were widely adopted in latin america and elsewhere and which has become an exemplar in the pension debate box 1 defines some of the relevant terms the final section concludes

on the flow of funds accounts and inter sectoral mobility of capital in india this study uses the flow of funds accounts framework and undertakes an in depth analysis of the inter sectoral mobility of capital in india unlike previous studies the fh model is estimated at th

secularization and long run economic growth in a consumer culture the consumer not christ is king skye jethani i introduction this paper proposes a novel theory of identity choice and endogenous economic growth in which secularization is both cause and consequence of successful economic development it contributes to the literature on the fundamentals of economic growth acemoglu 2009 by proposing a theory of how culture driven by economic change may change rapidly and where cultural change in turn drives further economic development the core idea is that through abandoning their religious identity their strife for salvation from the dire situation on earth individuals are able to derive more pleasure from material possessions and consumption activities the prospect of pleasure in this world motivates them to work harder and save more for future consumption increasing labor supply and capital accumulation induces technological progress and income growth which entices further individuals to abandon religion in order to derive more pleasure from material possessions which motivates them to supply more labor and capital etc through this feedback loop the economy takes off when religiosity declines and industrialization is observed in conjunction with secularization following the literature i define religious as believing in a god or a group of gods and following the rules of a religion mckendrick brewer and plumb 1982 although the proposed theory is perhaps more general the paper focuses on economic and religious developments of the western world which means it focuses on christian beliefs i define as the core creed of christian religion that through belief in and acceptance of the death and resurrection of jesus christ sinful humans can be reconciled with god and thereby are offered salvation and the promise of eternal life metzger and coogan 1993 the christian church is the agent specialized in promoting the desire for these immaterial heavenly values and goals ekelund et al 1997 i define as religious identity the self identification with christian religious values in section ii i argue that individuals identify with either immaterial self transcendence values religion or with material self enhancement values materialism i argue that individuals using individual possessions or consumption activities as identity fixers have chosen a secular materialistic identity i define as secularization the decline in the social significance of religion manifested by the decline in the number of religious people individuals identifying with religion measured by declining church attendance bruce 2011 most scholars of religion agree that for christians church attendance is a good measure of religiosity brierley 1999 bruce 2011 warner 2010 attending the sunday service was obligatory for protestants of most denominations as well as for members of the anglican church and deliberate failure to attend sunday mass is still considered to be a grave sin according to catholic canon law in the economists language church attendance is a revealed preference because church is the only place where sins can be forgiven not attending shows a loss of interest in salvation and eternal life the main goods offered by the church attendance is strongly but not perfectly correlated with adherence in particular attendance declines before membership declines bruce 2011 moreover there exists a temporary phase of fuzzy fidelity in which many individuals claim that while religion is not important in their life they continue to consider themselves christians and occasionally appear in church voas 2008 this temporary state is not explicitly taken into account in the theory below but considered to be best described by a secular identity as industrialization secularization is a general phenomenon observed throughout the western world the first data point however is only observed in 1851 for england when church attendance was about 60 brierley 1999

savings in chile what went right abstract in the last 10 years chile s overall economic performance has been remarkable in many respects including a significant and sustained increase in domestic savings to figures around 26 of gdp this paper empirically assesses the reasons behind such notable behavior of savings by applying co integration models to check for long run relationships and error correction models to verify short run adjustments the emphasis is on annual private savings data span from 1960 to 1995 which as it turns out depend more than proportionally on an adjusted measure of gdp and less than proportionally on foreign savings and public savings private savings are also positively affected by economic growth and a dummy reflecting the effect of pension funds most of the adjustment between short run and long run is completed in less than 3 years where the variable representing income bears the bulk of such adjustment in comparing two episodes of good economic performance in the last 20 years 1976 1981 and 1986 till present it is found that three basic differences arise concerning private savings sustainability of growth different access to foreign savings during the recovery from recession and different scenarios with respect to the development of long run capital markets in particular a relevant role played the move to a fully funded social security system in the early 1980s

ricardian equivalence and the public and private saving nexus in india abstractthis study tests the ricardian equivalence theorem ret and examines the responsiveness of private saving to public saving in india most estimators do not provide support for the empirical validity of ret and long run cointegration between public and private saving the increases in household saving hhs seem to have been engendered by the provision of saving incentives institution of saving schemes self driven motivation to save and the precautionary accumulations induced by uncovered uncertainties in incomes rather than by ricardian behaviour of households the self imposed aversion to debt and debt bequest borrowing and liquidity constraints and the intertemporal smoothing of consumption have been the added catalysts that contributed to the increases in hhs the households with binding borrowing constraints inadequate or no insurance and uncovered uncertainties in incomes seem to have been saving more to pay for higher inflation tax the fiscal consolidation and generation of public s

endogenous choice of trade policy instruments abstract recently developed theories of endogenous trade policy formation have attempted to explain tariffs as the result of economic interest seeking by individuals or groups this note demonstrates that tariffs will not emerge as a policy choice if income is redistributed solely through trade policy induced factor price changes a production tax cum subsidy will be adopted as both gainers and losers are better off than with a tariff

import demand in heterogeneous panel setting to study the elasticities of import demand function a heterogeneous panel is built with data of 40 countries and using panel unit root tests im et al 1997 and panel cointegration tests pedroni 2004 the model is tested with two previously used activity variables gdp and gdp minus export for a performance comparison to estimate elasticities use is made of two modified panel versions of fmols and dols developed by pedroni 1996 2000 2001 the tests prove that gdp outperforms gdp minus exports as an activity variable in the cointegration context fmols and dols give close results when individual estimates are done when between dimension estimators are used conflicting results are obtained then the sample is split into developed and developing countries and it is shown that income elasticity in developing countries are not different than unity on average and are higher than in developed countries contradicting previous literature results

the politics of underinvestment in agricultural research this paper develops a political economy framework that determines the factors causing underinvestment in public research expenditures governments are unable to fully compensate for unequal income distribution effects of research because of either their inability to make credible commitments or ofdeadweight costs associated with compensation

sustainability of current account deficits in india an intertemporal perspective this study examines the sustainability of current account deficits cads and the validity of intertemporal budget constraint ibc in india the long run model is estimated on annual data for the period 1950 1951 to 2009 2010 the optimal single equation and maximum likelihood ml system estimates of the model provide a consistent support for the long run relationship between imports and exports the olsgh estimates provide no support and that ml system estimates a consistent support for cointegration in both the models estimated with one and two structural breaks in level the new cointegration breakdown tests generally suggest that the cointegration prevails from 1951 to 2010 the evidence supporting the cointegration between imports and exports overwhelms the evidence providing a mixed or no support for cointegration the estimates of slope parameter above zero and the dominant support for cointegration between imports and exports vindicate the validity of ibc and the sustainability of cads the shor

public capital and long run costs in u k manufacturing a model of u k manufacturing production that incorporates the inputs of public as well as private capital is specified and estimated the model is then used to measure the contribution of public capital to productivity growth over the period 1966 to 1990 it is found that before 1980 the public and private capital contributions were of comparable magnitude after 1980 the contribution of public capital declined significantly copyright 1993 by royal economic society

on the political economy of public good inputs in agriculture the paper analyzes two elements in explaining and prescribing the level of costreducing public good inputs in agriculture the distribution of political influence and the economic properties of markets the incidence of costs benefits of alternative costsharing arrangements between taxpayers and producers is compared to the social optimal and competitive outcomes although one group could lose we focus only on situations of a pareto improvement the model predicts why some sectors have relatively more public versus private research funding and why the degree of underinvestment varies across sectors the observed underinvestment in agriculture may be due to the political power of farmers inelastic demand and highly productive public good inputs

refining for export and the convergence of petroleum product prices abstract the petroleum refining industry has changed over the past decades from one in which capacity primarily served local and regional markets to one in which trade in refined petroleum products has become more widespread we investigate the hypothesis of increasing globalization by examining the convergence of prices for refined products across different markets using data on refined products from market centers in the us and europe we test for convergence of prices using standard time series techniques the data plainly show that markets for refined petroleum products have become more interrelated as europe exported its gasoline surplus and global demand for petroleum products approached refining capacity econometric evidence supports the hypothesis that the us and european markets for oil and refined products are integrated we find evidence that a structural break during the financial crisis of 2008 changed the long run equilibrium price relationships and the short run price dynamics refined product markets are likely to experience continued globalization given trends in the united states and europe and because of key export oriented refining capacity investments made to take advantage of access to specific crude oil sources

purchasing power parity yet again evidence from spatially separated commodity markets abstract this paper examines the empirical validity of the law of one price by exploiting the non stationarity of prices set in us dollars of varieties of wheat that are traded simultaneously in the usa rotterdam and japan we demonstrate the crucial role of transport costs in achieving cointegration long run ppp although systematic short run deviations from ppp occur we show that this does not imply profitable arbitrage opportunities jel c5 f3 g1

implications of consumer heterogeneity in time series estimates of us money demand the money demand function has traditionally been estimated with income and interest rates typically employing quite lengthy time series controversy however surrounds the importance of heterogeneous agents in monetary economics and throughout macroeconomics more generally in particular if proportions of agents with different traits and hence different money demands are changing over time ignoring those changes may bias estimated income and interest elasticities this concern as well as that of appropriate functional form is explored here controlling for consumer heterogeneity has surprising effects on the estimated elasticities of traditional variables

a long run perspective on saving historical estimates of long run gross savings rates are provided for 11 countries which represent about 48 per cent of world product in real terms and close to half of world savings even though savings rates declined over the past decade in nine of the 11 countries present rates are usually well above their prewar levels factors which influence savings rates are also examined

rising longevity education savings and growth this paper examines the impact of declines in adult mortality on growth in an overlapping generations model with public education and imperfect annuity markets a decline in mortality affects growth through three channels first it raises the saving rate and thereby increases the rate of physical capital accumulation second it reduces accidental bequests lowers investment and thereby lowers the rate of physical capital accumulation third it may lead the median voter to increase the tax rate for public education initially but lower the tax rate in a later stage starting from a high mortality rate as found in many third world populations the net effect of a decline in mortality is to raise the growth rate however starting from a low mortality rate such as is found in most industrial populations the net effect of a further decline in mortality is to reduce the growth rate the findings appear consistent with recent empirical evidence

regression vs non regression models of normal returns implications for event studies event studies depend critically on correct specification of the counterfactual normal returns to corporate assets model selection tests for a sample of ft se 100 uk companies reject two widely used non regression models against the principal regression based alternative the market model

measures of shortage and monetary overhang in the polish economy this paper attempts to cast light on the debate about the existence and size of a monetary overhang in household money balances in command economies four measures of shortage or price deformation are constructed for the polish economy and used to test for the existence of shortage money balances in poland 1965 1989 the approach involves estimating relationships for household money balances 1965 1993 a period that spans both central planning and the post 1990 period of liberalised prices the principal finding is that the evolution of household money balances in poland cannot be explained without invoking measures of shortage and an overhang during the planning period the estimates suggest an overhang with a maximum of just over 40 of money balances

the linear quadratic adjustment cost model and the demand for labour in this paper we demonstrate a new way of testing the linear quadratic adjustment cost lqac model under rational expectations we illustrate how the parameter restrictions arising from this model can be formally specified and we use these restrictions to extent the technique of campbell and shiller 1987 to a wider class of models based on present value relations potentially the demand for labour is an area in which the lqac model can find applicability in practice and subsequently we analyse sectoral labour demand in danish manufacturing we find however that for our data set the quadratic adjustment cost model under rational expectations can be rejected

the exchange rate and purchasing power parity extending the theory and tests abstract this paper analyzes the exchange rate in a no arbitrage or real business cycle equilibrium model and provides empirical evidence for this model vis a vis ppp our contribution is to show based on a generalization of the equilibrium model of exchange rates that i the test equation linking the exchange rate to fundamentals should allow for international heterogeneity in time preferences and risk attitudes as well as noise that is the model should not be tested as an exact relation ii empirical work should use levels of variables rather than first differences and iii tests on the existence of long run relations should be complemented by test on the signs of the coefficients our empirical work shows that as a long run relation the generalized model outperforms ppp moreover under the generalized model quarterly deviations from the estimated long term relation have a half life of only four to five quarters

the gains from research into tradable commodities this paper develops a model for assessing the aggregate level and distribution of the benefits of reseach into tradable commodities it estimates gains to australia and to the rest of the world from research into the wool and wheat industries

financial integration investment and economic growth evidence from two eras of financial globalization abstract does international financial integration boost economic growth the empirical literature has not yet established a robust link between openness to the international capital market and economic growth in this paper we turn to the economic history of the first era of financial globalization 1880 1914 for new insights using identical empirical models and techniques as contemporary studies we find a significant growth effect in the historical period a key difference between now and then is that opening up to the international market led to net capital movements and higher investment in the historical period but it no longer does so today

real exchange rates and structural breaks cointegration tests often fail to detect the existence of long term relationships such as purchasing power parity for two reasons i these tests have low power and ii structural shocks can alter the long run real exchange rate in this paper the long run movements of five exchange rates relative to the us dollar and five european exchange rates relative to the deutsche mark are investigated in particular corrected cointegration tests are applied which take into account the possibility of a structural break at an unknown date empirical evidence is found that structural changes can be responsible for most exchange rate deviations from their equilibrium defined by purchasing power parity or a generic monetary model

the dynamics of real asset prices the real exchange rate trade reforms and foreign capital inflows abstract this paper explores the dynamics of real asset prices in chile in the last 15 years in a framework where a central role is played by the real exchange rate tariffs and foreign capital inflows working with time series models the real prices of land capital stocks and housing the empirical results show that at a time when structural reforms took place 1976 1982 including a trade liberalization tariffs contributed significantly to explain the real price of land while macroeconomic conditions were dominated by foreign capital inflows after 1982 the real exchange rate plays a key role in many respects

market share and exchange rate pass through in world automobile trade abstract using a bertrand differentiated products model we show that pass through should be high for exporters based in a country with a very large share of total destination market sales for source countries with small and intermediate market shares the relationship is potentially nonlinear and sensitive to assumptions about demand and firm interactions the model is estimated using a panel data set of automobile exports from four source countries to 12 destination markets over the period 1970 1988 the relationship between pass through and market share is significantly nonlinear pass through is lowest when the source country s market share is around 40 percent and highest when market share approaches 100 percent

the turning black tide energy prices and the canadian dollar the authors revisit the relationship between energy prices and the canadian dollar in the amano and van norden 1995 equation which shows a negative relationship such that higher real energy prices lead to a depreciation of the canadian dollar

health education and life cycle savings in the development process this paper studies investment in health and human capital in a life cycle model health investment enhances survival to old age by improving health from its endowed level the model predicts two distinctive phases of development when income is low enough the economy has no health investment and little savings leading to slow growth when income grows health investment will become positive and the saving rate will rise leading to higher life expectancy and faster growth a health subsidy can move the economy from the first phase to the next subsidies on health and human capital investments can improve welfare

tests for parameter instability in regressions with i 1 processes this article derives the large sample distributions of lagrange multiplier lm tests for parameter instability against several alternatives of interest in the context of cointegrated regression models the fully modified estimator of phillips and hansen is extended to cover general models with stochastic and deterministic trends the test statistics considered include the supf test of quandt as well as the lm tests of nyblom and of nabeya and tanaka it is found that the asymptotic distributions depend on the nature of the regressor processes that is if the regressors are stochastic or deterministic trends the distributions are noticeably different from the distributions when the data are weakly dependent it is also found that the lack of cointegration is a special case of the alternative hypothesis considered an unstable intercept so the tests proposed here may also be viewed as a test of the null of cointegration against the alternative of no cointegration the tests are applied to three data se

optimal residual based tests for fractional cointegration and exchange rate dynamics a lagrange multiplier test of the null hypothesis of cointegration in fractionally cointegrated models is proposed the test statistic uses fully modified residuals to cancel the endogeneity and serial correlation biases and standard asymptotic properties apply under the null and under local alternatives with iid gaussian errors the asymptotic gaussian power envelope of all unbiased tests is achieved by the one sided two sided test the finite sample properties are illustrated by a monte carlo study in an application to the dynamics among exchange rates for seven major currencies against the u s dollar mixed evidence of the existence of a cointegrating relation is found

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

saving and growth evidence from micro data abstract this paper examines whether the observed cross country correlation between aggregate saving rates and economic growth can be explained by models in which higher growth increases saving rates rather than the other way around there are two explanations why higher growth might increase saving first life cycle theory implies that higher growth will increase the life time wealth of younger savers relative to older dissavers thereby increasing the aggregate saving rate second models of consumption with habit formation imply that consumption responds slowly to unexpected income growth so unanticipated growth can produce a higher saving rate at least in the short run i assess these explanations using time series of cross sections of household surveys from four countries the us britain taiwan and thailand i find evidence that higher growth will produce only small increases in aggregate saving rates

net foreign assets and international adjustment the united states japan and germany abstract this paper examines external adjustment in the usa japan and germany from the perspective of net foreign asset positions it asks two questions what are in the long run the determinants of net foreign asset equilibrium what are in the short run some of the adjustment mechanisms sustaining that equilibrium an analysis of post war data produces two insights first using a cointegration approach the existence of long run net foreign asset equilibrium can be identified it is a function of demographic variables and public debt second deviations from long run equilibrium give rise to feedback through different components of domestic absorption in the three countries

is health care really a luxury much of the work which has led to a widely held view that the income elasticity of health care spending exceeds one has been based on international cross section data or on pooled cross sections and time series in this paper we re examine this view in the context of long run equilibrium relationships between non stationary time series possibly including autonomous trends our results cast doubt upon the usefulness of pooling and upon the notion of an elasticity above one

declining discount rates and the fisher effect inflated past discounted future uncertain and persistent real interest rates underpin one argument for using a declining term structure of social discount rates in the expected net present value enpv framework despite being controversial this approach has influenced both the inter agency working group on cost benefit analysis and the uk government s guidelines on discounting we first clarify the theoretical basis of the enpv approach then rather than following previous work which used a single series of u s treasury bond returns we treat nominal interest rates and inflation as co integrated series and estimate the empirical term structure of discount rates via the fisher effect this nests previous empirical models and is more flexible it also addresses an irregularity in previous work which used data on nominal interest rates until 1950 and real interest rates thereafter as we show the real and nominal data have very different time series properties this paper therefore provides a robustness check on previous discounting advice and updated methodological guidance at a time when governments around the world are reviewing their guidelines on social discounting the policy implications are discussed in the context of the social cost of carbon nuclear decommissioning and public health

domestic currency appreciation and foreign capital inflows what comes first chile 1977 1982 abstract the purpose of this paper is to find granger causality relations between the real exchange rate the inflow of foreign capital interest rate arbitrage and the terms of trade in a representative indebted developing country chile this is done for a time period in which chile went from an unprecedented expansion 1977 1981 to a severe recession 1982 the paper confronts two competing hypotheses that purport to explain such behavior hypothesis one claims that causality went from the real exchange rate affected by nominal exchange rate policy to capital inflows in what could be termed a current account deficit induced demand for foreign funds hypothesis two posits a causality that ran the other way from capital inflows to the real exchange rate in which case the exogenous inflows of foreign money implied a current account deficit special attention is paid to the role played by two other related factors interest rate arbitrage and terms of trade variations by applying innovation accounting techniques based on estimated vector autoregressions support is found for the second of these hypotheses thus the real issue in chile and in many other currently indebted latin american countries should be the timing and extent of the capital account liberalization process carried out during the period

does income inequality raise aggregate saving this paper reviews analytically and empirically the links between income distribution and aggregate saving consumption theory brings out a number of direct channels through which income inequality can affect overall household saving positively in most cases however recent political economy theory points toward indirect negative effects of inequality through firm investment and public saving on aggregate saving on theoretical grounds the sign of the saving inequality link is therefore ambiguous this paper presents new empirical evidence on the relationship between income distribution and aggregate saving based on a new and improved income distribution database for both industrial and developing countries the empirical results using alternative inequality and saving measures and various econometric specifications on both cross section and panel data provide no support for the notion that income inequality has any systematic effect on aggregate saving these findings are consistent with the theoretical ambiguity q 2000 elsevier science b v all rights reserved

coordination commitment and enforcement the case of the merchant guild we interpret historical evidence in light of a repeated game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien merchants the merchant guild developed the theoretically required attributes secured merchants property rights and evolved in response to crises to extend the range of its effectiveness contributing to the expansion of trade during the late medieval period we elaborate on the relations between our theory and the monopoly theory of merchant guilds and contrast it with repeated game theories that provide no role for formal organization

on the role of domestic and international financial cyclical factors in driving economic growth abstractwe investigate the effects of domestic and international financial cyclical factors on the us business cycle over the period 1890 2013 using an augmented stochastic version of the neoclas

growth distribution and politics we start by arguing that to understand growth differences across countries and time one needs to understand differences in public policies that affect the incentives for productive accumulation of capital human capital or technically useful knowledge and to understand policy differences one needs to understand how political institutions aggregate conflicting interests into public policies we then survey some recent work along these lines which argues that more inequality leads to slower growth next we illustrate some of the basic ideas of this work by help of a simple model of taxation we also present some econometric cross country evidence which is largely supportive of the basic ideas we end by suggestions for further work this abstract was borrowed from another version of this item

services sector and economic growth in india this study examines the long run equilibrium and short run dynamic relationship between services sector and gross domestic product gdp and between services and nonservices sectors in india the model is estimated using the optimal single equation and the maximum likelihood system estimators all the estimators consistently suggest the cointegrating relationship between services sector and gdp as well as between services and nonservices sectors the estimates of long run elasticity parameters are statistically significant and dimensionally consistent across the estimators the conventional cumulative sum cusum and the new cusum and moving sum mosum tests suggest the stability of the equilibrium residuals and reinforce the cointegrating relationship between the model series the error correction model provides some support for unidirectional granger causality from services sector to gdp the impulse response and variance decomposition analyses instead suggest the bidirectional causality between servic

revisiting the causal nexus between savings and economic growth in india an empirical analysis abstract this paper attempts to analyze the long run association between savings and growth and investigates the causality issue in indian context for the period 1950 51 to 2011 12 firstly the study identifies the structural break in the year 1980 by employing bi perron test with unknown time further it examines the association and the direction of causality between savings and real economic activity the empirical evidence of the study suggests that savings boost the real activity both in the pre and post break period in the long run while economic growth causes saving in the short run in the pre break period thus the present study brings evidence in favour of the neoclassical exogenous and the post neoclassical endogenous growth models and suggest that both the incentive based measures and the productivity based measures would be useful to generate higher savings and reinforce the acceleration of income and growth

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

cart before the horse the saving growth nexus in mexico abstract using recent developments in econometric techniques we show that the conventionally accepted view that higher saving rate causes higher economic growth does not hold for mexico in fact the causality goes in the opposite direction

estimating long run economic equilibria with stochastic trends an asymptotic theory is provided to analyze a menu of currently existing estimators of cointegrated systems we study in detail the single equation ecm seecm approach of hendry our theoretical results lead to prescriptions for empirical work such as specifying seecm s nonlinearly and including lagged equilibrium relationships rather than lagged differences of the dependent variable as covariates simulations support these prescriptions and point to problems of overfitting not encountered in the semiparametric approach of phillips and hansen 1990

modelling nie exports aggregation quantitative restrictions and choice of econometric methodology the current debate regarding the robustness of estimates of export demand and supply elasticities for nies is examined by modelling manufactured exports from korea the results suggest that normalisation of the export demand function for price rather than quantity is an important issue in estimating export demand functions of small countries and that estimates of export demand elasticities at high levels of aggregation are subject to potentially powerful biases when the aggregate consists of categories which are subject to quantitative restrictions if proper modelling procedures are followed it is likely that the small country assumption will find far more empirical support than it has hitherto

the effects of pension funds on markets performance a review the worldwide reforming process of pension systems triggered by the demographic transition and globalization has led several countries to implement multi pillar pension systems and enhance pension funds for this reason the studies on the effects that pension funds exert on markets performance have been flourishing in the last decades in this paper we provide an updated review of the empirical advances in this field of study with particular focus on the effects that pension funds produce on labour markets financial markets and economic growth