demise of the standard model for power sector reform and the emergence of hybrid power markets following earlier reforms in the power sectors of industrialized countries and emerging markets e g chile developing countries were encouraged to unbundle their electricity industries and to introduce competition and private sector participation this paper highlights the developments that led to how power sector reform came to be defined as a standard model and theoretical framework in its own right and how the model was used prescriptively in many developing countries however we also show that after more than 15 years of reform efforts this new industry model has not fully taken root in most developing countries finally we identify and characterize the emergence of new hybrid power markets which pose fresh performance and investment challenges

the phillips curve the persistence of inflation and the lucas critique evidence from exchange rate regimes comment we present evidence from the united states and the united kingdom that the persistence of price inflation is significantly higher under managed exchange rate regimes than under gold based fixed exchange rate regimes these differences are also reflected in expectations augmented phillips curves we use a two country macro model with forward looking price setters to demonstrate that higher monetary accommodation of inflation and exchange rate accommodation of inflation differentials increase inflation persistence the evidence does not contradict this hypothesis it supports the hypothesis of forward looking price setters and highlights the empirical significance of the lucas critique jel e31 e42 f33

erratum to why has u s inflation become harder to forecast the article journal of money credit and banking supplement to vol 39 no 1 february 2007 contains errors in figures 2 4 and tables 4 5 associated with a coding error in our program for estimating the uc sv model we thank ling hu of platinum grove asset management for finding this error and bringing it to our attention the corrected uc sv rows for tables 4 and 5 are given below corrected versions of figures 2 4 and corrected replication files can be found at http www princeton edu mwatson

nominal income targeting in an open economy optimizing model abstract this paper presents simulation results regarding the performance of nominal income targeting a monetary policy rule that sets interest rates in response to deviations of nominal gdp growth from a target path the macroeconomic model is one in which agents solve dynamic optimization problems with rational expectations but in an environment with slow price adjustments in the present version consumption choices reflect habit formation and the economy is open to international flows of goods and securities when calibrated to quarterly us data the model s results suggest that nominal income targeting performs well in relation to inflation targeting and taylor rules

monetary policy shifts and the stability of monetary policy models since the publication 1976 of the classic lucas critique researchers in empirical macroeconomics have endeavored to specify models that capture the underlying dynamic decision making behavior of consumers and firms who require forecasts of future events recently a number of researchers have developed simple models that have become the workhorses for monetary policy analysis the models vary considerably with regard to optimizing foundations and explicit treatment of expectations however relatively little effort has been devoted to testing the empirical importance of the lucas critique for these simple models can one find specifications that are policy invariant this paper develops and implements a set of tests for several monetary policy models used extensively in the literature in particular we attempt to test the robustness of optimizing versus nonoptimizing models to changes in the monetary policy regime we present evidence that shows that some forward looking models from the recent literat

why has u s inflation become harder to forecast we examine whether the u s rate of price inflation has become harder to forecast and to the extent that it has what changes in the inflation process have made it so the main finding is that the univariate inflation process is well described by an unobserved component trend cycle model with stochastic volatility or equivalently an integrated moving average process with time varying parameters this model explains a variety of recent univariate inflation forecasting puzzles and begins to explain some multivariate inflation forecasting puzzles as well

pooling forecasts in linear rational expectations models abstract estimating linear rational expectations models in a limited information setting requires replacing the expectations of future endogenous variables either with instrumented actual values or with forecast survey data applying the method of gottfries and persson empirical examinations of the information sets of economic agents quarterly journal of economics 103 251 259 i show how to augment these methods with actual future values of the endogenous variables to improve statistical efficiency the method is illustrated with an application to the us hybrid new keynesian phillips curve where traditional lagged instruments and the median forecast from the survey of professional forecasters both appear to miss significant information used by price setters so that forecast pooling with actual values improves the statistical fit to inflation

assessing nominal income rules for monetary policy with model and data uncertainty nominal income rules for monetary policy have long been debated but two issues are of particular recent interest first there are questions about the performance of such rules over a range of plausible empirical models especially models with and without explicit rational inflation expectations second there are questions about the performance of these rules in real time using the type of data that is actually available contemporaneously to policy makers rather than final revised data this paper determines optimal monetary policy rules in the presence of such model uncertainty and real time data uncertainty and finds only a limited role for nominal output growth

the asymmetry of the new keynesian phillips curve in the euro area abstract using a two stage quantile regression framework we uncover significant asymmetries across quantiles for all coefficients in an otherwise standard new keynesian phillips curve nkpc for the euro area a pure nkpc specification accurately captures inflation dynamics at high inflation quantiles

empirical evidence on inflation expectations in the new keynesian phillips curve abstract we review the main identification strategies and empirical evidence on the role of expectations in the new keynesian phillips curve paying particular attention to the issue of weak identi

inflation dynamics the role of expectations the modelling of expectations and its degree of backward looking behaviour are issues of main concern in the in ation dynamics research agenda one approach in the literature is to use expectations from surveys as an approximation to actual expectations this method avoids particular assumptions on expectations and their degree of rationality we estimate the phillips curve allowing for a simultaneous role of rational and survey expectations we formulate both a generalization of the usual phillips curve and a structural version in the spirit of gal and gertler 1999 we flnd that marginal cost determines in ation while the role of detrended output appears to be problematic we also flnd that survey expectations are an important component of in ation dynamics but they do not fully re ect economic agents rationality a signiflcant level of rationality is found even when controlling for survey expectations jel classiflcation e31

power sector reform in india current issues and prospects power sector reforms in india were initiated at a juncture when the sector was plagued with commercial losses and burgeoning subsidy burden investment in the sector was not able to keep pace with growing demand for electricity this paper takes stock of pre reform situation in indian power sector and identifies key concerns that led to initiation of the process of reform the paper discusses major policy and regulatory changes undertaken since the early 1990s the paper also illustrates changes in the market structure as we move along the reform process we also discuss some of the major provisions of the recently enacted electricity act 2003 that aims to replace the prevailing acts which govern the functioning of the power sector in the country in this context we discuss two issues arising out of it namely open access and multi year tariff that we think would have a significant bearing on the performance of the sector in the near future the paper also evaluates the reform process in the light of some of the regulatory changes undertaken finally the paper briefly discusses the issues involved in introduction of competition in the power sector primarily through development of a market for bulk power

how to achieve full electrification lessons from latin america electricity coverage in latin america has increased substantially in recent decades rising from 50 of the population in 1970 to more than 95 in 2015 growth however slowed in the 1990s as many countries experienced difficulties in extending their networks further in particular to serve those living in isolated and rural areas in spite of this the process of electrification was not interrupted and at the beginning of the 2010s decade most countries in the region were able to provide access to electricity to almost all of their populations in this paper we examine the main strategies used in latin america to increase coverage and argue that only a combination of policy efforts has made it possible to achieve the current situation we also examine the remaining obstacles at policy and institutional levels to achieving full coverage

nominal price rigidity money supply endogeneity and business cycles abstract this paper investigates the ability of nominal price rigidity to explain the co movement of inflation with the cyclical component of output observed in the post war u s data a dynamic general equilibrium model is constructed with the introduction of monopolistic competition and nominal price rigidity in a standard real business cycle model allowing for an endogenous money supply rule it is then demonstrated that sticky price models can explain the observed associations between movements in inflation and output much better than flexible price models this result depends little on whether money supply is assumed to be endogenous or not

the new keynesian phillips curve from sticky inflation to sticky prices the new keynesian phillips curve nkpc model of inflation dynamics based on forward looking expectations is of great theoretical significance in monetary policy analysis empirical studies however often find that backward looking inflation inertia dominates the dynamics of the short run aggregate supply curve this inconsistency is examined by investigating multiple structural changes in the nkpc for the u s between 1960 and 2005 employing both inflation expectations survey data and a rational expectations approximation we find that forward looking behavior plays a smaller role during the high and volatile inflation regime to 1981 than in the subsequent period of moderate inflation providing empirical support for sticky price models over the last two decades a break in the intercept of the nkpc is also identified around 2001 and this may be associated with u s monetary policy in that period

low inflation pass through and the pricing power of firms abstract recently there has been a significant decline in the degree to which firms pass through changes in costs to prices a decline that is frequently characterized as a reduction in the pricing power of firms the decline appears to be associated with the decline in inflation in many countries the decline has important implications for monetary policy because it affects both forecasts of inflation and the effects of changes in monetary policy on inflation some have argued that the decline in pricing power helped to keep inflation low in the face of apparently strong demand pressures in the united states in the late 1990s this paper puts forth the view that the decline in pass through or pricing power is due to the low inflation environment that has recently been achieved in many countries first a microeconomic model of price setting is used to show that lower pass through is caused by lower perceived persistence of cost changes evidence is then presented showing that inflation is positively correlated with persistence of inflation suggesting that the low inflation itself has caused the low pass through an economy wide model consistent with the micromodel is then presented to illustrate how such changes in pricing power affect output and inflation dynamics in favorable ways but can disappear quickly if monetary policy and expectations change

estimating new keynesian phillips curves a full information maximum likelihood approach abstract the new keynesian phillips curve has recently become an important ingredient in monetary policy models however using limited information methods the empirical support for the new keynesian phillips curve appear to be mixed this paper argues by means of monte carlo simulations with a simple new keynesian sticky price model that single equations methods e g gmm are likely to produce imprecise and biased estimates then it is argued that estimating the model with full information maximum likelihood fiml is a useful way of obtaining better estimates finally a version of the model used in the monte carlo simulations is estimated on u s data with fiml and although the pure forward looking new keynesian phillips curve is rejected a version with both forward and backward looking components provides a reasonable approximation of u s inflation dynamics

comparative statics for integrable nash equilibria abstract this paper derives comparative statics results for stable nash equilibria in integrable concave orthogonal games application of these results to cost curve shifts in the asymmetric cournot oligopoly immediately uncovers some apparently new comparative statics results

inflation targeting as a monetary policy rule the purpose of the paper is to survey and discuss in ation targeting in the context of monetary policy rules the paper provides a general conceptual discussion of monetary policy rules attempts to clarify the essential characteristics of in ation targeting compares in ation targeting to other monetary policy rules and draws some conclusions for the monetary policy of the european system of central banks jel classi cation e42 e52

post neoliberal electricity market re reforms in argentina diverging from market prescriptions this paper focuses upon the policy and institutional change that has taken place within the argentine electricity market since the country s economic and social crisis of 2001 2 as one of the first less developed countries ldcs to liberalise and privatise its electricity industry argentina has since moved away from the orthodox market model after consumer prices were frozen by the government in early 2002 when the national currency was devalued by 70 although its reforms were widely praised during the 1990s the electricity market has undergone a number of interventions ostensibly to keep consumer prices low and to avert the much discussed energy crisis caused by a dearth of new investment combined with rising demand levels this paper explores how the economic crisis and its consequences have both enabled and legitimised these policy and institutional amendments while drawing upon the specifics of the post neoliberal market re reforms to consider the extent to which the government appears to be moving away from market based prescriptions in addition this paper contributes to sector specific understandings of how despite these changes neoliberal ideas and assumptions continue to dominate argentine public policy well beyond the postcrisis era

behavioral heterogeneity in u s inflation dynamics in this article we develop and estimate a behavioral model of inflation dynamics with heterogeneous firms in our stylized framework there are two groups of price setters fundamentalists and rando

the un importance of forward looking behavior in price specifications the seminal work of edmund s phelps 1978 john b taylor 1980 and guillermo a calvo 1983 developed forward looking models of price determination that imparted inertia to the price level these models incorporate expectations of future prices and excess demand by imposing constraints typically lag lead symmetry constraints that force future variables to enter the specification in this paper the author tests the empirical significance of future prices in specifications like those of taylor he finds that expectations of future prices are empirically unimportant in explaining price and inflation behavior however the dynamics of a model that includes a purely backward looking inflation specification differ substantially and not altogether pleasingly from those with a forward looking specification copyright 1997 by ohio state university press

private sector development policies practices and problems private sector development psd has become a central concern of most donors development cooperation efforts during the last decade this paper is a critical review of policies in the area donors work with concepts of psd which are highly abstract treat developing countries private sectors as tabula rasa and focus mainly on macro level preconditions in practice however concrete psd policies are mostly micro level ones the paper argues that they are shaped mostly by the nature and interests of private sectors in donor country themselves incorporate a high proportion of tied aid and fail basic tests of coherence

power sector reform in small island developing states what role for renewable energy technologies abstract due to various pressures and desires more and more developing countries embark on power sector reform programmes yet there are a wide range of reform options and at present insufficient evidence is available as to which path will deliver best the desired objectives presently most small island developing states sids are dependent on high cost fossil fuel imports for power generation in spite of evidence that harnessing abundant domestic renewable sources of energy can deliver environmental social and economic benefits however depending on the type of power sector reform the transition towards renewable energy technologies rets can be either undermined or facilitated the specific focus on sids is justified because they have inherent characteristics that limit the degree to which the power sector can be transformed in comparison to larger continental developing countries with specific reference to sids this manuscript reviews the drivers and desires for power sector reform as well as presenting the available reform options and their implications on the up take of rets in addition to elaborating aspects of market governance other barriers to the consideration of rets such as financial bias in investment human capacity and environmental policy are discussed in view of this discussion which is based on evidence from recent reform programmes and theoretical academic literature recommendations are formulated that discourage full privatisation of the power sector as well as proposing less dogmatic lending conditions by international assistance bodies

technology shocks in the new keynesian model in the new keynesian model preference cost push and monetary shocks all compete with the real business cycle model s technology shock in driving aggregate fluctuations a version of this model estimated via maximum likelihood points to these other shocks as being more important for explaining the behavior of output inflation and interest rates in the postwar u s data these results weaken the links between the current generation of new keynesian models and the real business cycle models from which they were originally derived they also suggest that federal reserve officials have often faced difficult trade offs in conducting monetary policy

power sector reform in developing countries mismatched agendas power sector reform is rapidly spreading across all corners of the developing world at an alarmingly rapid pace while the rationales for reform seem to have gained acceptance among the stakeholders the reform model and process are contested this paper examines the impacts of reform using the promised outcomes as a basis for analysis the ability of reform to meet the developmental challenges facing the reformers is explored it concludes that reform has had some achievements if conventional performance indicators are used but also questions the validity of some of these indicators reform has however not fulfilled many of its goals and the prevailing recipes are likely to leave developing countries socially and economically worse off than in the pre reform period progressive government intervention is needed to shift reform process towards a more responsible development path

speed limit policies the output gap and optimal monetary policy in a standard new keynesian model a myopic central bank concerned with stabilizing inflation and changes in the output gap will implement a policy under discretion that replicates the optimal timeless perspective precommitment policy by stabilizing output gap changes the central bank imparts inertia into output and inflation that is absent under pure discretion even a fully optimizing i e non myopic central bank operating in a discretionary policy environment achieves better social outcomes if it focuses on inflation and changes in the output gap than are achieved under inflation targeting this abstract was borrowed from another version of this item

do expected future marginal costs drive inflation dynamics abstract this article discusses a more general interpretation of the two step minimum distance estimation procedure proposed in sbordone 2002 the estimator is again applied to a version of the new keynesian phillips curve where inflation dynamics are driven by the expected evolution of marginal costs the article clarifies econometric issues addresses concerns about uncertainty and model misspecification raised in recent studies and assesses the robustness of previous results while confirming the importance of forward looking terms in accounting for inflation dynamics it suggests how the methodology can be applied to extend the analysis of inflation to a multivariate setting

indicator variables for optimal policy the optimal weights on indicators in models with partial information about the state of the economy and forward looking variables are derived and interpreted both for equilibria under discretion and under commitment an example of optimal monetary policy with a partially observable potential output and a forward looking indicator is examined the optimal response to the optimal estimate of potential output displays certainty equivalence whereas the optimal response to the imperfect observation of output depends on the noise in this observation

electricity demand supply analysis current status and future prospects for maharashtra india abstract the growth potential of any state is linked with infrastructure and electricity infrastructure is the most important parameter for economic growth maharashtra a prominent state in india consumes 12 per cent of india s electricity maharashtra s power sector is facing the electricity deficit and shortage since early 2005 on the other hand industrial and service sectors are rising in the state the present paper discusses electricity situational analysis of the state electricity demand analysis has been presented and comparison of state electricity demand vis a vis mumbai s demand state capital has been carried out for two years variation for monthly average demand for two years and load shedding have also been analyzed power supply situation analysis and analysis of major power suppliers have been carried out the state load distribution center data is used to depict the load variation for a typical day interventions needed to sustainably meet the growing demands are also discussed

inflation targeting some extensions previous analyses of the implementation of inflation targeting are extended to monetary policy responses to different shocks consequences of model uncertainty and effects of interest rate smoothing and stabilization model uncertainty output stabilization and interest rate stabilization or smoothing all call for a more gradual adjustment of the conditional inflation forecast toward the inflation target the conditional inflation forecast is the natural intermediate target during inflation targeting the optimal way of reacting to shocks is hence to check how they affect the inflation forecast and then take the appropriate action jel classification e42 e52 e58

federal reserve information and the behavior of interest rates this paper tests for the existence of asymmetric information between the federal reserve and the public by examining federal reserve and commercial inflation forecasts it demonstrates that the federal reserve has considerable information about inflation beyond what is known to commercial forecasters it also shows that monetary policy actions provide signals of the federal reserve s information and that commercial forecasters modify their forecasts in response to those signals these findings may explain why long term interest rates typically rise in response to shifts to tighter monetary policy jel e52 e43 d82 asymmetric information between the federal reserve and the public is a phenomenon that is often posited but rarely tested numerous models of central bank behavior for example show that the existence of asymmetric information has important implications for the effectiveness of policy and the consequences of dynamic inconsistency yet there

privatization technical efficiency and welfare consequences the case of the cote d ivoire electricity company cie abstract in 1990 cote d ivoire privatized the management of its electric power company lease contracting in this paper we are interested in identifying the economic effect of this institutional change by estimating a stochastic production frontier we have found that productive efficiency improved after privatization thanks to organizational innovations total factor productivity gains have been closely associated with a cost reduction strategy the way these gains have been distributed in a monopoly context suggests that consumers have been the main beneficiaries through a significant decrease of the relative price of electricity

reforming israel s electricity sector abstract this paper analyzes the regulatory structure of the electricity sector in israel which is currently dominated by the government owned integrated utility israel electric corporation iec the current structure of a price cap with a mandatory rate reduction of 2 per year and a target return on equity roe of 6 5 is not sustainable because of iec s deteriorating financial health caused by the substantial investments it made to meet the 7 2 per year electricity demand growth in the past decade which has led to an exceptionally low realized roe of 3 4 for that period the investment trend will continue thanks to the 4 5 per year gdp growth projected for the next 10 20 years part of our proposed remedy is performance based regulation pbr implemented via a a price cap formula that will restore iec s financial health and offer iec downward pricing flexibility b changes in how iec compensates its workers and c a sliding scale plan that provides incentives for iec to become more efficient and to share risk with its customers we augment the pbr proposal by recommending changes in iec s tariffs and resource procurement procedures that aim to promote the development of a competitive power industry in the next 10 15 years

understanding the political economy and key drivers of energy access in addressing national energy access priorities and policies abstract globally 1 5 billion people lack access to electricity and nearly 3 billion lack access to modern cooking energy options of the world s energy poor 95 are in asia and sub saharan africa within asia almost 80 of electricity deprived and 86 of biomass dependent populations are in the big 5 countries bangladesh china india indonesia and pakistan in this paper we discuss the broad contours of the political economy of energy access in these countries the political economy is assessed through an examination of three sustainability objectives accessibility of physical infrastructure energy service delivery and conformance to social goals the key areas of concern include emphasis on supply driven grid electricity vested power dynamics favouring affluent and urban areas unreliability of energy service provision and misdirected and misappropriated subsidies the above mentioned issues are responsible for limiting accelerated achievement of universal energy access in the big 5 countries and need to be addressed through innovative approaches the paper emphasizes the need for firm commitments policy convergence and the implementation of pro poor equitable energy policies through a broad based energy framework of bench marked technology neutral energy provisioning that ensures reliability and equity it highlights the need for reorienting of the subsidy regime and incorporating energy service delivery indicators in monitoring and reporting mechanisms

new keynesian economics and the phillips curve models with sticky prices are an important part of new keynesian economics the author shows that several of the new keynesian models imply a formulation that is similar to the expectations augmented phillips curve of milton friedman and edmund phelps he then presents new estimates of the new keynesian phillips curve the author uses two proxies for price expectations survey based measures and an econometric based measure originally developed by bennett mccallum 1976 overall the results are consistent with the model but the survey based results are more precise suggesting that the surveys may be better measures of actual expectations copyright 1995 by ohio state university press

imperfect credibility and inflation persistence in this paper we formulate a dynamic general equilibrium model with staggered nominal contracts in which households and rms use optimal ltering to disentangle persistent and transitory shifts in the monetary policy rule the calibrated model accounts quite well for the dynamics of output and insation during the volcker disinsation and implies a sacri ce ratio very close to the estimated value our approach indicates that insation persistence and substantial costs of disinsation can be generated in an optimizing agent framework without relaxing the assumption of rational expectations or relying on arbitrary modi cations to the aggregate supply relation jel classi cation e31 e32 e52

an optimizing is lm specification for monetary policy and business cycle analysis we ask whether relations of the is lm type can sensibly be used for the aggregate demand portion of a dynamic optimizing general equilibrium model intended for analysis of issues regarding monetary policy and cyclical fluctuations the main result is that only one change the addition of a term regarding expected future income is needed to make the is function match a fully optimizing model whereas no changes are needed for the lm function this modification leads to a dynamic forward looking model of aggregate demand that is tractable and usable with a wide variety of aggregate supply specifications theoretical applications concerning price level determinacy and gradual price adjustment are included

two remarks on cournot equilibria abstract we describe two simple results in the theory of cournot equilibria the first has to do with the effect of taxation in a cournot industry and the second describes under what conditions a cournot equilibrium will implicity maximize an objective function these results are probably known but are not well known and they seem useful enough to be worth spelling out

impacts on investments and transmission distribution loss through power sector reforms abstract this study analyses original panel data from 86 countries between 1985 and 2006 econometric methods were used to identify the effects of different policy devices of power sector reforms on performance indicators installed capacity per capita transmission and distribution loss in the countries analyzed the research findings suggest that reform variables such as the entry of independent power producers ipps unbundling of generation and transmission establishment of regulatory agencies and the introduction of a wholesale spot market are the driving forces of increasing generation capacity as well as reducing transmission and distribution loss in the respective regions in this study we can assume that firstly different electric industry s reform policies measures have different impacts on geographically and economically diverse countries secondly a country s state of economic development has a different impact on policy effects of reforms thirdly coexistent with independent regulatory agencies reform policy becomes more powerful in realizing sector performances

electricity use and economic development abstract a study of the relationship between electricity use and economic development in over one hundred countries constituting over 99 of the global economy has been undertaken correlations between electricity consumption capita and gdp capita have been analysed and compared with those between total primary energy supply capita and gdp capita a supporting analysis has correlated the proportion of energy used in the form electricity the e e ratio with gdp capita the general conclusions of this research are that wealthy countries have a stronger correlation between electricity use and wealth creation than do poor countries and that for the global economy as a whole there is a stronger correlation between electricity use and wealth creation than there is between total energy use and wealth the study also shows that in wealthy countries the increase in wealth over time correlates with an increase in the e e ratio the results imply that the energy ratio toe should be replaced by the electricity ratio kwh as a development indicator and more precisely by the e e ratio kwh toe

targeting nominal income growth or inflation within a simple new keynesian model emphasizing forward looking behavior of private agents i evaluate optimal nominal income growth targeting versus optimal inflation targeting when the economy is mainly subject to shocks that do not involve monetary policy trade offs for society inflation targeting is preferable otherwise nominal income growth targeting may be superior because it induces inertial policy making which improves the inflation output gap trade off somewhat paradoxically inflation targeting may be relatively less favorable the more society dislikes inflation and the more persistent are the effects of inflation generating shocks jel e42 e52 f58

new tests of the new keynesian phillips curve abstract lagged dependent variables typically play an important role in empirical models of inflation do these lags reflect backward looking inflation expectations or do they proxy for rational forward looking expectations as in the new keynesian phillips curve gali and gertler 1999 inflation dynamics a structural econometric analysis journal of monetary economics 44 195 222 attempt to answer this question using gmm to estimate specifications incorporating both lagged and future inflation they report small coefficients on lagged inflation and conclude that the new keynesian model provides a good first approximation to inflation dynamics we show that these tests have low power against alternative backward looking specifications and demonstrate that their results are also consistent with a backward looking phillips curve using an alternative approach we find that the new keynesian pricing model cannot explain the importance of lagged inflation in standard inflation regressions and find that forward looking terms play a very limited role in explaining inflation dynamics

on inflation and output with costly price changes a simple unifying result this paper determines the real effects of credible disinflation when price setting is staggered the results are surprising a fairly quick disinflation causes a boom this finding suggests that nominal price rigidity alone does not explain why disinflation is costly in actual economies this abstract was borrowed from another version of this item

inflation dynamics and subjective expectations in the united states i introduction this paper analyzes the ability of sticky price models to explain the dynamics of u s inflation when using survey data as proxies for inflation expectations testing sticky price models with survey expectations is attractive since to the extent that survey data correctly capture agents expectations they allow to disregard issues related to the specification of agents expectations functions one neither has to impose untested orthogonality restrictions as required when estimating under the assumption of rational expectations nor has to make restrictive assumptions about the precise form of nonrationality present in agents forecast functions this allows to focus on the question whether the economic models under consideration are correctly specified previous tests of sticky price models performed under the assumption that agents hold rational expectations have generated mixed results prominently fuhrer and moore 1995 have reported that sticky price models do not generate sufficient stickiness for inflation when the output gap is used as a measure of real marginal costs recent evidence however has shown that the empirical performance depends crucially on how one measures real marginal costs the main determinant of inflation according to sticky price models for instance gall and gertler 1999 and sbordone 2002 show that sticky price models perform well once marginal costs are approximated by average unit labor costs 1 it makes an important difference whether sticky price models successfully explain inflation dynamics as a function of output behavior or they relate inflation dynamics to the behavior of unit labor costs given that the ultimate objective is a model explaining the joint behavior of output and inflation the latter case would require an additional empirically plausible theory linking the dynamics of unit labor costs to the behavior of output this paper studies whether the currently popular new keynesian phillips curve nkpc which can be derived from calvo 1983 style sticky price models is able to explain a relationship between inflation on the one hand and output or unit labor costs on the other hand thus we let the data speak whether a theory linking output to costs is warranted once expectations are approximated by data reported in the survey of professional forecasters our main finding is that the nkpc performs equally well with both measures of marginal costs output and unit labor costs whatever measure is used the estimate of the quarterly discount factor is close to one and the point estimate of the degree of price stickiness implies that firms reset their prices roughly every five quarters on average these results suggest that potential nonrationalities in expectations as they show up in surveys have biased previous estimates using output as a measure for marginal costs quite surprisingly the same nonrationalities do not seem to play a role when using unit labor costs here our estimates confirm the results obtained by gall and gertler 1999 and sbordone 2002 who assumed rational expectations we show that the reason for this finding is that approximating the agents information set using the unit labor cost variable rests on more solid grounds than approximating it using the output variable in particular the survey data suggest that the hypothesis of rational expectations implies a too high correlation between lagged output and future inflation expectations we show that this causes the coefficient estimate for output to become negative contrary to what is implied by theory these results suggest that once one takes account of potentially nonrational expectations via survey expectations sticky price models are able to establish a close link between output dynamics and the behavior of inflation to assess the robustness of this finding we include into the price equation lags of various variables and test for their significance

dynamic inconsistencies counterfactual implications of a class of rational expectations models a number of recent papers have developed dynamic macroeconomic models that incorporate rational expectations and optimizing foundations while the theoretical motivation behind these models is sound the dynamic implications of many of the specifications that assume rational expectations and optimizing behavior can be seriously at odds with the data for both inflation and real side variables exhibit gradual and hump shaped responses to real and monetary shocks for models that are intended for monetary policy analysis these dynamic shortcomings should be considered quite serious when monetary policy has only short run effects on real variables the inability to approximately capture the short run responses of inflation or real variables to policy shocks makes a model unsuitable for policy analysis this paper identifies a simple feature common to many dynamic specifications for prices and real variables that causes the problem the paper also discusses several potential solutions to the problem including alterations to the expectations assumption to the order of differencing implicit in the model and to the underlying behavioral assumptions this abstract was borrowed from another version of this item

assessing the sustainability challenges for electricity industries in asean newly industrialising countries abstract rapid social and economic progress in fast developing countries such that among the countries in the association of southeast asian nations asean have driven substantial growth in electricity consumption in this region whilst this represents significant societal and economic development it has potentially growing adverse environmental impacts this raises a concern on sustainable development in the electricity sector in this region this study evaluates key sustainability challenges in the electricity industries in the five largest energy consumers in asean indonesia thailand malaysia the philippines and vietnam the 3a s energy sustainability objectives accessibility availability and acceptability are used as the sustainability analytical framework this study also draws together a set of associated indicators and criteria within the analytical framework to analyse the status of the electricity industries in these countries the analysis shows that key sustainability challenges in the asean 5 are attributable to satisfying rapid demand growth enhancing security of electricity supply and mitigating the increase in co2 emissions from electricity generation given the promising resource and technical potential in this region renewable energy emerges as a favourable option to address these challenges however increasing the share of renewable energy in electricity generation requires considerable policy support this study suggests that there is an opportunity for the asean countries to strengthen regional collaborations through experience and resource sharing to enhance sustainability in the electricity industries this study also highlights some of the key issues facing the electricity industry and the need for new generation investment decision support tools which can address these issues