target zones and interest rate variability abstract for narrow exchange rate bands and for reasonable parameter values the interest rate differential s asymptotic unconditional variability is increasing in the width of the exchange rate band whereas for wide exchange rate bands it is slowly decreasing in the exchange rate band the interest rate differential s instantaneous conditional variability is decreasing in the width of the exchange rate band a narrow target zone differs from a completely fixed exchange rate regime in that the interest rate differential s instantaneous standard deviation is high and even increases when the zone narrows

standardization and variety abstract in the tradeoff between standardization and variety there can be too much or too little variety the latter possibility can only happen if there are several equilibria

exchange rate target zones a survey of the literature this work selectively reviews the literature on exchange rate target zones and their theoretical and empirical methodologies and examines whether they can be used to clarify to what extent this type of exchange rate regime could contribute to greater exchange rate stability we discuss the main contributions of the first and second generations of exchange rate target zone models in an attempt to reconcile the poor empirical performance of the krugman model with the reality of exchange rate target zone regimes this line of research integrates target zones with alternative underlying economic models such as imperfect credibility intra marginal interventions and sticky price models it was thus possible to understand the correlations observed between the exchange rate its fundamentals determinants and the interest rate differential and to explain the fact that the statistical distribution of the exchange rate is hump shaped rather than u shaped this implies that the initial emphasis of target zone models on nonlinearities honeymoon effect smooth pasting and marginal interventions has vanished exchange rate target zones are better described as similar to managed floating regimes with intra marginal interventions with some marginal interventions when the exchange rate reaches the edges of the floating band

the transition to digital television digital tv this paper studies the role of economic policy for the transition from analogue to digital television with particular attention to the switch off of the analogue terrestrial signal the analogue signal cannot be credibly switched off until almost all viewers have migrated to digital due to the policy objective of universal access to television but before switch off only part of the population can be reached with the digital signal in addition those who are reached need to spend more to upgrade their reception equipment than after switch off because the capacity to increase the power of the digital signal will be made available only then after reviewing the competitive structure and the role of government intervention in television markets we present the early experience of a number of industrialized countries in the transition to digital television we then formulate a micro econometric model of digital television adoption by individual viewers the model is calibrated to uk data and simulated to predict the impact of government policies on the take up of digital television policy makers can affect the speed of take up of digital television by 1 controlling the quality of the signals and the content of public service broadcasters 2 intervening in the market for digital equipment with subsidies and 3 publicizing the conditions and date of switch off of the analogue signal we find that if the analogue terrestrial signal is switched off only when certain aggregate adoption targets are reached strategic delays may arise and expectations may affect the success of the switch off policy jerome adda and marco ottaviani

monetary regime change and business cycles abstract this paper proposes a method to structurally estimate a model with a regime shift and evaluates the importance of acknowledging the break in the estimation we estimate a dsge model on swedish data taking into account the regime change in 1993 from exchange rate targeting to inflation targeting ignoring the break leads to spurious estimates accounting for the break suggests that monetary policy reacted strongly to exchange rate movements in the first regime and mostly to inflation in the second the sources of business cycles and their transmission mechanism are significantly affected by the exchange rate regime

policies and international trade agreements on technical compatibility for industries with network externalities abstract the paper considers a country home in which consumers have heterogeneous preferences over ex ante incompatible domestic and imported products and benefit from a network externality we analyze the cases with trade under perfect competition and the international duopoly in which both governments strategically use policies toward compatibility but cannot use conventional trade policies in both cases the equilibrium outcome of the non cooperative game depends upon the strength of the network externality effect and involves either an excessively high equilibrium level of compatibility in combination with either too much or too little trade or very low equilibrium levels of both compatibility and trade the paper concludes with the analysis of the international agreements on policies toward compatibility and evaluates the existing provisions in the wto legal system aimed at minimizing the trade inhibiting impact of standards and regulations in the area of technical compatibility

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

timber price dynamics following a natural catastrophe catastrophic shocks to existing stocks of a renewable resource can cause long run price shifts with timber these long run price shifts may be accompanied by a short run price drop due to salvage hurricane hugo damaged 20 of southern pine timber in the south carolina coastal plain in 1989 to estimate the short and long run effects of the hurricane on the prices of timber stocks we estimated an intervention model of the residuals of cointegration of south carolina sawtimber and pulpwood stumpage prices with prices of similar products from other regions modeling revealed a 30 negative price spike due to salvage and a long run enhancement effect leading to prices that are 10 to 30 higher than they would have been had hugo not occurred

on the mean reverting properties of target zone exchange rates a cautionary note abstract we estimate a franc mark target zone model and find a very limited honeymoon effect monte carlo experiments calibrated with the estimates caution against the use of standard linear tests for non mean reversion as indirect tests of the target zone model

why did the elites extend the suffrage democracy and the scope of government with an application to britain s age of reform a new rationale is presented for why an elite may want to expand the franchise even in the absence of threats to the established order expanding the franchise can turn politicians away from particularistic politics based on ad personam redistribution within the elite and foster competition based on programs with diffuse benefits if these programs are valuable a majority of the elite votes in favor of an extension of the franchise despite the absence of a threat from the disenfranchised we argue that the evolution of public spending and of political competition in nineteenth century britain is consistent with our model i introduction at the beginning of the nineteenth century in most countries narrow elites had a disproportionate influence on public affairs even in england where parliament was an influential institution suffrage was mostly the privilege of the wealthy and some members of parliament were elected in boroughs with as few as 100 voters while cities such as manchester did not have any representative a century later most western countries had universal male suffrage with female suffrage to arrive shortly thereafter what brought about this democratic revolution in many cases the elites were forced out of power after violent revolutions however there are important examples such as england where democratization took the form of gradual extensions of the suffrage and these were accompanied by little overt violence it is the peculiar pride of england that the record of social and political reform is to be found on the statute book not in the annals of revolution cheyney 1931 p vii such peaceful democratizations are difficult to rationalize within the benchmark political economic models in those models extending the franchise dilutes the elite s power to influence policy and results

the target zone model non linearity and mean reversion is the honeymoon really over we estimate a target zone model for three erm exchange rates for 1983 6 and 1987 91 by the method of simulated moments taking account of the continuous time specification by using daily data with the interruptions of holidays and weekends specification tests are unable to reject the model the estimates imply however an essentially linear relationship between the exchange rate and the fundamentals with a very limited honeymoon effect using monte carlo simulations calibrated on the estimates we find that standard tests for mean reversion of the exchange rate would largely reject the target zone model when in fact it held

political losers as a barrier to economic development per capita income in many sub saharan african countries such as chad and niger is less than 1 30th of that of the united states most economists and social scientists suspect that this is in part due to institutional failures that stop these societies from adopting the best technologies a particularly interesting historical example comes from the diffusion of railways in the 19th century while railways are regarded as a key technology driving the industrial revolution there were large lags in their diffusion for example in 1850 the united states had 14 518 km of track britain 9 797 km and germany 5 856 km in the russian and hapsburg empires there were just 501 km and 1 357 kim respectively all data from brian r mitchell 1993 why do societies as in this example fail to adopt the best available technologies one answer is that existing powerful interest groups block the introduction of new technologies in order to protect their economic rents and societies are able to make technological advances only if they can defeat such groups economic monopolies may be one example a monopolist might wish to block the introduction of a new technology by a rival that will capture the market this idea which we call the economic losers hypothesis was discussed by simon kuznets 1968 developed at length by joel mokyr 1990 in the context of technology adoption and formalized by per krusell and jose victor rios rull 1996 and stephen l parente and edward c prescott 1997 related ideas are widely discussed in the literature on international trade policy with many formal models e g gene m grossman and elhanan helpman 1994 there are problems with this story however first despite the intuitive appeal of the idea there are relatively few instances where major economic change was blocked by economic losers mokyr 1990 emphasizes the attempts of many skilled artisans to block the introduction of new machines the most famous example is the luddites skilled weavers who were thrown out of work by mechanization interestingly however many of these groups including the luddites were ultimately unable to block economic progress equally important the economic losers hypothesis relies on the presumption that certain groups have the political power to block innovation but if so why not use this power to simply tax the gains generated by the introduction of the new technology this might be because there are limits on the nature of fiscal instruments though it seems plausible that groups with sufficient political power to block innovation would be able subsequently to lobby effectively for redistribution a more important reason however may be that the introduction of new technology and economic change more generally may simultaneously affect the distribution of political power we argue that the effect of economic change on political power is a key factor in determining whether technological advances and beneficial economic changes will be blocked in other words we propose a political loser hypothesis we argue that it is groups whose political power not economic rents is eroded who will block technological advances if agents are economic losers but have no political power they cannot impede technological progress if they have and maintain political power i e are not political losers then they have no incentive to block progress it is therefore agents who have t discussant gene grossman princeton university

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

standardization in decentralized economies this paper presents a dynamic model inspired by evolutionary game theory of how standards and norms emerge in decentralized economies it shows that standardization outcomes depend on adopters attitudes to problems caused by incompatibility if individuals display aversion to incompatibility standardization never fails to happen eventually but societies sometimes end up picking inferior standards in this case official action can be useful to quickly achieve sensible standardization on the other hand when individuals display tolerance or neutrality to incompatibility there is neither path dependency nor a lock in problem and regulation seems a poor alternative to laissez faire

the logic of financial westernization in the middle east abstract in the 19th century financial reforms in the middle east included the legalization of interest the establishment of secular courts and banking regulations all based on western models exploring why foreign institutions were transplanted this article shows that islamic law blocked evolutionary paths that might have generated financial modernization through indigenous means sources of rigidity included 1 the islamic law of commercial partnerships which limited enterprise continuity 2 the islamic inheritance system which restrained capital accumulation 3 the waqf system which inhibited resource pooling and 4 islam s traditional aversion to the concept of legal personhood which hampered private organizations

people s opium religion and economic attitudes since max weber there has been an active debate on the impact of religion on people s economic attitudes much of the existing evidence however is based on cross country studies in which this impact is confounded by differences in other institutional factors we use the worldvalues surveys to id entify the relationship between intensity of religious beliefs and economic attitudes controlling for country fixed effects we study several economic attitudes towardcooperation the government working women legal rules thriftiness andthe market economy we also distinguish across religious denominations differentiating on whether a religion is dominant in a country we find that on average religious beliefs are associated with good economic attitudes where good is defined as conducive to higher per capita income andgrowth yet religious people tendto be more racist andless favorable with respect to working women these effects differ across religious denominations overall we find that christian religions are more positively associatedwith attitudes conducive to economic growth r 2003 elsevier science b v all rights reserved jel classification a1 e0 n4 z1

a cointegration analysis of canadian wood pulp prices the effects of the canada u s exchange rate the u s pulp price and the domestic use of pulp on the canadian pulp price are investigated using a cointegration analysis results suggest that the u s pulp price is more important than other variables in determining the price of pulp in canada the incomplete pass through of the exchange rate indicates that canadian pulp producers may not have market power to increase their price of pulp the temporary increase in the price of canadian pulp in response to a devaluation of the canadian dollar may be due to short term contracts which canadian pulp producers have with their importers

religion politics and development lessons from the lands of islam abstract the question as to whether religion can block economic development and institutional change or is a purely endogenous factor assumes particular importance today because of the rise of islamist movements and the disappointing economic performances in the lands of islam this paper starts from a critical examination of the thesis of bernard lewis according to which the lack of separation between religion and politics creates particular difficulties on the way to modern economic growth in these lands it will be argued that 1 lewis thesis conceals the critical fact that even when political and religious functions appear to be merged religion is the handmaiden rather than the master of politics 2 the influence of religion increases when the state falls into crisis owing to its impotence or excessive absolutism 3 because the islamic frame of reference provides political rulers with a cheap default option when they are contested they rarely undertake the much needed reforms of the country s institutions 4 this way of escape is all the more attractive to contested rulers as islamist movements born of the internal situation as well as of the international environment accuse them of un islamic behaviour 5 as argued by timur kuran by creating an institutional trap the legacy of the islamic classical system also makes institutional reforms more difficult to achieve

identifying monetary impacts on agricultural prices in var models since the mid 1970s a number of studies have used vector autoregressive var models to evaluate the magnitude and timing of macroeconomic impacts on agriculture use of the var method has been viewed as a way to obtain empirical evidence about these impacts that might not emerge from more traditional overidentified and less dynamic econometric models the hope has been that by placing minimal restrictions on var models the true structure of the economic relationships under investigation can be observed while the aim is laudable critics of var models have argued that it has had the unfortunate consequence of obscuring some important structural identification issues and seeming to promise that something can be obtained for nothing cooley and leroy leamer they point out that identifying restrictions are required to give economically interpretable meaning to the results of any simultaneous equation model sem in standard practice identification of var models is obtained implicitly by choice of a choleski decomposition of the covariance matrix of one step ahead forecast errors which is equivalent to imposing a recursive structure for the economy of concern is that the recursive structure may not be believable further as bernanke has observed examination of ad hoc variants of the recursive order implies a strange set of prior beliefs in which the analyst holds strongly that the system is recursive but is not sure in what order the variables should be arranged in response to these concerns several recent papers have pointed out that identification of var models does not have to rely on the assumption that the contemporaneous structure is recursive bernanke sims rather the distinguishing features of a var model are first that identification rests on the assumption that distinct mutually orthogonal behavior shocks drive the economy and second that lagged relationships among the endogenous and exogenous variables if any are left entirely unrestricted given these features a var model must be identified solely by restrictions placed on the contemporaneous interactions among the variables but the identifying restrictions do not have to preclude simultaneity in this paper we elaborate on the structural interpretation of var models and use this analysis to examine monetary impacts on agricultural prices we discuss the identification problem and the implications of a recursive structure we illustrate our points with respect to the three variable model of money industrial prices and agricultural prices that has been used in several articles to evaluate the effects of monetary shocks on price dynamics bessler devadoss and meyers we then introduce a somewhat richer behavioral model of the macroeconomy and its effects a simultaneous model is shown to offer a more believable identification of monetary policy and other macroeconomic shocks than a recursive model and monetary impacts on agricultural prices are assessed

network externality an uncommon tragedy economists have defined network externality and have examined putative inframarginal market failures associated with it this paper distinguishes between network effects and network externalities where the latter are market failures the authors argue that while network effects are important network externalities are theoretically fragile and empirically undocumented some network externalities are merely pecuniary network ownership or transactions among network participants can internalize some network effects the type of market failure that has been associated with these externalities is a transition problem that has little to do with externality

an empirical reassessment of target zone nonlinearities abstract in this paper we investigate the presence of target zone nonlinearities in the pound sterling german mark exchange rate for the period of the uk european exchange rate mechanism erm membership using data with frequency of every 2 days tests against general nonlinear specifications as well as specifications consistent with a stochastic devaluation risk model of exchange rate target zones are carried out using recursive techniques in addition the significance of nonlinear effects is analysed within a recursive bayesian framework we find evidence of target zone nonlinearities in the whole sample but the recursive analysis yields support for the presence of such nonlinearities only in specific subsamples our results imply that the reduction in the uk inflation rate was most likely a consequence of contractionary policies rather than of the expectational effects associated with the target zone

testing the basic target zone model on swedish data 1982 1990 the swedish exchange rate band is studied using daily data on exchange rates and interest rate differentials for the 1980s applying a number of different statistical and econometric techniques it is found that the first generation of target zone models cannot provide an adequate explanation of swedish data the main reasons are probably intra marginal interventions by the swedish central bank and time varying devaluation expectations

the economics of organization the transaction cost approach the transaction cost approach to the study of economic organization regards the transaction as the basic unit of analysis and holds that an understanding of transaction cost economizing is central to the study of organizations applications of this approach require that transactions be dimensionalized and that alternative governance structures be described economizing is accomplished by assigning transactions to governance structures in a discriminating way the approach applies both to the determination of efficient boundaries as between firms and markets and to the organization of internal transactions including the design of employment relations the approach is compared and contrasted with selected parts of the organization theory literature

target zones in theory and history credibility efficiency and policy autonomy abstract an experiment with an exchange rate band in austria hungary in the early 20th century provides a rare opportunity to discuss critical aspects of the theory of target zones providing a new derivation of the target zone model as a set of nested hypotheses the inference is drawn that policy credibility and market efficiency were paramount in the success of the austro hungarian experience

regime switching and interest rates in the european monetary system this paper examines the impact that a currency target zone has on short term interest rates for a number of countries in the european monetary system we characterize the short rate using a regime switching model that allows fbr a differently parameterized mean reverting square root process in each regime we find that the volatility the level and the speed of adjustment are all higher in the regime that is operative during speculative attacks and currency crises moreover we allow the conditional probability of being in each regime to be state dependent so the model can be used to examine questions relating to the likelihood of realignments and the stability of the target zone system c 1999 elsevier science bn all rights reserved jel classification e43 g12

trust in large organizations several authors suggest that trust is an important determinant of cooperation between strangers in a society and therefore of performance of social institutions we argue that trust should be particularly important for the performance of large organizations in a cross section of countries evidence on government performance participation in civic and professional societies importance of large firms and the performance of social institutions more generally supports this hypothesis moreover trust is lower in countries with dominant hierarchical religions which may have deterred networks of cooperation trust hold up remarkably well on a cross section of countries this abstract was borrowed from another version of this item

the economic impact of islam on developing countries summary this essay focuses on two questions how do the current economic systems and institutions of muslim countries differ from those of other countries at the same stage of economic development what is the impact of islam on the economic and social performance of these countries employing a cluster analysis i find that there is no special muslim economic system moreover few economic institutions are uniquely muslim using a regression analysis i also find that the presence of islam has relatively little influence on most economic or social performance indicators in the analysis of muslim economies religion does not appear to be a useful explanatory variable

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

snowball a dynamic oligopoly model with indirect network effects abstract allowing for innovation dynamics in the software market this paper studies the conditions under which standardization in the hardware market arises and persists over time in the model software firms repeatedly invest in quality upgrades compete in the product market and make exit as well as entry decisions the results show that in general excess inertia does not occur a platform becomes the standard in a market only if it is better than the competing platforms furthermore low overall rates of innovation always lead to variety conversely the higher the speed of innovation the more likely standardization is

estimating the degree of interventionist policies in the run up to emu based on a theoretical monetary exchange rate model in continuous time this article establishes a sequential estimation framework which is capable of indicating central bank intervention in the run up to a currency union using daily pre european monetary union pre emu exchange rate data for the countries of the current euro zone we find mixed evidence of active pre emu intervention policies so called institutional frontloading strategies our estimation framework is highly relevant to economic and political agents operating in financial markets of the upcoming emu accession countries

the presence of target zone nonlinearities when narrower bands exist within official zones the presence of target zone nonlinearities is generally refuted in empirical research we argue that this may be due to estimation being performed vis a vis official limits when monetary authorities are in fact targeting a narrower band estimation results for the belgian and french franc confirm that nonlinearities are present when narrower zones are accounted for

stochastic devaluation risk and the empirical fit of target zone models in the model of this paper an exchange rate fluctuates between given boundaries for random lengths of time and jumps discretely when devaluation occur we provide explicit solutions for the stochastic processes followed by the exchange rate and by the expected rate of depreciation when the likelihood and the size of devaluations vary stochastically over time the model produces realistic patterns of covariation between exchange rates and interest rate differentials and provides interesting interpretations of available empirical evidence we also specify how to infer devaluation risk from target zone data

religious co option in autocracy a theory inspired by history abstract the relationship between religion and politics is explored from a theoretical standpoint assuming that religious clerics can be co opted by the ruler acting as an autocrat the comparative effects of decentralized versus centralized religions on the optimal level of cooperation between the autocrat and the religious clerics which itself impinges upon political stability is analysed the paper shows that the presence of a decentralized body of clerics makes autocratic regimes more unstable it also shows that in time of stability the level of reforms is larger with a centralized religion than with a decentralized one when the autocrat in the decentralized case pushes more reforms than in the centralized one he always does so at the cost of stability historical case studies are presented that serve to illustrate the main results

dynamic price competition with network effects i consider a dynamic model of competition between two proprietary networks consumers die and are replaced with a constant hazard rate and firms compete for new consumers to join their network by offering network entry prices i derive a series of results pertaining to a existence and uniqueness of symmetric equilibria b monotonicity of the pricing function e g larger networks set higher prices c network size dynamics increasing dominance vs reversion to the mean and d firm value how it varies with network effects finally i apply my general framework to the study of termination charges in wireless telecommunications i consider various forms of regulation and examine their impact on firm profits and market share dynamics

exchange rate pass through when market share matters the authors investigate the pass through from exchange rates to import prices when firms future demands depend on their current market shares they show that profit maximizing foreign firms may either raise or lower their dollar export prices when the dollar appreciates temporarily i e the pass through may be perverse and that current import prices may be more sensitive to expected future exchange rates than to current exchange rates they present evidence that suggests the behavior of expected future exchange rates may provide a clue to the puzzling recent behavior of u s import prices copyright 1989 by american economic association

policy inference using var models policy inference using var models i introduction macroeconomics has a long tradition of examining the response of macroeconomic variables to shocks in alternative policy measures much recent work in this area has been based on the empirical regularities between variables found in vector autoregressive var models the var results in turn have been used to investigate the impact of changes in different policy variables var modeling procedures have been used to test the relative effects of changes in money interest rates broad credit measures and fiscal actions on economic activity 1 moreover because var analysis does not require the specification of an underlying theoretical model it also has been used to study the linkages among macroeconomic variables across national borders 2 although debate over the alleged atheoretical nature of vars continues for example see cooley and leroy 1985 leamer 1985 and braun and mittnik 1985 var models are frequently used for policy analysis how the dynamic specification of a var model is generated and how the dynamics may influence the resulting policy recommendation is the subject of this study while modeling the dynamic relationship among macro variables is a longstanding subject relatively few studies have tested for the effects of alternative lag structures on a given model to our knowledge there has been little systematic analysis of the sensitivity of policy effects to changes in the lag structure of a given var model 3 in this paper we investigate this specification problem using a simple four variable var model similar in spirit to sims s 1980b 4 this model consists of quarterly observations for money real output prices and nominal short term interest rates for the period 1960 through 1985 in selecting this model we opt to focus on the impacts of lag specification on policy inferences derived from a given var model in doing so we ignore the effects of altering the specification in terms of variables included or excluded this approach seems reasonable however since our purpose is to investigate the effects of lag structure not specification problems in general to compare the policy conclusions derived from the alternative dynamic structures we use six different lag selection criteria these criteria briefly described in section ii vary the bias efficiency tradeoff inherent in such statistical procedures section iii discusses the estimation of the var model using the alternative dynamic structures comparison of policy recommendations derived from the models is presented in section iv using variance decompositions anticipating that discussion the evidence from our model suggests that policy recommendations are very sensitive to changes in the dynamic structure conclusions close the paper in section v ii lag length selection procedures many previous researchers have chosen to impose equal lag lengths on each of the variables in their models 5 this approach produces parameter estimates that may suffer from bias or inefficiency depending on whether the model is under or over parameterized we use six different approaches to determine the lag specification five are based on statistical criteria with the exact criteria listed in table i for comparability we also employ the nonstatistical ad hoc procedure of arbitrarily fixing the maximum lag on all variables to be four quarters one of the statistical approaches used is the standard f test 6 the f test imposes zero restrictions on lags beyond some point and tests this restricted model against a more general lag structure the f statistic is calculated sequentially until adding another lag does not statistically improve the fit of the model two of the selection procedures use a mean squared error criterion these are mallows s 1973 c sub p statistic and akaike s 1970

long run price effects of exchange rate changes in finnish pulp and paper exports this paper presents long run exchange rate elasticities of finnish newsprint and pulp export prices in the united kingdom uk and germany over the period 1980 94 the elasticities were estimated for a markup pricing model using johansen s cointegration method the magnitudes of the elasticity estimates obtained by imposing price homogeneity indicate that pass through of exchange rate changes to export prices has been incomplete in both markets for newsprint the pass through elasticity was 0 60 in the uk and 0 46 in germany which means that about one half of the changes in the exchange rates is reflected in prices as expressed in the destination countries currencies and about a half in prices measured in finnish markka instead in pulp exports the pass through elasticities differed from each other between the two destination countries more clearly than in newsprint exports indicating a different pricing behaviour of finnish pulp exporters in the uk and germany when exchange rate changes pass throug

intervention policy and mean reversion in exchange rate target zones the swedish the intervention policy of the swedish central bank is studied using daily intervention data for the late 1 980s in contrast to the first generation of target zone models we find that the interventions occur all over the exchange rate band and almost every day based on this evidence we estimate an exchange rate target zone model with intra marginal interventions the results go a long way towards explaining the well established hump shaped exchange rate distribution and lack of non linearities

the multiscale causal dynamics of foreign exchange markets abstract this paper relies on wavelet multiresolution analysis to investigate the dependence structure and predictability of currency markets across different timescales it explores the nature and direction of causality among the exchange rates with respect to the us dollar of the most widely traded currencies namely euro great britain pound and japanese yen the timescale analysis involves the estimation of linear nonlinear and spectral causal relationships of wavelet components and aggregate series as well as the investigation of their out of sample predictability moreover this study attempts to probe into the micro foundations of across scale causal heterogeneity on the basis of trader behavior with different time horizons the examined period starts from the introduction of the euro and covers the dot com bubble the financial crisis of 2007 2010 and the eurozone debt crisis technically this paper presents an invariant discrete wavelet transform that deals efficiently with phase shifts dyadic length and boundary effects it also proposes a new entropy based methodology for the determination of the optimal decomposition level and a wavelet based forecasting approach overall there is no indication of a global causal behavior that dominates at all timescales in the out of sample analysis wavelets clearly outperform the random walk for the volatility series moreover the synergistic application of wavelet decomposition and artificial neural networks provided with an enhanced predictability in many forecast horizons for the returns these results may have important implications for market efficiency and predictability

quantitative modelling of the eur chf exchange rate during the target zone regime of september 2011 to january 2015 krugman 1991 s target zone model for exchange rate dynamics has become the reference of a large part of this literature despite its simplicity and elegance empirical evidence has been lacking not least because it is difficult to capture the predicted non linear relationship between the observable exchange rate and the non observable fundamental value this is why we propose a different approach by inverting locally the relation between exchange rate and fundamental value we derive analytical expressions for the conditional volatility and the probability density as a function of the exchange rate this allows us to examine krugman s prediction directly from historical data and furthermore enables us to test the smooth pasting condition which is intimately related to the no arbitrage condition concretely we study the performance of the euro swiss franc exchange rate in the extraordinary period from september 6 2011 to january 15 2015 when the swiss national bank enforced a minimum exchange rate of 1 20 swiss francs per euro we show that the data are well explained by the theory and conclude that krugman s target zone model holds after all but apparently only under extreme and sustained pressure that pushes continuously the exchange rate very close to the boundary of the target zone

kleptocracy and divide and rule a model of personal rule many developing countries have suffered under the personal rule of kleptocrats who implement highly inefe cient economic policies expropriate the wealth of their citizens and use the proceeds for their own glorie cation or consumption we argue that the success of kleptocrats rests in part on their ability to use a divide and rule strategy made possible by the weakness of institutions in these societies members of society need to cooperate in order to depose a kleptocrat yet such cooperation may be defused by imposing punitive rates of taxation on any citizen who proposes such a move and redistributing the benee ts to those who need to agree to it thus the collective action problem can be intensie ed by threats which remain off the equilibrium path in equilibrium all are exploited and no one challenges the kleptocrat kleptocratic policies are more likely when foreign aid and rents from natural resources provide rulers with substantial resources to buy off opponents when opposition groups are shortsighted when the average productivity in the economy is low and when there is greater inequality between producer groups because more productive groups are more dife cult to buy off jel o12 h00

exports and growth a causality analysis for the pulp and paper industries based on international panel data this study examines the causal relations between exports and domestic production in the pulp and paper industries the issue is whether exports are the engine of growth or whether exports follow growth the data were time series of the 15 main exporting countries between 1961 and 1995 the method was granger causality analysis with error correction based on models estimated in three ways ordinary least squares by country least squares with dummy variables lsdv and seemingly unrelated regression regardless of method the strongest relation was an instantaneous within a year feedback between exports and production the lsdv results implied average multipliers across countries of 1 2 to 1 4 from exports to production and 0 20 to 0 25 from production to exports in both industries experiments with monthly data on the pulp industries of canada and the usa showed that temporal aggregation could affect the granger causality test results

learning mixed equilibria we study learning processes for finite strategic form games in which players use the history of past play to forecast play in the current period in a generalization of fictitious play we assume only that players asymptotically choose best responses to the historical frequencies of opponents past play this implies that if the stage game strategies converge the limit is a nash equilibrium in the basic model plays seems unlikely to converge to a mixed strategy equilibrium but such convergence is natural when the stage game is perturbed in the manner of harsanyi s purification theorem journal of economic literature classification number c72

the term structure of interest rate differentials in a target zone theory and swedish data abstract the term structure of interest rate differentials is derived in a model of a small open economy with a target zone exchange rate regime for given time to maturity the interest rate differential is decreasing in the exchange rate and for given exchange rate the interest rate differential s absolute value and its instantaneous variability are both decreasing in the time to maturity devaluation realignment risks are incorporated and imply upward shifts of the interest rate differentials several implications of the theory are found to be broadly consistent with data on swedish exchange rates and interest differentials for the period 1986 1989

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

religion and economic performance summary this paper investigates the relationship between religion and economic performance in both cross country and within country regressions the null hypothesis that religious affiliation is uncorrelated with performance can frequently be rejected i e religion matters though the regressions do not yield a robust pattern of coefficients with respect to particular religions the results with respect to islam do not support the notion that it is inimical to growth on the contrary virtually every statistically significant coefficient on muslim population shares reported in this paper in both cross country and within country statistical analyses is positive if anything islam promotes growth