common trends and common cycles in regional crime this paper uses the vahid and engle journal of applied econometrics 8 341 360 1993 common trend common cycle approach to model the dynamics of regional crime rates in england over the period

urbanization fertility and child education in sub saharan africa abstract using individual level survey data we show that the urbanization process in today s sub saharan africa is associated with the fertility transition and increased investment in child education this is consistent with the experience of the western economies during their transition from a post malthusian towards a modern growth regime the use of individual level data allows us to analyze structural rural urban differences holding constant age and regional characteristics which are potentially confounding factors in regional and country level regressions

monetary union in west africa and business cycles synchronicity new evidence in the light of the initiative of the west african monetary zone wamz to introduce a common currency by 2020 this paper investigates the intricacies of the business cycles synchronicity among the six countries given i the rising importance of trade and cooperation with china ii the consideration of the euro as a potential anchor currency and a vehicle for trade with the eurozone and iii the importance of nigeria as the largest country of the group and the main supplier of oil we investigate the relative importance of these three major players in having their business cycles linked with the group in addition we investigate the underlying determinants of the business cycles synchronicity among the wamz countries on a pairwise basis results show a clear dominance of china s business cycle synchronicity with the wamz over europe s and nigeria s trade integration emerges as the key underlying factor of the common cycle observed

prospects for enhanced exchange rate cooperation in east asia some preliminary findings from generalized ppp theory the asian financial crisis increased economic disparities in the east asian ea region thus making monetary integration more difficult but rekindled political interest in asian monetary and exchange rate cooperation this article applies the theory of generalized purchasing power parity g ppp which looks at the behaviour of long run real exchange rates to assess the potential for an optimum currency area oca among a subset of ea countries based on five of the more advanced members of the association of southeast asian nations asean5 our findings suggest little support for an oca for asean5 as a bloc prior to the asian financial crisis and mixed results in the post crisis period in particular asymmetries in the way countries adjust to shocks and low or insignificant speeds of adjustment were found thus although the application of single oca criteria is notoriously demanding and our tests apply to only one of the many criteria for the successful formation of an oca we cannot find persuasive

the proper scope of government theory and an application to prisons when should a government provide a service in house and when should it contract out provision we develop a model in which the provider can invest in improving the quality of service or reducing cost if contracts are incomplete the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee has however the private contractor s incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on noncontractible quality the model is applied to understanding the costs and benefits of prison privatization

energy consumption at business cycle horizons the case of the united states in this paper we propose a simple extension to a keynesian type macro model by augmenting it with energy consumption we show the relationship between energy consumption and output in a macroeconomic setting and ask the question do permanent shocks dominate changes in energy consumption and output at business cycle horizons for the united states to achieve the goal of this paper we undertake a variance decomposition analysis of shocks based on a common trend and common cycle framework within a vector error correction model our main finding is that permanent shocks explain the bulk of the variations in energy consumption and output at business cycle horizons for the united states

optimal monetary policy responses to relative price changes abstract an optimizing model with a flexible price sector and a sticky price sector is presented to analyze the effects of relative price changes on inflation fluctuations the relative price of the flexible price good represents a shift parameter of the new keynesian phillips curve the optimal monetary policy is to target sticky price inflation rather than a broad inflation measure although stabilizing the relative price around its efficient value is one of the appropriate goals of the central bank stabilizing sticky price inflation is sufficient for achieving this goal an optimal monetary policy for a small open economy is also discussed

common and uncommon trends and cycles abstract the paper discusses the concepts of co movements of macro variables in the short run and the long run when different trend cycle decompositions are considered moreover it specifies a model for the trend where identification is achieved by imposing restrictions on the shape of the impulse response function to the permanent shock this is a multivariate generalization of lippi and reichlin 1994 where the trend and the cyclical components are easily derived from the estimation of a var model an empirical section illustrates differences in implications between our suggested decomposition and other decompositions widely used in the literature for a bivariate case of cointegrated variables

testing for common features in north american energy markets abstract using recent advances in the field of applied econometrics we explore the strength of shared trends and shared cycles between north american natural gas and crude oil markets in doing so we use daily data from january 1991 to april 2001 on spot u s henry hub natural gas and wti crude oil prices the results show that there has been decoupling of the prices of these two sources of energy as a result of oil and gas deregulation in the united states we also investigate the interconnectedness of north american natural gas markets and find that north american natural gas prices are largely defined by the u s henry hub price trends

monetary policy synchronization in the asean 5 region an exchange rate perspective in light of the long standing vision of economic and monetary integration in the asean association of southeast asian nations region and the importance of coordinating monetary policies to achieve it the objective of this article is to assess the monetary policy synchronization among the founding members of the asean that is indonesia malaysia the philippines singapore and thailand due to the importance of exchange rate movements to monetary policies we approach this issue from a currency exchange rate perspective specifically multivariate trend cycle decomposition is employed to investigate common trends and common cycles among the exchange rates of these countries during the period 1976 2012 our analysis reveals that the real exchange rates of malaysia the philippines singapore and thailand share common cycles in the short term and have common trends in the long term but the indonesian currency does not share these relationships thus our results augur well for the synchronization of mo

common trends and common cycles in international labor productivity abstract the objective of this paper is to present a trend cycle decomposition of the industrial labor productivity series in six major industrialized countries to study the relationship between trend and cycle innovations and to highlight the role of monetary policy as a possible source of transitory and permanent variations in labor productivity

common trends and common cycles the existence of a serial correlation common feature among the first differences of a set of i 1 variables implies the existence of a common cycle in the beveridge nelson stock watson decomposition of those variables a test for the existence of common cycles among cointegrated variables is developed the test is used to examine the validity of the common trend common cycle structure implied by flavin s excess sensitivity hypothesis and campbell and mankiw s mixture of rational expectations and rule of thumb hypothesis for consumption and income linear independence between the cointegration and the cofeature vectors is exploited to decompose consumption and income into their trend and cycle components copyright 1993 by john wiley sons ltd

an unobserved components model that yields business and medium run cycles we generalize the unobserved components uc model to allow the permanent component to have different dynamics than the transitory components when decomposing u s economic activity using a multivariate uc model of log output consumption and investment we find that these proposed dynamics in the permanent component are statistically significant and distinct from those of the transitory components our approach provides an alternative explanation for the growth cycles identified by comin and gertler 2006 that is related to the cyclical movements in technology in a framework consistent with the beveridge and nelson 1981 decomposition

setor agricola brasileiro uma aplicacao do modelo de tendencias e ciclos comuns no periodo de 1990 a 2005 the present study analyzes the behavior of agricultural gdp real exchange rate and the current account balance agricultural in brazil during the period of 1990 to 2005 cointegration techniques were used to identify a var system with common stochastic trends and to investigate the system responses to transitories and permanent shocks the tests had proven the existence of a common trend and two cycles between the variables variance decomposition indicates that transiotories shocks account form most of the short and long run fluctuations in agricultural gdp it was found that permanent shocks explain most of the variance of the exchange rate and of the current account balance mainly in the long run

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

panel data evidence of the impact of exchange rate uncertainty on private investment in south east asia this article examines the impact of real exchange rate uncertainty on the private investment in south east asia using panel data from four countries of the region namely indonesia malaysia the philippines and thailand annual time series data from 1972 to 2001 is used before carrying out the estimation the time series properties of the data are diagnosed and an error correction model is developed and estimated the model is estimated using both the fixed effects and the random effects estimators the estimated results from both the estimations suggest that the real exchange rate uncertainty had a negative effect on the private investment in that region

some consequences of temporal aggregation in empirical analysis i derive the generating mechanism of a temporally aggregated process when the disaggregated one belongs to the vector autoregressive integrated moving average class i then study the effects of temporal aggregation on a set of characteristics of usual interest such as exogeneity causality cointegration and common features an empirical example with canadian interest rates illustrates the main issues

inflation dynamics during the financial crisis using confidential product level price data underlying the u s producer price index ppi this paper analyzes the effect of changes in firms financial conditions on their price setting behavior during the great recession that surrounds the financial crisis the evidence indicates that during the height of the crisis in late 2008 firms with weak balance sheets increased prices significantly relative to industry averages whereas firms with strong balance sheets lowered prices a response consistent with an adverse demand shock these stark differences in price setting behavior are consistent with the notion that financial frictions may significantly influence the response of aggregate inflation to macroeconomic shocks we explore the implications of these empirical findings within a general equilibrium framework that allows for customer markets and departures from the frictionless financial markets in the model firms have an incentive to set a low price to invest in market share though when financial distortions are severe firms forgo these investment opportunities and maintain high prices in an effort to preserve their balance sheet capacity consistent with our empirical findings the model with financial distortions relative to the baseline model without such distortions implies a substantial attenuation of price dynamics in response to contractionary demand shocks

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

does ppi lead cpi in brazil abstract the main question of the paper is to add an additional explanation to an economic empirical causality between ppi producer price index and cpi consumer price index that is does ppi s final stage of processing also known as final goods is a lead indicator for the cpi in the brazilian economy if so how strong or weak this relationship is is there a one way or two way causality how does exogenous shocks affect both variables in terms of future trajectories this is analysed empirically through a traditional var vector autoregressive and bvar bayesian vector autoregressive models so as to understand the dynamics of both ppi and cpi inertial and principal components and also out of sample forecasting we conclude that it can be verified that ppi final goods can be a good leading indicator for the domestic cpi purging ex in natura foods

forecasting the volatility of australian stock returns do common factors help this article develops multivariate factor models for forecasting volatility in australian stocks we suggest estimation procedures for approximate factor models that are robust to jumps when the cross sectional dimension is not very large and also work with volatility measures that have been constructed so that they contain no jump components out of sample forecast analysis shows that multivariate factor models of volatility outperform univariate models but there is little difference between simple and sophisticated factor models

measuring common cyclical features during financial turmoil evidence of interdependence not contagion abstract this paper develops a test of contagion in financial markets by considering a measure of co movement based on the notion of common cycles to detect short run co movements between a set of time series we apply our methodology to the international effects of the 1994 mexican peso crisis and the 1997 asian crisis our results can be interpreted as evidence of a high level of market co movement during all states of the world and therefore question the hypothesis of shift contagion in the transmission of financial shocks during the 1997 asian crisis and to a lesser extent the 1994 mexican crisis

multicointegration in us consumption data the present study tests for the existence of multicointegration between real per capita private consumption expenditure and real per capita disposable personal income in the usa in doing so the study exploits the fact that the flows of disposable income and consumption expenditure on the one hand and the stock of consumers wealth which can be considered as cumulative past discrepancies between the flows of income and expenditure on the other hand can be thought of as a stock flow model in which multicointegration is likely to occur recently developed i 2 techniques are applied for testing for multicointegrating relations and find supporting evidence for the existence of multicointegration in us consumption data

regional and outward economic integration in south east asia the subject of this article tackles macroeconomic integration of the south east asian countries south korea singapore and taiwan economically the analysis is based on notions of stochastic long run convergence and business cycle synchrony in the gross domestic products gdps relevant tests for cointegration and common serial correlation features reveal a high degree of coherence in long run growth and medium run fluctuations this allows extracting a common stochastic growth trend and a common business cycle further analysis shows that both these components are subject to stronger influences from the us than from japan convergence towards these matured economies conspicuously appears since the 1990s

productivity shocks in a sectoral real business cycle model for west germany abstract if aggregate output is driven by integrated productivity shocks then sectoral output series should display few if any cointegrating relationships similarly serial correlation cofeature should be a rare occurrence these conjectures are confirmed in an analysis with west german data however productivity shocks identified and tested in an extended version of the long and plosser real business cycle model do not contain enough unit roots to account for those found in the output series hence productivity shocks can at best provide a partial explanation for aggregate output fluctuations

southeast asian monetary integration a real options perspective we examine the real option implicit in countries decisions of whether to join a monetary union and calibrate our theoretical model for the core asean afta group of indonesia malaysia philippines singapore and thailand none of the countries would be prepared to join a monetary union amongst them at present and most have low to negligible probabilities of ever wanting to do so

the nobel memorial prize for robert f engle work is a fine example of best practice applied time series econometrics he identifies important dynamic economic phenomena formulates precise and interesting questions about those phenomena constructs sophisticated yet simple econometric models for measurement and testing and consistently obtains results of widespread substantive interest in the scientific policy and financial communities although many of engle s contributions are fundamental i will focus largely on the two most important the theory and application of cointegration and the theory and application of dynamic volatility models moreover i will discuss much more extensively engle s volatility models and their role in financial econometrics for several reasons first engle s nobel citation was explicitly for methods of analyzing economic time series with time varying volatility arch whereas granger s was for for methods of analyzing economic time series with common trends cointegration second the credit for

real output co movements in east asia any evidence for a monetary union of integration in the region would greatly shape the economic structure of each individual economy an d has direct implications for the effectiveness of domestic stabilisation policy and policy coordination this paper empiricall y examines the feasibility of forming a monetary union in east asia by assessing the real output co movements among these economies as suggested by the optimum curr ency area oca theory that losing monetary independence would be the major cost for adopting

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

why is consumption so smooth for thirty years it has been accepted that consumption is smooth because permanent income is smoother than measured income this paper considers the evidence for the contrary position that permanent income is in fact less smooth than measured income so that the smoothness of consumption cannot be straightforwardly explained by permanent income theory the paper argues that in postwar u s quarterly data consumption is smooth because it responds with a lag to changes in income

why not hang them all the virtues of inefficient punishment replacing a criminal punishment with another that both is more severe and has a lower ratio of punishment cost to amount of punishment while reducing the probability of conviction to maintain the same level of deterrence lowers both punishment cost and enforcement cost hence imprisonment is always dominated by execution and both are dominated by fines and other alternatives moden legal systems do not fit that pattern one possible explanation is that the ability enforces to profit by convictions and produce costly rent seeking examples include product liability litigation civil forfeiture and fraudulent prosecution motivated by rewards in eighteenth0 century england the problem was avoided by the use of infficient punishments in the legal system of saga period iceland and the private norms of shasta county california execution while not directly profitable for enforcers facilitates rent seeking through threats leading to out of court settlements

inflation targeting what inflation rate to target abstract in an economy with nominal rigidities in both an intermediate good sector and a finished good sector and thus with a natural distinction between cpi and ppi inflation rates a benevolent central bank faces a tradeoff between stabilizing the two measures of inflation a final output gap and unique to our model a real marginal cost gap in the intermediate sector so that optimal monetary policy is second best we discuss how to implement the optimal policy with minimal information requirement and evaluate the robustness of these simple rules when the central bank may not know the exact sources of shocks or nominal rigidities a main finding is that a simple hybrid rule under which the short term interest rate responds to cpi inflation and ppi inflation results in a welfare level close to the optimum whereas policy rules that ignore ppi inflation or ppi sector shocks can result in significant welfare losses

a world of cities the causes and consequences of urbanization in poorer countries historically urban growth required enough development to grow and transport significant agricultural surpluses or a government effective enough to build an empire but there has been an explosion of poor mega cities over the last 30 years a simple urban model illustrates that in closed economies agricultural prosperity leads to more urbanization but that in an open economy urbanization increases with agricultural desperation the challenge of developing world mega cities is that poverty and weak governance reduce the ability to address the negative externalities that come with density this paper models the connection between urban size and institutional failure and shows that urban anonymity causes institutions to break down for large cities with weak governments draconian policies may be the only way to curb negative externalities suggesting a painful trade off between dictatorship and disorder a simple model suggests that private provision of infrastructure to reduce negative externalities is less costly when city populations are low or institutions are strong but that public provision can cost less in bigger cities

testing for codependence of cointegrated variables we analyse nonstationary time series that do not only trend together in the long run but restore the equilibrium immediately in the period following a deviation while this represents a common serial correlation feature the framework is extended to codependence allowing for delayed adjustment we show which restrictions are implied for the moving average ma and vector error correction model vecm representations and put forward a generalized method of moments gmm test in addition for cases where the constraints can be uniquely imposed on a vecm a likelihood ratio test is proposed we apply the concept to us and european interest rate data examining the capability of the federal reserve bank fed and european central bank ecb to control overnight money market rates

common cycles in seasonal non stationary time series this paper extends the notion of common cycles to quarterly time series having unit roots both at the zero and seasonal frequencies it is shown that common cycles are present in the hylleberg engle granger yoo decomposition of these series when there exists a linear combination of their seasonal differences which follows an ma process of order at most three the pitfalls of seasonal adjustment for common cycles analysis are also documented inference on common cycles in seasonally cointegrated series is derived from existing statistical methods for codependence concepts and methods are illustrated with an empirical analysis of the comovements between consumption and output using italian data copyright 1999 john wiley sons ltd

recent advances in modelling seasonality abstract in this paper we review recent developments in econometric modelling of economic time series with seasonality the prime focus is on econometric models which incorporate explicit descriptions of seasonal variation instead of removing this variation using a seasonal adjustment method this review centres around developments in seasonal unit root models and in periodic parameter models both in the univariate and multivariate context several empirical examples are used for illustration we also discuss several areas for further research

common features in economics and finance an overview of recent developments this introductory article offers an overview of some developments in the common features literature since the publication of the seminal article by engle and kozicki in the journal of business economic statistics in 1993 with the aim of highlighting the unifying theme of the contributions in this volume

do the asean countries and taiwan form a common currency area abstract common currency areas and asian common currency areas in particular are highly topical and somewhat controversial areas for research we explore the hypothesis that the members of the association of southeast asian nations meet necessary conditions for forming a common currency area and whether taiwan appears a natural member of such an area we test data on the asean countries and taiwan for consistency with a common currency area we produce the first evidence that these five asean countries and the asean countries plus taiwan meet the microeconomic criteria to form a common currency area

measuring international business cycles by saving for a rainy day macroeconomics inevitably begins with a trend cycle decomposition of a nation s output we propose a decomposition in which consumption is the trend component and savings is the cycle component using data from the g 7 plus australia we show that this decomposition identifies international business cycles that are i more volatile ii of longer mean duration and iii less correlated across countries than the cycle component from the hodrick prescott filter we argue that this difference stems from the fact that our method imposes a basic theoretical restriction arising from the permanent income hypothesis similar to the restriction used in cochrane s 1994 decomposition resume mesurer les cycles d affaires internationaux par l epargne les travaux en macroeconomie commencent inevitablement par une decomposition du profil de la production nationale en tendance et cycles les auteurs proposent une decomposition ou la composante consommation est la tendance et l epargne est la composante cyclique utilisant les donnees du g 7 et de l australie on montre que cette decomposition identifie les cycles d affaires internationaux qui sont i plus volatiles ii d une duree moyenne plus longue et iii moins co relies entre pays que la composante cyclique a la hodrick prescott les auteurs suggerent que la difference provient du fait que leur methode impose une restriction theorique de base emergent de l hypothese du revenu permanent semblable a la restriction utilisee dans la decomposition a la cochrane 1994

are shocks to tourism transitory at business cycle horizons the goal of this article is to propose a theoretical framework based on a macro model that can be used to examine the relative importance of permanent and transitory shocks in explaining variations in tourist expenditure and gross domestic product gdp at business cycle horizons we estimate the model for australia our findings reveal a common trend and common cycle relationship among tourist expenditure and gdp and the variance decomposition analysis of shocks reveals that at business cycle horizons permanent shocks explain the bulk of the variations in output while transitory shocks explain the bulk of the variations in tourist expenditure

output dynamics of the g7 countries stochastic trends and cyclical movements using a time series framework the paper studies the interactions of the annual real per capita gdp data of the g7 countries evidence is found of six common nonstationary processes behind the international output dynamics in addition there is evidence for the existence of a common business cycle among these countries the trend and cycle components of each output series are obtained with a procedure that accounts for the presence of both the common nonstationary and cyclical factors it is found that the relative variability and the correlation of the trend and cycle components are not similar across the g7 countries

a new approach to statistical arbitrage strategies based on dynamic factor models of prices and their performance statistical arbitrage strategies are typically based on models of returns we introduce a new statistical arbitrage strategy based on dynamic factor models of prices our objective in this paper is to exploit the mean reverting properties of prices reported in the literature we do so because to capture the same information using a return based factor model a much larger number of lags would be needed leading to inaccurate parameter estimation to empirically test the relative performance of return based and price based models we construct portfolios long short long only and equally weighted based on the forecasts generated by two dynamic factor models using the stock of companies included in the s p 500 index for constructing portfolios the empirical analysis statistically tests the relative forecasting performance using the diebold mariano framework and performing the test for statistical arbitrage proposed by hogan et al 2004 our results show that prices allow for significantly more accurate forecasts than returns and pass the test for statistical arbitrage we attribute this finding to the mean reverting properties of stock prices the high level of forecasting accuracy using price based factor models has important theoretical and practical implications

openness country size and government abstract this paper shows that smaller countries have a larger share of public consumption in gdp and are also more open to trade these empirical observations are consistent with recent theoretical models explaining country formation and break up and may account for the observed positive empirical relationship between trade openness and government size

explaining long and short run interactions in time series data in this article i extend the concept of separate cointegration to include the common feature trend cycle decomposition approach this combined approach operates a reduction of the parameter space and permits the identification of the time series long and short run constituent factors a careful assessment of their reciprocal relations in turn allows for the answering of potentially interesting economic questions to show the usefulness of the proposed methodology i apply it to the study of the relationships between the international business cycle and trade flows

cities skills and regional change glaeser e l ponzetto g a m and tobio k cities skills and regional change regional studies one approach to urban areas emphasizes the existence of certain immutable relationships such as zipf s or gibrat s law an alternative view is that urban change reflects individual responses to changing tastes or technologies this paper examines almost 200 years of regional change in the united states and finds that few if any growth relationships remain constant including gibrat s law education does a reasonable job of explaining urban resilience in recent decades but it does not seem to predict county growth a century ago after reviewing this evidence a simple model of regional change is presented and estimated where education increases the level of entrepreneurship human capital spillovers occur at the city level because skilled workers produce more product varieties and thereby increase labour demand it is found that skills are associated with growth in productivity or entrepreneurship not

evidence for common features in g7 macroeconomic time series systems of economic data potentially exhibit a number of common features which aid both econometric modelling and economic interpretation this paper surveys a variety of common features and applies the corresponding testing and estimation techniques to systems of macroeconomic time series in the g7 countries strong evidence is found of common trends and common or co dependent cycles in the data and for two countries empirical support for common non linearities

globalization and the skilled city abstract the location of economic activity both across and within countries has undergone dramatic shifts over the last five decades three key trends stand out first cross country inequality has declined as many developing countries have grown rapidly second economic geography within countries has instead grown more unequal in both the developed and the developing world third within country spatial disparities have grown mainly because of the disproportionate success of skilled cities in this paper i develop a model that jointly explains these patterns as a consequence of deepening international economic integration my model explains the faster population and output growth of skilled cities as well as their tendency to increase their initial skill advantage consistent with the evidence my theory predicts a non monotonic path of urban growth in developed countries the model predicts a future shift in worldwide urban hierarchies as some developing world cities overtake unskilled cities in industrialized countries along global supply chains

business cycles under monetary union a comparison of the eu and us reserve districts in the usa and the 15 countries that make up the eu the comparison is suggestive of what might be expected to emerge in the way of business cycle synchronization from a monetary union between the member states of the eu now simply non decimal denominations of the euro and the national central banks of the 11 are branches of the european system of central banks many prominent observers doubted that europe would ever reach this stage and many continue to believe that monetary union between such a large and dispar ate group of countries is fundamentally unsound a key element in the argu ments of many critics of emu is the degree of business cycle asynchronicity between the member states of the eu this paper contributes to the ongoing debate by documenting key differences and similarities between business cycles in the eu and business cycles in the 12 federal reserve districts in the united states the practice of looking to the us experience for insights into the problems and functioning of a monetary union has a long precedent in the literature on fixed exchange rates in general and in the literature on emu in particular for example in making an argument for fixed exchange rates rolnick and weber 1994 note that the usa can be viewed as having a system of fixed exchange rates between currencies issued by the 12 regional federal reserve banks they argue that the notes issued by the 12 banks are not strictly ident ical and that the difference between the notes creates the possibility that the united states could have a system of floating exchange rates among the 12 federal reserve districts 1 rolnick and weber go on to examine the features of the relationship among the 12 regional federal reserve banks that make a system of fixed exchange rates between them feasible in the process drawing lessons for how a monetary union among the countries of the eu might work the analysis in this paper complements earlier analyses in a number of ways the resurgence of interest in business cycle research over the past 20

career incentives of city leaders and urban spatial expansion in china this paper develops a theoretical framework to study the critical role that politics play in shaping the spatial dimension of china s urbanization and the related welfare implications utilizing a

on the welfare costs of business cycle fluctuations and economic growth variation in the 20th century and beyond lucas 1987 has shown a surprising result in business cycle research the welfare cost of business cycles are very small our paper has several original contributions first in computing welfare costs we propose a novel setup that separates the eects of uncertainty stemming from business cycle uctuations and economic growth variation second we extend the sample from which to compute the moments of consumption the whole of the literature chose primarily to we gratefully acknowledge the comments of caio almeida carlos e da costa robert f engle pedro c ferreira antonio fiorencio rodolfo manuelli samuel pessoa and octavio tourinho on this or on earlier versions of this paper all errors are ours we thank cnpq brazil faperj and inct for nancial support y corresponding author

on the optimality of a gcc monetary union structural var common trends and common cycles evidence this paper examines the suitability of the proposed monetary union among the members of the gulf cooperation council gcc to do so we identify the underlying structural shocks that these economies are subject to and assess the extent to which the shocks are symmetric additionally we test for common trends and common business cycles among the gcc economies we find that while the transitory demand shocks are typically symmetric the permanent supply shocks are asymmetric furthermore we do not find synchronous long run and short run movements in output despite the progress that has been made in terms of integration our findings indicate that the conditions for forming a gcc monetary union have not as yet been met

a possible explanation of the missing deflation puzzle following the great recession despite large and persistent slowdown in economic activity the fall in inflation was modest this is known as the missing deflation puzzle in this paper we develop and estimate a new keynesian model to provide an explanation for the puzzle the new model allows for time varying volatility in cross sectional idiosyncratic uncertainty and accounts for changes in intermediate input prices we show that inflation did not fall much because intermediate input prices were increasing

long run and short run co movements in energy prices and the prices of agricultural feedstocks for biofuel recent expansions in biofuel production have led to concerns about an emerging new relationship between energy prices and the prices of agricultural feedstock for biofuel we provide new econometric evidence on this relationship using common trend common cycle decompositions to estimate long run and short run co movement across various energy and agricultural prices we also test for the presence of regime changes that may alter the relationship between energy and agricultural feedstock prices under certain conditions we find that co movements between energy and agricultural feedstock prices tend to dissipate in the long run which has important implications for biofuel and food policy

energy price shocks and the macroeconomy the role of consumer durables so far the literature on dynamic stochastic general equilibrium models with energy price shocks uses energy on the production side only in these models energy shocks are responsible for only a negligible share of output fluctuations we study the robustness of this finding by explicitly modeling private consumption of energy at the household level in addition to energy use at the firm level to account for total energy use in the economy additionally we distinguish between investment in consumer durables and investment in capital goods the model economy is calibrated to match total energy use and durable goods consumption as observed in the u s data simulation results indicate that despite higher total energy use this economy has an even smaller proportion of output fluctuations attributable to energy price shocks productivity shocks continue to be the primary force behind business cycle fluctuations the driving force behind our results is that the household now has the flexibility to rebalance its investment portfolio specifically the energy price hike is absorbed by reducing durable goods investment more than investment in capital goods thereby cushioning the hit to future production at the expense of current consumption hence our model better matches the consumption volatility observed in the data jel classification e32 q43

what moves oecd real interest rates this paper conducts a structural time series analysis of ex ante real interest rates of the five major oecd economies the relationships of rates to permanent and temporary real and nominal shocks appear to be qualitatively consistent with predictions of stochastic general equilibrium business cycle models u s real and nominal shocks are found to be the most important causes of persistence in rates but only nominal shocks cause dynamic movements that are coherent across all countries the rise in real interest rates in the early 1980s was mainly due to nominal shocks real shocks played little or no role

common cycles and common trends in the stock and oil markets evidence from more than 150 years of data abstract this paper investigates the role of permanent and transitory shocks within the framework of common cycles and common trends in explaining stock and oil prices we perform a multivariate variance decomposition analysis of monthly data on the west texas intermediate wti oil price and the s p 500 the dataset used in the study spans a long period of 150 years and therefore contains a rich history to examine both the short and long run comovement properties of oil and stock prices given that the oil and stock markets might comove both in the short and long run it is of interest to see the relative impacts of transitory and permanent shocks on both variables we find that log oil price and log s p 500 share a common stochastic trend for our full sample of september 1859 to july 2015 but a common cycle only exists during the post ww ii period full and post ww ii samples have quite different common feature estimates in terms of the impact of permanent and transitory shocks as measured by the impulse responses and forecast error variance decompositions we also find that in the short run oil is driven mostly by cycles transitory shocks and stock market is mostly driven by permanent shocks but permanent shocks dominate in the long run

how strong is co movement in employment over the business cycle evidence from state sector data abstract this study measures the extent of co movement in employment across states and sectors at business cycle frequencies the strength of co movement is quantified using the cohesion measure developed by croux forni and reichlin rev econ statist 83 2001 232 the data indicate that cohesion is generally positive for the state sector pairs although the distributions mass around relatively low values the results suggest that cohesion has risen over time and that cohesion increases with spatial aggregation evidence reveals that the measured degree of co movement is sensitive to the chosen periodicity of the data and that there is much greater cohesion across states for a given sector than across different sectors within a state an investigation into the sources of cross state variation in cohesion reveals that important determinants include the share of state employment in manufacturing the different effects of monetary policy actions on each state s employment and the degree of sectoral diversity within a state

fitting observed inflation expectations abstract the paper provides evidence on the extent to which inflation expectations generated by a standard christiano et al 2005 smets and wouters 2003 type dsge model are in line with what observed in the data we consider three variants of this model that differ in terms of the behavior of and the public s information on the central banks inflation target allegedly a key determinant of inflation expectations we find that i time variation in the inflation target is needed to capture the evolution of expectations during the post volcker period ii the variant where agents have imperfect information is strongly rejected by the data iii inflation expectations appear to contain information that is not present in the other series used in estimation and iv none of the models fully capture the dynamics of this variable

on the path of integration in the gulf region it is examined whether the six countries comprising the gulf cooperation council gcc are sufficiently compatible to form a viable economic and financial block in the gulf region despite long and numerous governmental attempts since the mid 1980s and in spite of public pressures to expedite the process these countries have thus far failed to achieve full economic and financial integration empirical evidence suggests that this apparent failure is unlikely the outcome of economic or financial incompatibility among the countries in the region the results imply that more efforts should be directed at resolving possible sociopolitical differences that may have hampered real progress toward the emergence of a genuine and effective bloc in the gulf region

regional income fluctuations common trends and common cycles this paper investigates trend and cycle dynamics in per capita income for the major u s regions during the 1956 1995 period cointegration and serial correlation common features information are used in jointly decomposing the series into trend and cycle components we find considerable differences in the volatility of regional cycles controlling for differences in volatility we find a great deal of comovement in the cyclical response for all regions but the far west possible sources underlying differences in regional cycles are explored such as the share of a region s income accounted for by manufacturing defense spending as a proportion of a region s income oil price shocks and the stance of monetary policy somewhat surprisingly we find that the share of manufacturing in a region seems to account for little of the variation in regional cycles relative to national cycles but manufacturing share differentially affects trend growth for four of the seven regions studied

land pressures the evolution of farming systems and development strategies in africa a synthesis abstract evidence assembled in this special issue of food policy shows that rising rural population densities in parts of africa are profoundly affecting farming systems and the region s economies in ways that are underappreciated in current discourse on african development issues this study synthesizes how people markets and governments are responding to rising land pressures in africa drawing on key findings from the various contributions in this special issue the papers herein revisit the issue of boserupian agricultural intensification as an important response to land constraints but they also go further than boserup and her followers to explore broader responses to land constraints including non farm diversification migration and reduced fertility rates agricultural and rural development strategies in the region will need to more fully anticipate the implications of africa s rapidly changing land and demographic situation and the immense challenges that mounting land pressures pose in the context of current evidence of unsustainable agricultural intensification a rapidly rising labor force associated with the region s current demographic conditions and limited nonfarm job creation these challenges are manageable but will require explicit policy actions to address the unique development challenges in densely populated rural areas

long and short run fisher effects new tests and new results we find fisher effects both long and short run in our full sample period and in the lengthy first sub period using mishkin s monthly data for treasury bill yields and the corresponding inflation rate recently developed cointegration techniques ahn and reinsel 1990 reinsel and ahn 1992 are used to detect a long run fisher effect the short run effect is analysed within a cointegration framework using a granger causality test that we developed in the two more recent but comparatively short sub periods since october 1979 our results indicate the fisher effect is not present in either long or short run form these methodologies and results differ from the conclusions of mishkin s 1992 recent study

using satellite imagery to create tax maps and enhance local revenue collection although taxes on land and property have many desirable attributes the challenge of ensuring completeness of tax rolls and currency of valuations preclude their effective use to support urbanizati

can interest rates really control house prices effectiveness and implications for macroprudential policy this paper investigates how changes in the central bank policy and retail mortgage rates affected real housing prices in new zealand during the period 1999 2009 we find that real interest rates are significantly and positively related to real housing prices indicating that increases in the policy rate may not be effective in depressing real housing prices by testing interest rates we also find some evidence of housing price bubbles our findings suggest that the central bank could have limited housing price bubbles if it had started to intervene in the housing market prior to 2003 our results set international exemplars for using policy rates or macroprudential tools to cool the housing market where the extent of policy rate adjustments is limited by internal or external economic factors