regional capital mobility in china economic reform with limited financial integration abstract this paper assesses the changes in the regional capital mobility in china during the period of economic reform in 1978 2008 by employing a panel time varying coefficient tvp model this approach is much more suitable to model china s evolution in the regional capital mobility than a standard structural break model as china s reforms took place gradually and were often implemented over several stages using the tvp model we find that 1 china s provincial capital mobility demonstrated a moderate improvement over the sample period but worsened temporarily between 1994 and 1997 this is probably due to the government s effort to combat inflation which reduced the investment and transfers to regions 2 regions with the most developed and least developed provinces experienced higher degree of capital mobility improvement than those in the middle

regional capital mobility in china 1978 2006 we examine cross region capital mobility in china and track how the degree of mobility has changed over time the effects of fiscal and redistributive activities of different levels of government in china on private capital mobility are taken into account our results indicate that there was a significant improvement in capital mobility over time in china particularly for private capital in the more developed regions the central and provincial governments via their taxation spending and transfers loosen the relationship between private saving and investment and appear to promote capital mobility particularly for less developed regions there are considerable differences between more and less developed regions in terms of the degree of capital market integration and the improvement in capital mobility over time the results have important policy implications on global re balancing as well as regional development gap and risk sharing within china

regime changes in international real interest rates are they a monetary phenomenon in this paper we use the bai and perron 1998 2001 2003 methodology to test for multiple structural breaks in the mean real interest rate for 13 industrialized countries we find extensive evidence of structural breaks in the mean real interest rate for all 13 countries in an attempt to explain the breaks in international real interest rates we also test for multiple structural breaks in the mean inflation rate for the 13 countries once again we find extensive evidence of structural breaks in the mean inflation rate for all of the countries interestingly the breaks in inflation rates and real interest rates often coincide with increases decreases in the mean inflation rate as we move from one regime to the next typically associated with decreases increases in the mean real interest rate

inflation and real short term interest rates a kalman filter analysis of the term structure this paper applies the kalman filter technique to look at the relationship among real interest rates inflation and the term structure of interest rate under the expectations hypothesis using quarterly data from 1960 1 to 1991 1 for inflation three month nominal short term interest rates and long term yields with maturities from one to five years this paper finds that the expectations hypothesis of the term structure holds up well for the data under the assumptions of a time varying premium and a random walk real interest rate in other words a reconciliation of the expectations hypothesis with the data is attained by assuming time varying term premium and non stationary real interest rate

is purchasing power parity overvalued the purpose of this paper is to re examine the hypothesis of long run purchasing power parity among industrial countries under the current float using the panel data approach we propose a new finite sample panel data unit root test procedure that allows for a general serial correlation structure and arbitrary contemporaneous correlation in model innovations across countries this procedure is then applied to the recently developed panel data unit root tests of im pesaran and shin 1996 and of maddala and wu 1999 the test results show sufficient evidence against the unit root null for most samples by comparing our results with the existing ones in the literature we found that the method of assuming a restrictive serial correlation structure tends to weaken evidence against the unit root null

can futures market data be used to understand the behavior of real interest rates this paper examines whether futures market data can be used to understand the behavior of real interest rates several ways of examining the data indicate that futures market data are not particularly informative about real interest rates not only does this evidence cast some doubt on results in previous research that make use of futures market data to draw inferences about real interest rates but it also indicates that future research on real interest rates may need to turn to a different line of attack understanding the behavior of real interest rates is a central issue in financial economics in previous research on this topic several approaches have been used to measure real interest rates in one approach real interest rates have been calculated by subtracting survey data on inflation expectations such as the livingston data from nominal interest rates the problem with survey based measures of real interest rates is that they are only as good as the survey measure of inflation expectations and there may be little incentive for the survey respondents to answer accurately an even more telling criticism of survey based measures often ignored in the literature is that the behavior of market expectations in driven by economic agents ai the margin who are eliminating unexploited profit opportunities market expectations are unlikely therefore to be well measured by the average expectations of survey respondents 2 because of doubts about survey based measures of real interest rates other

modeling and forecasting tourism demand for arrivals with stochastic nonstationary seasonality and intervention abstract this paper presents the use of time series sarima and marima with interventions in forecasting tourism demand using ten arrival series for hong kong augmented dickey fuller tests indicated that all the series were seasonal nonstationary significant interventions such as relaxation of the issuance of out bound visitors visas the asian financial crisis the handover and the bird flu epidemic were all empirically identified with significant test results and expected signs the forecasts obtained using models that capture stochastic nonstationary seasonality and interventions sarima and marima with intervention analysis are compared with other eight time series models and were found to have the highest accuracy

is inflation persistence different in reality this study examines the inflation persistence using both online and official price indexes in argentina brazil china japan germany south africa the uk and the us using fractional integration technique the main results suggest that the degree of persistence estimated by the long memory parameter is smaller when using online price indexes believed to be a more realistic measure of inflation mainly in the cases of argentina brazil china and the uk monetary policy implications are discussed

nominal interest rates as indicators of inflation expectations forward interest rates have become popular indicators of inflation expectations theusefulness of this indicator depends on the relative volatilty and the correlation of inflation expectations and expected real interest rates this paper studies u s and u k data using a range of different tools and data sets the forward rate rule perfoms reasonably well in spite of significant movements in the expected real interest rate the reason is that the noise that movements in the expected real interest rate add to the inflation expectations is balanced by a tendency for expected real interest rates and inflation expectations to move in opposite directions

saving investment associations and capital mobility on the evidence from japanese regional data abstract the paper examines the magnitude of the saving retention coefficient b in a setting of known near perfect capital mobility japanese regions first we find that on total regional saving and investment rate data inclusive of regional government saving and investment the estimate of b is negative this negative relationship in the total rates across japanese regions appears to arise from the strong negative association in the government saving and investment rates second on private regional investment and saving rate data b is insignificantly different from zero this is evidence consistent with the hypothesis of feldstein and horioka economic journal 1980 that in a financially integrated economy b would be close to zero

saving investment correlations and capital mobility on the evidence from annual data this paper evaluates the use of saving investment correlations to measure capital mobility it is argued that the intertemporal approach to the balance of payments predicts that the practice of calculating the correlation coefficient using long term averages of saving and investment shares biases the result toward accepting the hypothesis of capital immobility calculations based on annual data show that the correlation coefficient is much lower and that is varies considerably estimates of intranational capital mobility based on saving and investment shares of u s federal states show that the saving and investment link is much looser within a nation than among nations copyright 1992 by royal economic society

comparing capital mobility across provincial and national borders the persistence of high savings investment correlations and home country bias in portfolio construction at the national level is contrasted with new evidence on savings behaviour in canadian provinces we confirm that national borders clearly divert flows of capital to domestic investments but provincial borders have no such effect in particular while there is a significant correlation between national savings and investment among provinces that effect disappears we discuss the implications for interpreting the distinction

consumption risk sharing in china this paper empirically examines the degree of regional consumption risk sharing in china it finds that less risk sharing is taking place across chinese provinces than across us states and canadian provinces although its extent across the latter is somewhat higher than across the national boundaries of industrial countries specifically about half of the fitted annual variation in provincial consumption growth is common to all chinese provinces compared with more than two thirds less than one third in the case of us states and canadian provinces g 7 countries my estimates reveal that chinese households would be willing to pay dearly to insure their consumption against idiosyncratic shocks

the relation between stock prices and inflationary expectations the international evidence this paper provides empirical evidence on the relation between stock returns and inflationary expectations for nine countries over the period 1971 80 the fisherian assumption that real returns are independent of inflationary expectations is soundly rejected for each major stock market of the world using interest rates as a proxy for expected inflation our data provide consistent support for the geske and roll model whose basic hypothesis is that stock price movements signal negative revisions in inflationary expectations finally a weak real interest rate effect was found for some of these countries

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

a simple adaptive measure of core inflation this paper proposes a new measure of core inflation and compares it with several existing measures the new measure is adaptive and is designed to track sudden and persistent movements in inflation such as those arising from changes in monetary policy regimes the adaptive measure filters out transients more effectively than existing measures and it is a superior predictor of locally mean reverting components of inflation

short term interest rates as predictors of inflation on testing the hypothesis that the real rate of interest is constant in an innovative and provocative paper in this review eugene fama presents evidence which appears to be consistent with the joint hypothesis that the real rate of interest ignoring taxes is a constant and that the market for u s treasury bills is efficient in the sense of embodying rational expectations those findings are strikingly at variance with a long list of previous studies which seemed to support the view that the real rate of interest varies over time and can be related to economic variables such as real output monetary policy and so forth 2 the methodologies which lead to these contradictory conclusions are quite different previous studies had followed the lead of irving fisher by relating nominal interest rates to distributed lags on past rates of inflation 3 these distributed lags are generally interpreted as approximations to the market s expected rate of inflation and thus any remaining variation is attributed to variation in the real rate 4 fama s methodology on the other hand draws on the fact that the difference between the market interest rate and the subsequently observed rate of inflation the ex post real interest rate consists by definition of the ex ante real interest rate plus a pure forecasting error 5 the hypothesis of market efficiency implies that these forecasting errors must be serially random thus observing ex post real rates is equivalent to observing ex ante real rates with random measurement error these errors of course confound the problem of identifying variation in the ex ante real rate in this paper we will argue that the relative magnitude of these measurement errors is such that the tests carried out by fama were not powerful enough to reject the joint hypothesis that the ex ante real rate is a constant and expectations are rational more powerful tests which are presented in this paper using the same data do lead to rejection of that hypothesis of course rejection

money supply announcements interest rates and foreign exchange abstract this paper presents a test of the joint hypothesis that money supply announcements affect the real interest rate and that changes in the real interest rate affect the exchange rate in the short run the test results are consistent with the joint hypothesis for example it is found that announcement of an unexpected jump in the money supply is accompanied by an increase in interest rates and an appreciation of the dollar if the rise in interest rates was entirely due to higher inflationary expectations the dollar should not appreciate

leading indicator tourism forecasts leading indicators have been widely used in general business forecasting situations but only rarely in a tourism context in this study leading indicator transfer function tf models are developed to generate forecasts of international tourism demand from the uk to six major destinations the out of sample forecasting accuracy is compared with the accuracy of forecasts generated by univariate arima and error correction models ecms the inclusion of a causal input within an arima time series framework tf model does not result in an improvement in forecasting performance the time series models outperform the ecm for short term forecasting but the ecm generates more accurate longer term forecasts

intranational risk sharing and its determinants abstract we develop a model of risk sharing in which agents can pool their consumption risks in both national and local markets and then smooth the remaining consumption fluctuations with credit markets estimating the model with a unique dataset on chinese cities we find that the participation rate in risk sharing is low but upon entering the market agents tend to pool risk in the national market rather than the local market the welfare gain from reaching the perfect consumption risk sharing at the national market could be as large as 4 of the perpetual deterministic consumption flow however conditional on the estimated degree of risk sharing participation the welfare gain from pooling all income risks at the national market is only 0 1 empirical analysis on the determinants of city risk sharing reveals that the degree of risk sharing depends on initial economic development and share of gdp contributed by tertiary industry

market rationality tests based on cross equation restrictions abstract the information used by researchers in cross equation tests of rational expectations may be a small subset of the information available to the market such tests produce consistent estimates but have low power we develop a mechanism for dealing with this problem and use the procedure to perform cross equation tests on predictions from the football betting market the tests fail to reject rationality we provide evidence that market predictions from betting markets are not formed rationally it appears therefore that cross equation tests have low power even if the information sets used by the researcher and the market are approximately the same

tests of the fisher hypothesis with international data theory and evidence the fisher hypothesis 7 8 states that nominal interest rates adjust fully to expected inflation for years tests of this hypothesis followed fisher 8 in regressing nominal rates on a distributed lag of past inflation which was used as a proxy for the expected rate of inflation see roll 15 for references fisher eventually concluded that nominal rates do not fully reflect expected inflation saying that when the cost of living is not stable the rate of interest takes the appreciation and depreciation into account to some extent but only slightly and in general indirectly 1 fisher attributed this to money illusion in more recent years other researchers have explained the non neutrality of inflation on grounds of general equilibrium sargent 16 and taxes darby 3 and feldstein 6 a new method of testing the fisher hypothesis was introduced by fama 4 he concluded that interest rates set in u s financial markets are informationally efficient fama s work highlighted the two separate although not always distinguishable elements in the fisher hypothesis 1 the effect of expected inflation on the expected real rate and 2 the question of whether or not the nominal rate reflects a rational forecast of expected inflation to test the informational efficiency of nominal rates fama 4 assumed a constant expected real rate arguing in the later paper that the efficiency test is robust with respect to the assumption of the constancy of the expected real rate this assumption has come under severe criticism carlson 2 nelson and schwert 14 on the grounds that the efficiency results are not verifiable given the actual behavior of realized real rates summers 17 extended the study of interest rates to the period 1860 to 1979 using both fisher s and fama s methods and found that the results are less favorable for the fisher hypothesis in a more recent study fama and gibbons 5 tested the fisher hypothesis using a procedure developed by ansley 1 which assumes that the expected real rate follows a random walk they concluded that nominal rates fully reflect expected inflation at the same time that the expected real rate adjusts to it this paper examines the question of whether international interest rates reflect expected inflation in their respective countries in doing so we expand on the previous work of kane and rosenthal 11 we show that although fama 4 introduced a bias into his tests his general approach was correct we then present simple time series tests and show that they fail for eurocurrency rates

on the accuracy of time series interest rate and survey forecasts of inflation there has been much work examining and evaluating different methodologies in forecasting inflation for example fama 1975 1977 develops an interest rate model to predict the 1 monthahead rate of inflation using the cpi fama and gibbons 1982 1984 modify the interest rate model to account for a nonconstant real rate of interest and compare it to a univariate timeseries forecasting model and to the livingston forecasts carlson 1977a 1977b and others also analyze the consensus forecasts from the livingston survey pertaining to multiperiod forecasts of inflation pearce 1979 considered the livingston survey and time series forecasts our purpose in this paper is to investigate further the relative forecasting ability of three different methodologies in contrast to previous studies that have generally used the cpi to measure inflation our analysis uses the implicit gnp deflator this modification is motivated largely by the fact that calculations of the cpi inflat n rate often are distorted greatly by changes in relative prices e g blinder 1980 fischer 1981 this paper compares the accuracy of three different inflation forecasting procedures these include a univariate time series model an interest rate model based on the methodology of fama and gibbons and the median forecasts derived from the american statistical association national bureau of economic research survey the evidence presented is based on ex ante forecasts of quarterly inflation rates using the gnp deflator for the period 1970 11984 11 based on the evidence presented the general conclusion is that the survey forecasts provide the most accurate inflation forecasts

are tax effects important in the long run fisher relationship evidence from the municipal bond market are nominal bonds appropriately discounted for taxes empirical estimnates of the response of nominal interest rates to changes in inflation the fisher effect have failed to produce a definitive answer four reasons have been put forward as possible explanations i tobin effects ii fiscal illusion iii peso problems and iv different estimators utilizing data on taxable and tax exempt bond interest rates and several different estimators we find that the fisher effect estimates are always larger for the taxable bond relative to the tax exempt bond suggesting that fiscal illusion and different estimators cannot account for the previous results how economic agents respond to the tax burdens of assets with different tax treatment is an important issue at both the level of the individual micro and the aggregate economy macro one clear source of evidence would appear to be the market for high quality debt trading in both taxable and tax exempt debt occurs on a daily basis the response of the rates of return on taxable and tax exempt debt to changes in expected inflation are described by the fisher relationship the fisher relationship is one of the oldest equilibrium relationships in financial economics fisher s original proposition was that if the real rate of interest is relatively constant over time a fully perceived change in the purchasing power of money as proxied by the inverse of the rate of inflation would be accompanied by a proportional increase in the nominal interest rate darby 1975 points out that when nominal interest income is taxed as are interest payments on u s treasury bills the fisher relationship implies a response from nominal interest rates that is greater than the change in expected inflation in order to maintain the constant ex ante real interest rate summers 1983 suggests that given average marginal tax rates in the united states the appropriate value of the fisher effect is 1 3 to 1 5 for tax exempt bonds the original fisher specification should be a good approximation implying a fisher effect close to unity in a seminal paper fama 1975 presents evidence to support the hypothesis that changes in nominal

dynamic seemingly unrelated cointegrating regressions we propose the parametric dynamic seemingly unrelated regression dsur estimator for simultaneous estimation of multiple cointegrating regressions dsur is efficient when the equilibrium errors are correlated across equations and is applicable for panel cointegration estimation in environments where the cross section is small relative to the available time series we study the asymptotic and small sample properties of the dsur estimator for both heterogeneous and homogeneous cointegrating vectors we then apply the method to analyse two long standing problems in international economics our first application revisits the estimation of long run correlations between national investment and national saving our second application revisits the question of whether the forward exchange rate is an unbiased predictor of the future spot rate

current account solvency and the feldstein horioka puzzle in this paper we suggest an alternative explanation of the high cross section association between shares of saving and investment in gdp which feldstein and horioka 1980 interpret as evidence of low capital mobility in oecd countries saving and investment shares appear to be i i we show that a solvency constraint implies that the current balance is stationary and thus that saving and investment cointegrate with a unit coefficient irrespective of the degree of capital mobility it is this long run relation that the fh cross section regression captures econometric results for 23 oecd countries over the 1960 92 period are consistent with this explanation

testing the rationality of price forecasts new evidence from panel data this paper tests the rationality of individual price forecasts in a panel of professional forecasters here unlike in most previous studies rationality is not rejected the results here differ because 1 using individual forecasts avoids aggregation bias 2 comparison of forecasts to initial data avoids bias due to data revision 3 the professional forecasters have economic incentives to state their expectations accurately and 4 a new covariance matrix estimator consistent when forecast errors are correlated across individuals is used copyright 1990 by american economic association

new hope for the expectations hypothesis of the term structure of interest rates survey data on interest rate expectations permit separate testing of the two alternative hypotheses in traditional term structure tests that the expectations hypothesis fails and that expected future interest rates are ex post inefficient forecasts we find that the source of the spread s poor predictions of future interest rates varies with maturity at short maturities the expectations hypothesis fails at long maturities however changes in the yield curve reflect changes in expected future rates one for one an implication of the expectations hypothesis this result confirms earlier findings that long rates underreact to short rates but now it cannot be attributed to term premia if the attractiveness of an economic hypothesis is measured by the number of papers which statistically reject it the expectations theory of the term structure is a knockout most tests beginning with macaulay 1938 find no evidence supporting the expectations hypothesis 1 many cannot even reject statistically the alternative hypothesis that the spread between long and short rates contains no information about future interest rate changes 2 to make matters worse in u s postwar data future long rates tend to rise when short rates are above long rates since the expectations hypothesis would predict that long rates tend to fall the theory often does worse than even the naive model that future interest

the adjustment of stock prices to information about inflation this paper analyzes the reaction of stock prices to the new information about inflation based on daily returns to the standard and poor s composite portfolio from 1953 78 it seems that the stock market reacts negatively to the announcement of unexpected inflation in the consumer price index c p i although the magnitude of the reaction is small it is interesting to note that the stock market seems to react at the time of announcement of the c p i approximately one month after the price data are collected by the bureau of labor statistics

the fisher hypothesis under different monetary regimes we examine the relation between inflation and nominal interest rates under the various monetary regimes in effect in the united states since the turn of the century our data include a newly constructed time series of short term municipal bond yields observed annually since 1902 the results generally support the hypothesis that after tax nominal yields adjust point for point with rationally forecasted inflation for the postwar years but strongly reject that hypothesis for the preceding years we suggest and offer supporting evidence that the difference between the two subperiods may be attributable to differences in the optimal forecasting technique for each era when forecasting is a costly endeavor

back propagation learning in improving the accuracy of neural network based tourism demand forecasting abstract traditional tourism demand forecasting techniques concentrate predominantly on multivariate regression models and univariate time series models these single mathematical function based forecasting techniques although they have achieved a certain degree of success in tourism forecasting are unable to represent the relationship of demand for tourism as accurate as a multiprocessing node based feed forward neural network previous research has demonstrated that using a feed forward neural network can accomplish a higher forecasting accuracy than the regression and time series techniques for a set of linearly separable tourism demand data this research extends the applicability of neural networks in tourism demand forecasting by incorporating the back propagation learning process into a non linearly separable tourism demand data empirical results indicate that utilizing a back propagation neural network outperforms regression models time series models and feed forward neural networks in terms of forecasting accuracy

do forest assets hedge inflation forest assets are commonly viewed as good hedges against inflation the view is based largely however on anecdotal evidence rather than empirical analysis this paper examines the historical relationship between forestry returns and inflation the results suggest that forests in the u s west and south have been superior hedges against higher than anticipated inflation forests in the northeast have been less effective inflation hedges the results also indicate that western and southern forests have been overvalued during periods of relatively high expected inflation markets for forests in the northeast however have been relatively efficient processors of inflation expectations

bayesian models for tourism demand forecasting abstract this study extends the existing forecasting accuracy debate in the tourism literature by examining the forecasting performance of various vector autoregressive var models in particular this study seeks to ascertain whether the introduction of the bayesian restrictions priors to the unrestricted var process would lead to an improvement in forecasting performance in terms of achieving a higher degree of accuracy the empirical results based on a data set on the demand for hong kong tourism show that the bayesian var bvar models invariably outperform their unrestricted var counterparts it is noteworthy that the univariate bvar was found to be the best performing model among all the competing models examined

estimation of the specification error in the fisher equation this paper asks how false is the fisher hypotheis previous work has asked is the fisher hypothesis true the framework here characterizes the specification error in the the fisher equation as model noise following durlauf and hall 1988 1989a 1989b the noise provides a metric for the specification error for the post war period to october 1979 the variance of the noise is small while after that date it is apparently large that is using a method that contains many previous tests of the fisher effect in explaining nominal in explaining nominal interest rate movements mishkin 1991 has criticized this consensus as reflection a common stochastic trend in inflation and nominal interest rates prior to october 1979 the test here is immune to this criticism as i use the ex post real interest rate as the regressand and show that at least prior to october 1979 it obeys a sationary process

domestic savings and intra national capital flows abstract regional british data on savings and investment are shown to be uncorrelated consistent with the hypothesis of perfectly mobile intra national capital flows

real interest rates and inflation an ex ante empirical analysis we develop a method of measuring ex ante real interest rates using prices of index and nominal bonds employing this method and newly available data we directly test the fisher hypothesis that the real rate of interest is independent of inflation expectations we find a negative correlation between ex ante real interest rates and expected inflation this contradicts the fisher hypothesis but is consistent with the theories of mundell and tobin darby and feldstein and stulz we also find that nominal interest rates include an inflation risk premium that is positively related to a proxy for inflation uncertainty

do expected shifts in inflation affect estimates of the long run fisher relation recent empirical studies suggest that nominal interest rates and expected inflation do not move together one for one in the long run a finding at odds with many theoretical models this article shows that these results can be deceptive when the process followed by inflation shifts infrequently we characterize the shifts in inflation by a markov switching model based upon this model s forecasts we reexamine the long run relationship between nominal interest rates and inflation interestingly we are unable to reject the hypothesis that in the long run nominal interest rates reflect expected inflation one for one

new techniques to extract market expectations from financial instruments this paper is a selective survey of new or recent methods to extract information about market expectations from asset prices for monetary policy purposes traditionally interest rates and forward exchange rates have been used to extract expected means of future interest rates exchange rates and inflation more recently these methods have been refined to rely on implied forward interest rates so as to extract expected future time paths very recently methods have been designed to extract not only the means but the whole risk neutral probability distribution from a set of option prices

tourism demand for italy and the business cycle this study provides a strategy for modelling the effect of the business cycle on tourism demand under the rationale that tourism cycles are heavily influenced by lagged effects of the overall business cycle using quarterly data on overnight stays in italian hotels both domestic and inbound between 1985 and 2004 we adopt a structural time series approach to evaluate two alternative models the first with a latent cycle component lcc and the second based on specific economic explanatory variables xcv the two models are compared in terms of explanatory power best fit residual diagnostics and forecasting ability the results show similar performances the policy implication is that the xcv model can be used for calibrating countercyclical interventions in tourism policy

regional capital flows and economic regimes evidence from china abstract using provincial data from china this paper examines the pattern of capital flows in relation to the transition of economic regimes we show that fast growing provinces experienced less capital inflows before the large scale market reform contrary to the prediction of the neoclassical growth theory as china transitioned from the central planning economy to the market economy the negative correlation between productivity growth and capital inflows became much less pronounced from a regional perspective this finding suggests domestic institutional factors play an important role in shaping the pattern of capital flows

is there a unit root in the inflation rate evidence from sequential break and panel data models summary using sequential trend break and panel data models we investigate the unit root hypothesis for the inflation rates of thirteen oecd countries with individual country tests we find evidence of stationarity in only four of the thirteen countries the results are more striking with the panel data model we can strongly reject the unit root hypothesis both for a panel of all thirteen countries and for a number of smaller panels consisting of as few as three countries the non rejection of the unit root hypothesis for inflation is very fragile to even a small amount of cross section variation 1997 john wiley sons ltd

inequality saving and global imbalances a new theory with evidence from oecd and asian countries global imbalances are attributable to savings deficiency in some economies and savings glut in others the recent global crisis has triggered widespread social conflict over income inequality the inequality saving link has again become a pressing issue needing serious attention we present a new theory to explain why the link between inequality and saving is negative in oecd countries but positive in emerging asia we also offer an econometric analysis of differences in inequality saving links between those economies we find that aggressive financial services lead to a negative link by creating income illusion for overconsumption but imperfect financial markets contribute to a positive link by interacting with industrial policies as part of growth strategies while ignoring liquidity constraints on consumption

what does the term structure tell us about future inflation abstract this empirical analysis indicates that for maturities of six months or less the term structure of nominal interest rates provides almost no information about the future path of inflation but does provide information about the term structure of real interest rates however as maturities lengthen to nine and twelve months the nominal term structure begins to contain information about future inflation but ceases to provide information about the real term structure these results are explained by differences in the relative variability of expected future inflation changes and real term structure slopes at different points in the term structure

the relevance of business cycles in forecasting international tourist arrivals abstract casual empiricism suggests that there may be a cyclical trend associated with international tourist arrivals in which variation around the linear trend can be formed by the interaction with other cyclical phenomena this paper employs a simple model that incorporates a linear trend and sine function to capture these two characteristics in forecasting international tourist arrivals in hong kong the model is extended to include a set of sine functions through the application of fourier analysis to account for situations in which more than one phenomenon may be present in the time series the forecasting accuracy of the model is compared with other forecasting approaches evaluation of the results using the mean absolute percentage error measure show that the forecasting performance of the extended model with a linear trend and two sine functions is superior in terms of accuracy when compared with other forecasting models

the relationship between domestic savings and investment the feldstein horioka test using japanese regional data abstract the feldstein horioka test on capital mobility applies to japanese intra national capital flows we find that savings and investment are insignificantly correlated this suggests that the high correlation observed by the previous studies is due to the currency premium

estimating the fisher effect and the stochastic money growth process this paper demonstrates that a change in the stochastic process generating money can alter the relationships between money and inflation and between inflation and interest rates the extent to which inflation is forecastable is shown to depend significantly on the extent to which money is forecastable thus the greater the persistence and forecastability of money the greater the likelihood of observing a statistically significant fisher effect us data over the 1953 86 period are used to demonstrate that instability in the fisher effect coincides with changes in the stochastic process generating money there is a significantly stronger fisher effect during a subsample in which money and hence inflation are more predictable

the overvaluation of purchasing power parity abstract recent panel studies of purchasing power parity have reported strong evidence of mean reversion in real exchange rates however these studies fail to control for cross sectional dependence in the data this failure has dramatic consequences raising the significance level of tests with a nominal size of 5 percent to as much as 50 percent it is shown in this paper that controlling for cross sectional dependence no evidence against the random walk null can be found in panels of up to 64 real exchange rates this finding cannot be attributed to low power as there is ample power in panels of this size to reject the unit root null