reprint of thawing frozen capital markets and backdoor bailouts evidence from the fed s liquidity programs abstract during the subprime crisis the federal reserve introduced several emergency liquidity programs as supplements to the discount window dw taf pdcf and tslf using data on loans to large commercial banks and primary dealers we find that the programs were used by relatively few institutions and thus provided limited relief to banks that relied on short term debt markets although usage increased after lehman s bankruptcy most commercial banks avoided the dw and taf we also find that the programs were more often used by failed european banks than by healthy us banks likely because these loans are expensive relative to private market funds our results also show that usage of pdcf and tslf programs while higher was more often used by primary dealers in weaker financial position

factor demand and substitution in a developing country energy use in mexican manufacturing a translog cost function is used to estimate elasticities of substitution and factor demand in a number of mexican industries 1966 81 the results vary but factor demand is on average quite price sensitive and elasticities are of the same order of magnitude as in other studies for both developed and developing countries this indicates that factor demand does adapt to price changes even in countries which are dependent on buying technology abroad it also shows that a policy of heavy subsidies to domestic energy consumption is the main reason for growing energy intensity thereby casting some light on the allocation costs of such subsidies

explaining the non causality between energy and economic growth in the u s a multivariate sectoral analysis the rapidly growing literature on the relationship between energy consumption and economic growth has not univocally identified the causal relationship yet we argue that bivariate models which analyze the causality only at the macro level are eventually misleading especially in cases where both variables do not cover the same scope of economic activity after discussing appropriate pairs of variables we investigate granger causality between energy and growth in the u s for the period from 1970 to 2007 for three sectors industry commercial sector transport as well as on the macro level using the recently developed ardl bounds testing approach by pesaran and shin 1999 and pesaran et al 2001 we find evidence for unidirectional long run granger causality in the commercial sector from growth to energy as well as evidence for bi directional long run granger causality in the transport sector the dependence of causality on the level of aggregation is interpreted as evidence for simpsons paradox the choice of control variables is based on findings from the environmental kuznets curve literature we find that controlling for the increasing energy productivity of production as well as trade significantly improves the fit of the bivariate model

public goods self selection and optimal income taxation using the self selection approach to tax analysis this paper derives a modified samuelson rule for the provision of public goods when the government deploys an optimal nonlinear income tax this approach gives a straightforward interpretation of the central result in this area generalises it and provides a simple characterisation of optimal policy in a wide range of circumstances the analysis also emphasises and clarifies the significance of the choice of numeraire for the optimality of decentralising public spending decisions it is well known that the famous samuelson rule for the provision of public goods may not be applicable when the tax revenues used to finance the public goods come from distorting taxes the principle was recognized as long ago as pigou 1947 long before the samuelson rule was devised pigou saw that in addition to the resource cost involved in transferring funds from the private to the public sector there was a deadweight loss involved from this insight he suggested that the criterion for providing public goods should be more stringent than the samuelson rule would later suggest in particular one might expect that the inclusion of the deadweight loss of taxes as part of the cost of providing a public good would lead to a reduction in its optimal provision relative to a situation in which lump sum taxes were available the problem was investigated more systematically by atkinson and stern 1974 who considered the case in which a public good is financed by a set of optimal commodity taxes all individuals were assumed to be identical so efficiency alone dictated the objective they found that no prima facie case could be made for the pigou position that the use of distortionary taxes called for a reduction in the supply of the public good their analysis clearly showed that there were two influences at work when the financing of a public good was by distorting taxes on the one hand

projecting the energy pathway using a methodological sequence the case of mexico abstract the relationship between primary energy and economic development tends to be positive however it is a complex relationship for emerging economies we use the energy pathway ep method to 1 examine this relationship 2 introduce its behavioural taxonomy and 3 propose a hybrid methodological sequence that allows to examine the historical context and to forecast the ep we apply our methodology to the mexican case an emerging economy that has had both energy intensive and energy productivity periods and changes in its development model the study was conducted by using data of a 52 year old path and explored the path may have from 2018 onwards our results are as follows first the pathway shows nine behavioural possibilities second we found that the mexican ep responds to structural changes we conclude that for the years following 2018 mexico s path will have a disturbance the main objective will be to avoid unwanted behaviour the key is to improve the relationships among the government the private sector and international agreements in order to continue the sequence of the theory on the relations between energy and development more studies are needed under a systematic analytical framework applied to both other countries and comparative studies

too big to fail some empirical evidence on the causes and consequences of public banking interventions in the uk abstract during the 2007 09 financial crisis the banking sector received an extraordinary level of public support in this empirical paper we examine the determinants of a number of public sector interventions government funding or central bank liquidity insurance schemes public capital injections and nationalizations we use bank level data spanning all british and foreign banks operating within the united kingdom we use multinomial logit regression techniques and find that a bank s size relative to the size of the entire banking system typically has a large positive and non linear effect on the probability of public sector intervention for a bank we also use instrumental variable techniques to show that british interventions helped there is fragile evidence that the wholesale non core funding of an affected institution increased significantly following capital injection or nationalization

welfare and optimum dynamic taxation of consumption and income abstract this paper estimates that the us could attain large welfare gains by implementing an optimal ramsey tax policy that taxes consumption and income it is also found that the welfare implications associated with taxing consumption are quantitatively more important than those associated with dynamically taxing income indeed replacing income taxes with a constant consumption tax leads to a welfare gain that is only slightly lower than that attained by a dynamic policy that taxes consumption and income in computing these welfare gains careful attention is given to the dynamic path of tax rates and the transitional dynamics associated with how the economy responds to a new tax policy

optimal public good provision with limited lump sum taxation it is often argued that the use of distortionary taxation lowers the optimal provision of public goods below its optimal level in a first best economy which contains no restrictions on lump sum taxation however this issue is usually investigated using commodity tax models that contain no lump sum taxes this paper examines a many consumer economy in which the only tax instruments are commodity taxes and a poll tax subsidies are negative taxes the optimal level of public good provision in this economy typically exceeds the first best level at least for distributionally neutral public goods copyright 1991 by american economic association

the federal funds market excess reserves and unconventional monetary policy abstract following the bankruptcy of lehman brothers interbank borrowing and lending dropped whereas reserve holdings of depository institutions skyrocketed as the fed injected liquidity into the u s banking sector this paper introduces bank liquidity risk and limited market participation into a real business cycle model with ex ante identical financial intermediaries and shows in an analytically tractable way how interbank trade and excess reserves emerge in general equilibrium investigating the role of the federal funds market and unconventional monetary policy for the propagation of aggregate real and financial shocks i find that federal funds market participation is irrelevant in response to standard supply and demand shocks whereas it matters for uncertainty shocks i e mean preserving spreads in the cross section of liquidity risk liquidity injections by the central bank can absorb the effects of financial shocks on the real economy although excess reserves might increase and federal funds might be crowded out as a side effect

structural change and technology choice energy use in mexican manufacturing industry 1970 1981 abstract this paper analyses industrial energy use in a country that has experienced falling instead of rising energy prices mexico subsidizes domestic energy consumption with the avowed purpose of stimulating industrialization methods are developed to distinguish the effects of technology choice from the effects of changing industrial structure and are then used to analyse the increased energy intensity of manufacturing industry 1970 1981 the increase is found to depend entirely on the adoption of more energy using technology whereas the changes in output structure have had little or no effect there has been a slight bias in favour of the less energy intensive sectors

do central bank liquidity facilities affect interbank lending rates in response to the global financial crisis that started in august 2007 central banks provided extraordinary amounts of liquidity to the financial system to investigate the effect of central bank liquidity facilities on term interbank lending rates near the start of the crisis we estimate a six factor arbitrage free model of u s treasury yields financial corporate bond yields and term interbank rates this model can account for fluctuations in the term structure of credit and liquidity spreads observed in the data a significant shift in model estimates after the announcement of the liquidity facilities suggests that these central bank actions did help lower the liquidity premium in term interbank rates

factors shaping aggregate energy intensity trend for industry energy intensity versus product mix understanding the mechanisms of change of energy consumption in industry has attracted much attention since the 1973 world oil crisis a popular line of research has been to decompose changes in the aggregate energy intensity of industry to give the relative impacts arising from energy intensity change and product mix change using a decomposition technique many empirical studies covering a large number of countries have been reported the main objective of this paper is to put together the empirical results reported in these studies in a coherent framework and identify possible systematic features of particular interest are the basic trends in this line of research the relative importance of energy intensity change and product mix change possible variations over time and between country groups in the energy impacts of these changes and inconsistencies in findings among studies an overview of the decomposition technique including its strengths weaknesses and role in industrial energy consumption studies is also presented

what goes up recent trends in china s energy consumption since 1996 china s energy output has dropped by 17 while primary energy use has fallen by 4 driven almost entirely by shrinking output from coal mines and declining direct use since china is the world s second largest emitter of greenhouse gases it is important to understand the sources of this apparent transformation and whether it portends a permanent change in patterns of energy use this remarkable reversal of the long term expansion of energy use has occurred even as the economy has continued to grow albeit more slowly than in the early 1990s generation of electric power has risen implying a steep fall in end uses particularly in industry available information points to a variety of forces contributing to this phenomenon including rapid improvements in coal quality structural changes in industry shutdowns of factories in both the state owned and non state segments of the economy improvements in end use efficiency and greater use of gas and electricity in households a combination of slowing economic growth industrial restructuring broader economic system reforms and environmental and energy efficiency policies has apparently led to at least a temporary decline in and perhaps a long term reduction in the growth of energy use and therefore greenhouse gas emissions

income consumption and wage taxation in a life cycle model separating efficiency from redistribution the desirability of switching from an income tax base to a wage or consumption tax base hinges critically on the potential efficiency gains from doing so the overlapping generations life cycle model developed by lawrence summers 1981 cannot easily be used to answer this question because individuals of different ages alive at the time of the tax substitution differ in their shares of income consumption wages and savings propensities steady state welfare changes include redistribution of taxes and factor incomes the effects of redistribution on the calculation can be controlled for by tracing the transition in another paper summers 1980 used myopic expectations individuals assume that current prices will prevail and solved the economy s equilibrium for 100 years gains and losses were discounted and summed alan auerbach laurence kotlikoff and jonathan skinner 1983 hereafter referred to as aks employed a perfect foresight model they used lumpsum payments to keep the utility of those alive at the time of the tax change fixed and allowed equal equivalent variations to all future generations 1 a perfect foresight model requires simultaneous solution of many years of equilibria 150 years in the aks model although these techniques eliminate distributional elements such models are so costly to construct modify and use that the study of relative efficiency of alternative tax regimes is now greatly hampered by computational complexity this study has two major contributions first it introduces a much simpler method of separating the efficiency and redistributional components of steady state gains rather than tracing the transition it uses a system of transfers which ensures that changes in welfare in the steady state do not arise from redistribution of income to or from transitional generations while this approach does not allow calculation of the transition its application to the aks model suggests that very little information about the magnitude of efficiency effects is lost by forgoing the tracing of the transition for estimating the relative efficiency of income consumption and wage taxation or the extent to which assumptions drive the results this approach greatly simplifies the researcher s task 2 this simplification becomes increasingly valuable as more detail is introduced into models which could involve thousands of equations using an approach that traces the transition secondly my calculations suggest that switching tax bases may not be worthwhile this result differs from the results of summers 1981 and auerbach and kotlikoff 1987 which strongly suggest that the consumption tax is always superior on efficiency grounds using a 0 25 intertemporal substitution elasticity and a cobb douglas production function the steady state wel congressional research service library of congress washington dc 20540 i thank christophe chamley don fullerton yolanda henderson don kiefer larry kotlikoff jonathan skinner tom woodward dennis zimmerman and three anonymous referees for helpful comments and discussions the views in this paper do not necessarily represent those of the congressional research service or the library of congress 1the aks model is confined to one good charles ballard 1984 1989 lawrence goulder 1985 and ballard and goulder 1987 develop multisector models 2the suggestion of a method for separating efficiency from redistribution is not intended to imply that there is no value to tracing the transition tracing the transition can provide information about intergenerational redistribution in an uncompensated change and insights into the realism of the model

the effectiveness of non standard monetary policy in addressing liquidity risk during the financial crisis the experiences of the federal reserve and the european central bank abstract a number of studies sought to measure the effects of non standard policy on bank funding markets this paper carries those estimates a step further by looking at the effects of bank funding market stress on the volume of bank lending by separately modeling loan supply and demand we determine how non standard central bank measures affected bank lending by reducing stress in bank funding markets our results suggest that non standard policy measures lowered bank funding volatility in the us and the euro area lower bank funding volatility in turn increased loan supply in both regions contributing to sustained lending activity

economic reform energy and development the case of mexican manufacturing abstract given increasing concern over global climate change and national security there is a burgeoning interest in examining the relationship between economic growth and energy use in developed and developing countries more specifically decoupling energy use per unit of gross domestic product gdp has fast come to be seen as in the interests of national economies and the world as a whole recent attention has been paid to the dramatic decreases in the energy intensity of the chinese economy which fell by 55 between 1975 and 1995 do other developing economies follow similar trajectories this paper examines the energy intensity of the mexican economy for the period 1988 1998 although the long term trend in mexican energy intensity is rising the energy intensity of the mexican economy began to decline in 1988 this paper explores the factors that have contributed to this reduction diminishing mexican energy use per unit of gdp has been driven by significant decreases in industrial energy intensity we show that these changes have resulted from changes in the composition of mexican industrial structure and technological change

the u s money market and the term auction facility in the financial crisis of 2007 2009 abstract the interbank money market in the united states and europe became turbulent during the financial crisis of 2007 2009 with the counterparty default risk premiums and liquidity premiums of short term financing among major financial institutions rising sharply to unprecedented levels using various measures of macroeconomic and financial risks i find that the surges in counterparty risk premiums were predominantly driven by heightened uncertainties about the macroeconomy and financial market as well as underlying mortgage default risks the new liquidity facility that the federal reserve established the term auction facility significantly relieved the strains in the money market primarily through lowering banks liquidity concerns its effect on the counterparty risk premiums however has been quite limited

a pigovian rule for the optimum provision of public goods abstract the integrated treatment of optimal taxation and public expenditure presented here is based on the dual relationship between the prices of private goods and the quantities of public goods the conditions for optimum public good provision can be expressed as a modification of the samuelson conditions with extra terms representing a the distortionary effect of taxes on the willingness to pay for the public good and b distributional effects the former captures pigou s notion of the indirect damage caused by the need to finance public expenditure out of distortionary taxes and we call this the pigou term in certain cases a very simple benefit cost ratio for public projects emerges that is equivalent to measuring benefits as if they were taxed

the biophysical perspective of a middle income economy material flows in mexico abstract we analyse natural resource use dynamics in the mexican economy during the last three decades despite low and uneven economic growth the extraction and use of materials in the mexican economy has continuously increased during the last 30 years in this period population growth rather than economic growth was the main driving force for biophysical growth in addition fundamental changes have taken place in the primary sectors in manufacturing and in household consumption and these are reflected in an increasing emphasis on the use of fossil fuels and construction materials mexico s economy has been strongly influenced by international trade since the country commenced competing in international markets in the 1970s mexico mainly exported primary resources this pattern has changed and manufactured goods now have a much greater importance due to a boom in assembling industries in contrast with other latin american countries mexico has achieved a diversification of production moving towards technology intensive products and a better mix in its export portfolio however crude oil exports still represent the single most important export good mexico s material consumption is still well below the oecd average but is growing fast and the current resource use patterns may well present serious social and environmental problems to the medium and long term sustainability of mexico s economy and community information on natural resource use and resource productivity could provide valuable guidance for economic policy planning in mexico

changing macroeconomic dynamics at the zero lower bound this article develops a change point var model that isolates four major macroeconomic regimes in the us since the 1960s the model identifies shocks to demand supply monetary policy and spread yield using restrictions from a general equilibrium model the analysis discloses important changes to the statistical properties of key macroeconomic variables and their responses to the identified shocks during the crisis period spread shocks became more important for movements in unemployment and inflation a counterfactual exercise evaluates the importance of lower bond yield spread during the crises and suggests that the fed s large scale asset purchases helped lower the unemployment rate by about 0 6 percentage points while boosting inflation by about 1 percentage point

the effect of the term auction facility on the london interbank offered rate abstract the term auction facility taf the first auction based liquidity initiative by the federal reserve during the global financial crisis was aimed at improving conditions in the dollar money market and bringing down the significantly elevated london interbank offered rate libor the effectiveness of this innovative policy tool is crucial for understanding the role of the central bank in financial stability but academic studies disagree on the empirical evidence of the taf effect on libor we show that the disagreement arises from mis specifications of econometric models regressions using the daily level of the libor ois spread as the dependent variable miss either the permanent or temporary taf effect depending on whether the dummy variable indicates the events of the taf or the regimes before and after an taf event those regressions also suffer from the unit root problem and produce unreliable test statistics by contrast regressions using the daily change in the libor ois spread are robust to the persistence of the taf effect and the unit root problem consistently producing reliable evidence that the downward shifts of the libor ois spread were associated with the taf the evidence indicates the efficacy of the taf in helping the interbank market to relieve liquidity strains

consumption vs wage taxation and the capital levy abstract based on a representative consumer framework it has been argued that wage taxation is inferior to consumption taxation this note shows that the opposite result may emerge in a model where households are heterogeneous and where a uniform poll tax or subsidy is available

simulating fundamental tax reform in the united states this paper uses a new large scale dynamic life cycle simulation model to compare the welfare and macroeconomic effects of transitions to five fundamental alternatives to the u s federal income tax including a proportional consumption tax and a flat tax the model incorporates intragenerational heterogeneity and a detailed specification of alternative tax systems simulation results project significant long run increases in output for some reforms for other reforms namely those that seek to insulate the poor and initial older generations from adverse welfare changes long run output gains are modest

a review article the case against the use of the sum of compensating variations in cost benefit analysis this paper presents a case against the use of the sum of compensating varia tions as a cost benefit test we argue that 1 the ethical judginents implied by the test are not defensible 2 positive sums of compensating variations occur without potential pareto improvements resulting in social preference reversals without simultaneous scitovsky re versals 3 when lump sum transfers are feasible a positive sum of compensating variations is necessary but not sufficient for a potential pareto improvement 4 in order to eliminate preference reversals and intransitivities all households must have almost identical quasi homothetic preferences a condition that is not satisfied in real economies