limited commitment and the demand for money understanding money demand is important for our comprehension of macroeconomics and monetary policy its instability has made this a challenge common explications for the instability are financial regulations and financial innovations that shift the money demand function we provide a complementary view by showing that a model where borrowers have limited commitment can significantly improve the fit between the theoretical money demand function and the data limited commitment can also explain why the ratio of credit to m1 is currently so low despite that nominal interest rates are at their lowest recorded levels this article is protected by copyright all rights reserved

the demand for assets through a low interest rate environment asset demand is important in many areas of economics to investigate this we estimate a globally flexible dynamic fourier asset demand specification and calculate morishima elasticities of substit

lords of the harvest third party influence and regulatory approval of genetically modified organisms little is known about the factors that influence regulatory agency decision making we posit that regulatory agencies are influenced by the firms they regulate but not exclusively via dyadic exchanges as is traditionally argued in the regulatory capture and business government literatures instead regulatory decisions are indirectly shaped via third party actors who shield agencies from legitimacy threats focusing empirically on the united states department of agriculture s usda approval of genetically modified organisms gmos we find that product assessments by powerful stakeholders and peer agencies influence product approval and that their effects vary under different threats we also discuss the implications of these findings for businessgovernment relations nonmarket strategy and organization theory

the changing empirical definition of money some estimates from a model of the demand for money substitutes interest bearing checkable deposits are examined to test whether they should be included in measures of the u s money stock both divisia and traditional simple sum aggregates are constructed on the basis of tests for weak separability in a model of the demand for financial assets using nonparametric demand analysis we find that several groups of assets are compatible with aggregation theory we find empirical support for a narrow measure consisting of the components of current mia in tests based on a st louis equation and in terms of controllability a divisia aggregate performs better than the simple sum mia measure

financial technology shocks and the case of the missing m2 m2 growth was unusually weak in the early 1990s when its velocity soared although m2 growth subsequently recovered its velocity plateaued at a high level giving rise to a case of missing money these swings in m2 growth have accompanied opposite swings in bond mutual fund inflows m2 growth is better tracked and the missing m2 problem is resolved when money models are modified to account for shifts in bond mutual fund costs this approach avoids the capital gains and portfolio substitution problems posed by adding bond or equity funds to m2 while capturing the substitution effects relevant to money demand

measurement matters recent results from monetary economics reexamined inferences about the effects of money on economic activity may depend importantly on the choice of a monetary index because simple sum aggregates cannot internalize pure substitution effects this hypothesis is investigated by replicating five recent studies that have challenged an aspect of the conventional wisdom about the effects of money on aggregate activity in four of the five cases the qualitative inference in the original study is reversed when a simple sum monetary aggregate is replaced by a divisia index of the same asset collection the results are mixed in the fifth case

inflation and welfare in a monetary economy it is in everyone s private interest to try to get someone else to hold non interest bearing cash and reserves but someone has to hold it all so these efforts must simply cancel out all of us spend several hours per year in this effort and employ thousands of talented and highly trained people to help us these person hours are simply thrown away wasted on a task that should not have to be performed at all

rethinking the liquidity puzzle application of a new measure of the economic money stock historically attempts to solve the liquidity puzzle have focused on narrowly defined monetary aggregates such as non borrowed reserves the monetary base or m1 many of these efforts have failed to find a short term negative correlation between interest rates and monetary policy innovations more recent research uses sophisticated macroeconomic and econometric modeling however little research has investigated the role measurement error plays in the liquidity puzzle since in nearly every case work investigating the liquidity puzzle has used one of the official monetary aggregates which have been shown to exhibit significant measurement error this paper examines the role that measurement error plays in the liquidity puzzle by i providing a theoretical framework explaining how the official simple sum methodology can lead to a liquidity puzzle and ii testing for the liquidity effect by estimating an unrestricted var

divisia index inflation and welfare this work addresses a usual criticism in the literature of the welfare costs of inflation related to the tact that some items in the relevant definition of money pay interest while others do not we show that the problem can be solved by using a divisia index of monetary services as the welfare measure

neoclassical consumer demand theory and the demand for money m friedman 1956 suggests that the demand for money should be analyzed in terms of consumer demand theory although often the interpretation of empirical results from studies using aggregate data appears to be in terms of the motives approach i e transactions precautionary and speculative motives the authors develop friedman s ideas within an explicit model of consumer theory and find that they provide a consistent framework for analyzing portfolio choice and offer greater insights into results from aggregate studies of the demand for money than the motives approach in particular the authors provide a new interpretation of the role of nominal interest rates inflation and a hicksian measure of wealth in the demand for money function copyright 1991 by royal economic society

retail sweep programs and monetary asset substitution abstract this paper examines how retail sweep programs affect monetary asset substitution estimates from the fourier flexible form reveal that sweeping generates systematic and sometimes large distortions in estimated bank depositor substitution elasticities

a comparison of nonparametric tests of weak separability for annual and quarterly data on consumption leisure and money among the most fundamental assumptions made in economics are utility maximization and the separability of the arguments in the representative consumer s utility function these assumptions are important for theoretical and empirical applications of economics in this article we present results from nonparametric tests of these assumptions of consumer behavior we find that utility maximization generally obtains with either annual or quarterly per capita data on consumption goods leisure and relatively liquid monetary assets annual data on consumption goods leisure and all monetary assets are consistent with utility maximization there is some evidence in support of using partial adjustment models when estimating quarterly data models of the demand for monetary assets further annual data on consumption goods and leisure and on liquid monetary assets meet the necessary and sufficient conditions for weak separability these results support the notion of a monetary aggregate more broadly based than cu

risk response in the beef marketing channel a multivariate generalized arch m approach a model of the farm retail price spread for beef is specified under rational expectations in which systematic risk response on the part of marketing intermediaries is allowed the three equation structural model contains potentially time varying risk terms in margin and supply equations which i approximate and estimate using a multivariate garch in mean approach the estimated model is used to infer relative risk premia in beef margins and to simulate short run equilibrium risk effects results indicate that price risk has at times had substantial impacts on farm and retail beef prices and production

sweep programs and optimal monetary aggregation abstract this paper examines the admissibility of monetary aggregate groupings for the us over 1993 2001 based upon weak separability we investigate the impact of retail and commercial demand deposit sweep programs on the separability of monetary asset groupings weak separability is tested using the swofford whitney and fleissig whitney tests we use varian s measurement error adjustment procedure to eliminate violations of the generalized axiom of revealed preference garp when funds from both retail and commercial demand deposit sweep programs are placed within checkable deposits all groupings narrow and broad pass garp and weak separability for groupings based on conventional money measures tests tend to favor broad aggregates

interest on bank reserves and optimal sweeping abstract a key rationale offered by the federal reserve for the payment of interest on reserves was to remove the incentive for banks to operate sweep accounts sweeping shifts funds from transactions deposits subject to reserve requirements to non reservable deposits this paper extends a conventional banking model to analyze sweeping behavior sweeping responds positively to increases in bank loan rates and reserve ratios and negatively to increases in the interest rate on reserves or exogenous increases in bank equity sweeping generates greater responsiveness in lending to changes in loan rates or the interest rate on reserves and lower responsiveness to changes in reserve ratios or equity than in its absence empirical analysis of an explicit condition that we derive suggests that with an unchanged reserve requirement the fed could eliminate sweeping by setting the interest rate on reserves to no less than approximately 4 points below the market loan rate

direct effects of base money on aggregate demand theory and evidence abstract meltzer the transmission process working paper carnegie mellon university 1999a shows that real monetary base growth is a significant determinant of consumption growth in the us controlling for the short term real interest rate in this paper i show that the same property of base money holds for total output relative to trend or potential in both the us and the uk the standard optimizing is lm model cannot account for this result but i show that it can once the long term nominal interest rate is included in the money demand function because the long term real rate matters for aggregate demand the presence of the long term nominal rate in the money demand function increases the effect of nominal money stock changes on real aggregate demand when prices are sticky

a semi nonparametric approach to the demand for uk monetary assets we estimate an asymptotically ideal model of the demand for uk personal sector monetary assets we use data that are consistent with utility maximizing behaviour and find that uk monetary assets are generally substitutes in use the estimated elasticities of substitution during the 1980s and the early 1990s indicate that a relatively broad monetary aggregate should be used in economic studies the results also suggest that any policy based on interest or user cost elasticities of substitution between financial assets should be based on the morishima elasticities as the allen uzawa calculation can give misleading results

another look at long run money demand abstract this paper investigates the long run demand for m1 in the postwar united states previous studies based on data ending in the late 1980s are inconclusive about the parameters of postwar money demand this paper obtains precise estimates of these parameters by extending the data through 1996 the income elasticity of money demand is approximately 0 5 and the interest semi elasticity is approximately 0 05 these parameters are significantly smaller in absolute value than the corresponding parameters for the prewar period a caveat is that the analysis assumes there is no trend in money demand resulting from technological change

monetary aggregation and the neutrality of money zisimos koustas this article tests the long run neutrality of money proposition using quarterly u s data over the period from 1960 1 to 1996 2 and the methodology suggested by king and watson 1997 paying particular attention to the integration and cointegration properties of the variables comparisons are made among simple sum divisia and currency equivalent ce monetary aggregates using the anderson et al 1997a 1997b series of divisia and ce monetary aggregates jel e40 e50 c32 i introduction the aim of this article is to investigate a long run question about the role of money in monetary policy whether changes in the conduct of monetary policy influence the growth rate of output as lucas 1996 p 661 puts it so much thought has been devoted to this question and so much evidence is available that one might reasonably assume that it had been solved long ago but this is not the case in fact recently fisher and seater 1993 and king and watson 1997 contribute to the literature on testing quantity theoretic propositions by developing tests using recent advances in the theory of nonstationary regressors and show that meaningful long run neutrality and superneutrality tests can only be constructed if both nominal and real variables satisfy certain nonstationarity conditions and that much of the older literature violates these requirements in this paper in the spirit of serletis and koustas 1998 and koustas and serletis 1999 we test the long run neutrality and superneutrality of money using the king and watson 1997 methodology paying particular attention to the gains that can be achieved by rigorous use of microeconomic and aggregation theoretic foundations in the construction of money measures this is accomplished by making comparisons among simple sum divisia and currency equivalent ce monetary aggregates using the anderson et al 1997a 1997b data see anderson et al 1997a 1997b for more details we also pay attention to the integration and cointegration properties of the variables because meaningful neutrality and superneutrality tests critically depend on such properties the organization of the article is as follows the next section briefly discusses the problem of the definition aggregation of money in section iii we investigate the univariate time series properties of the variables as these properties are relevant for some problems of potential importance in the practical conduct of monetary policy as well as for estimation and hypothesis testing in section iv we test the long run neutrality and superneutrality of money propositions using the king and watson 1997 structural bivariate autoregressive methodology paying particular attention to the integration and cointegration properties of the data the final section concludes ii the many kinds of money the monetary aggregates currently in use by the federal reserve are simple sum indices in which all monetary components are assigned a constant and equal unitary weight this index is m in 1 m sigma sup n sub i 1 x sub i where x sub i is one of the n monetary components of the monetary aggregate m this summation index implies that all monetary components contribute equally to the money total and it views all components as dollar for dollar perfect substitutes there is no question that such an index represents an index of the stock of nominal monetary wealth but cannot in general represent a valid structural economic variable for the services of the quantity of money over the years there has been a steady stream of attempts at properly weighting monetary components within a simple sum aggregate with no theory however any weighting scheme is questionable barnett 1980 derived the theoretical linkage between monetary theory and aggregation and index number theory he applied economic aggregation and index number theory and constructed monetary aggregates based on diewert s 1976 class of superlative quantity index numbers

government assisted oligopoly coordination a concrete case in 1993 the danish antitrust authority decided to gather and publish firm specific transactions prices for two grades of ready mixed concrete in three regions of denmark following initial publication average prices of reported grades increased by 15 20 percent within one year we investigate whether this was due to a business upturn and or capacity constraints but argue that these seem to have little explanatory power we conclude that a better explanation is that publication of prices allowed firms to reduce the intensity of oligopoly price competition and hence led to increased prices contrary to the aim of the authority

uncertain intellectual property conditions and knowledge appropriation strategies evidence from the genomics industry innovating science and technology based firms often endure a sustained period of uncertain intellectual property rights ipr protection before patents could be granted to their valuable knowledge assets this problem is exacerbated as firms increasingly develop their innovations or operate in countries with weak ipr institutional environments but how does ipr uncertainty affect firms strategy toward knowledge appropriation capturing of economic value from their knowledge assets and toward providing access to these knowledge assets drawing on research from the economics of science and intellectual property strategy we examine this question using a novel panel data covering 362 firms and organizations in the knowledge intensive genomics industry based on all genomics patents and matching papers from 1988 to 2005 we find that under uncertain ipr conditions firms reveal and accumulate more knowledge through open science follow on publishing but shift to knowledge appropriation through commercial science follow on patenting when ipr uncertainty is narrowed this effect is most salient when firms develop their knowledge assets or operate under strong ipr institutional regime for highly science based knowledge assets firms continue tapping into open science for access and reciprocity in knowledge acquisition from the scientific community these findings highlight the role of patent grant as a potential lever to shape firms knowledge processes and long term innovative capacity and the emergence of a concerted science strategy employed by firms

how capital regulation and other factors drive the role of shadow banking in funding short term business credit abstract this paper empirically analyzes how capital regulation risk and other factors altered the relative use of shadow banking funded short term business debt since the early 1960s results indicate that the share was affected over the long run not only by changing information and reserve requirement costs but also by shifts in relative regulation of bank versus nonbank credit sources such as basel i in 1990 and reregulation in 2010 in the short run the shadow bank share rose when deposit interest rate ceilings were binding on traditional banks the economic outlook improved or risk premia declined and fell when event risks arose

optimal cartel trigger price strategies abstract a dynamical model of industry equilibrium is described in which a cartel deters deviations from collusive output levels by threatening to produce at cournot quantities for a period of fixed duration whenever the market price falls below some trigger price in this model firms can observe only their own production level and a common market price the market demand curve is assumed to have a stochastic component so that an unexpectedly low price may signal either deviations from collusive output levels or a downward demand shock

non parametric tests of consumer behaviour the neoclassical model of consumer behaviour postulates that a consumer s choice behaviour can be described as deriving from utility maximization subject to a budget constraint one is then naturally led to ask what this model implies about observed behaviour this question has been addressed from two quite distinct approaches the first approach originating in the work of slutsky 1915 and antonelli 1886 derives necessary and sufficient conditions involving the derivatives of the demand functions the second approach originating in the work of samuelson 1938 1947 1948 derives algebraic conditions on the demand functions implied by maximizing behaviour

on the instability of long run money demand and the welfare cost of inflation in the united states we evaluate the policy implications of measuring the welfare cost of inflation accounting for instabilities in the long run money demand for the u s over the period 1900 2013 we extend the analysis and reassess the results reported in lucas 2000 and ireland 2009 also considering the recent theoretical contributions of lucas and nicolini 2015 and berentsen et al 2015 breaks in the long run money demand give rise to regime dependent welfare cost estimates we find that the welfare cost is about 0 1 of annual income over 1976 2013 as compared to 0 8 over 1945 1975 overall these values are substantially lower than those reported in the literature

mixed integer programming revealed preference tests of utility maximization and weak separability of consumption leisure and money swofford and whitney 1987 1988 1994 investigated the validity of two key assumptions underlying representative agent models of macroeconomics these assumptions are utility maximization and weak separability using mixed integer programming we check revealed preference conditions for these assumptions we find that m1 money defined by friedman and schwartz 1963 and a broad aggregate are weakly separable we find that consumption goods and leisure and nondurables and services are weakly separable we find that m2 m3 and mzm are not weakly separable finally we find three categories of consumption durables nondurables and services do not form an aggregate

consumer behaviour theory and empirical evidence a survey this survey is designed to emphasize the relationship between empirical a nd theoretical considerations in the analysis of consumer behavior a lthough it focuses primarily on analysis at the individual or micro l evel it tries where possible to draw implications for the estimati on of aggregate relationships the importance of micro level analysis stems from the rapid expansion in available panel and survey data se ts this development has generated its own theoretical and empirical issues many of which are raised in this survey copyright 1988 by royal economic society

the search for a stable money demand function a survey of the post 1973 literature phe question of whether the demnand function for money is stable is one of the most important recurring issues in the theory and application of macroeconomic policy what is being sought in a stable demand function is a set of necessary conditions for money to exert a predictable influence on the economy so that the central bank s control of the money supply can be a useful instrument of economic policy as such the notion of a stable demand function appears to involve three key elements e g john t boorman 1976 p 317 and david e w laidler 1977 pp 34 35 first the demand for money relation should be highly predictable in a statistical sense as measured by the usual goodness of fit statistics precision of estimated coefficients and presumably its ability to forecast accurately out of sample second a stable demand function for money has relatively few arguments a relationship that requires knowledge about a large number of variables in order to pin it down is in effect not predictable finally the variables that appear as arguments in the function should represent significant links to spending and economic activity in the real sector in sum a stable demand function for money means that the quantity of money is predictably related to a small set of key variables linking money to the real sector of the economy the importance of a stable money demand function for monetary policy can be illustrated with the standard is lm model in which interest rates and gnp are the endogenous variables in this context a stable demand function for money translates into a well defined relationship between money interest rates and gnp

intertemporal substitution money and aggregate labor supply this study investigates the macroeconometric credibility of the intertemporal substitution hypothesis it extends the usual formulation by considering money within the representative consumer s life cycle decision the authors also provide measures of the real wage rate and asset returns based upon interpretation of the constraint as consumption saving behavior estimation with quarterly u s data generates plausible and significant estimates of the structural parameters the findings indicate elastic labor supply response to the wage rate but mixed results with respect to nominal returns the estimates are reasonably robust to alternative measures of consumption money leisure and rates of return copyright 1996 by ohio state university press

what makes companies pursue an open science strategy whereas recent scholarly research has provided many insights about universities engaging in commercial activities there is still little empirical evidence regarding the opposite phenomenon of companies disseminating scientific knowledge our paper aims to fill this gap and explores the motivations of firms that disclose research outcomes in a scientific format besides considering a dimension internal to the firm we focus particularly on knowledge sourcing from academic institutions and the appropriability regime we conduct an econometric analysis with firm level data from the fourth edition of the french innovation survey cis and matched scientific publications for a sample of 2512 rd performing firms from all manufacturing sectors this analysis provides evidence that firms are more likely to adopt academic principles if they need to access scientific knowledge that is considered important for their innovation development whereas the mere existence of collaborative links with academic institutions is not a strong determinant furthermore the results suggest that the inclination of firms to publish is sensitive to the level of knowledge spillovers in a sector and the effectiveness of legal appropriation instruments c 2013 elsevier b v all rights reserved

long run income and interest elasticities of money demand in the united states econometric techniques designed to accommodate nonstationary data are used to reexamine the stability of interest and income elasticities of money demand in the united states estimates based on postwar monthly data reveal a stable relationship between m1 velocity and various measures of interest rates that proxy the opportunity cost of holding money balances tests for the existence of cointegration and methods used to estimate the income and interest elasticities are based on procedures prescribed by soren johansen 1988 corresponding error correction estimates offer insight as to the dynamics of the process that maintains the equilibrium relation between velocity and interest rates copyright 1991 by mit press

are consumption and government expenditures substitutes or complements morishima elasticity estimates from the fourier flexible form 1 introduction macroeconomists paid relatively little attention to the economic effects of government expenditures and to alternative methods of financing those expenditures until barro 1974 1979 1981 challenged conventional views on the economic impact of government activity much of the literature stimulated by these studies addressed the effects of alternative financing methods for a given path of government expenditures but barro 1981 also stressed the fact that government expenditures can provide direct welfare to economic agents and that variations in the level of government expenditures may have an impact on the consumption decisions of households as a result many studies estimate the extent to which economic agents treat government expenditures as substitutes to or complements with private consumption expenditures e g kormendi 1983 aschauer 1985 graham and himarios 1991 ni 1995 the degree of substitution or complementarity between private consumption and government expenditures is of crucial importance in assessing the impact of fiscal policies on economic welfare thus it is important to establish the extent to which federal expenditures and private consumption are substitutes or complements as a guide to the design of fiscal policies there is much disagreement about the extent to which consumption and government expenditures are substitutes or complements in use for economic agents 1 studies differ in their details so it is difficult to know what might account for such diverse results but it seems fair to say that the relationship between government expenditures and consumption is largely an open question the diversity of the results however may be a consequence of a number of restrictive assumptions that have been used in various studies many of these assumptions appear hard to justify a priori studies typically estimate the parameters of an equation containing private consumption and government expenditures often assuming that the relevant choice variable for the representative household is an aggregate consumption measure given by the sum of nondurables and services consumption e g aschauer 1985 reid 1985 bean 1986 campbell and mankiw 1990 or the sum of nondurables services and the service flow from durable goods e g kormendi 1983 graham and himarios 1991 this implies that each component of private consumption expenditures is a perfect substitute for the household an assumption for which there is no compelling theoretical basis similarly government expenditures defense nondefense and state and local are typically aggregated e g feldstein 1982 aschauer 1985 reid 1985 graham 1993 with various studies excluding either federal or state and local expenditures just as for private consumption expenditures these aggregation assumptions should be tested rather t han simply imposed in applied work in addition although substitution elasticities are generally not constant in an optimizing framework they are often assumed to be constant in applications by using a single aggregate of consumption or a utility function that imposes a constant elasticity of substitution e g aschauer 1985 and ni 1995 finally none of the above mentioned studies computes elasticities of substitution in a manner consistent with microeconomic utility maximization principles 2 in this article we provide estimates of elasticities of substitution between consumption and government expenditures based on the demand systems approach that has been widely used in testing the neoclassical theory of household behavior see eg deaton and muellbauer 1980 and the survey of barnett et al 1992 this approach has a number of attractive features making it a substantial improvement over the applied studies available in the macroeconomics literature the estimates in this article are based on an optimizing framework where both government and consumption expenditures are treated as choice variables by the representative household

a note on different approaches to index number theory the central question in a recent paper by j peter neary 2004 concerning real incomes and the penn world tables is what exactly do the numbers mean this question is important because these data are widely used in empirical research more generally index number data including indicators of inflation and economic growth are used so extensively in research throughout the profession that it indeed seems helpful to understand what they actually indicate in the literature two approaches to index numbers are distinguished the axiomatic approach and the economic approach in this note we would like to discuss the way in which these two approaches differ and how that affects what the numbers mean in neary s paper the difference is described as one between an approach that does and an approach that does not assume that quantities arise from optimizing behavior this is in line with a tradition in index number theory that can be traced back to ragnar frisch 1936 we will argue that a more accurate description is that the difference lies in whether or not optimizing agents or representative consumers are assumed to optimize the same utility function it is exactly this distinction that sets the differ ent limitations of both approaches for constructing a meaningful indicator of real income those limitations will be described in some detail and being aware of them is helpful for assessing the value of results from both the axiomatic and the economic approach they also suggest ways in which the two approaches may be complementary for constructing meaningful index numbers introducing the geary allen international accounts gaia system neary combines taking the economic approach with judging the resulting indices in view of some axioms we think that this makes his paper a suitable point of departure for the discussion of how the two approaches handle differences in relative prices on the one hand and differences in preferences on the other

market transparency and market structure the livestock mandatory reporting act of 1999 the premise of the livestock mandatory reporting act of 1999 is that enhanced transparency promotes competition this article provides a theoretical study of the consequences of such transparency for the structure conduct and performance of the livestock industry i conclude that the usefulness of the act to the livestock industry may not be in the value of reported information to feeders as the supporters of the act claim rather by forcing packers to pool information at negligible marginal cost the act may foster more competitive conduct in the procurement of livestock copyright 2003 oxford university press

a non parametric analysis of personal sector decisions on consumption liquid assets and leisure this paper uses the non parametric techniques developed by varian i982 i983 and afriat i967 1973 from the theory of revealed preference see samuelson 1947 to address a number of questions of interest to those who model the determination of consumption liquid assets and leisure hours 1 the primary assumption underlying much work in this area whether it deals with highly aggregated categories such as the consumption of non durables or relatively disaggregated categories such as the consumption of energy products or food is that demand functions for consumer goods are consistent with the hypothesis that they are derived from the maximisation of a well behaved utility function subject to a relevant budget constraint the absence of liquid assets or leisure from such studies involves the implicit assumption of weak separability between consumption goods and these other goods the parametric approach then assumes a particular functional form for either the utility function indirect utility function or cost function and estimates the parameters that best describe the data however as varian i983 points out when it comes to testing hypotheses in such a framework it is always a joint hypothesis comprising both the restrictions and the choice of functional form which is being tested 2 to avoid this problem varian developed the nonparametric revealed preference approach to provide algebraic conditions which are imposed by maximising behaviour on a set of data with a finite number of observations this non parametric approach is exploited here in several ways there have been a number of studies using a parametric approach at a fairly disaggregated level to the determinants of consumers expenditure see for example deaton i974 anderson and blundell i982 and ray i984 for applications using

measuring substitution in monetary asset demand systems the allen elasticity of substitution aes is widely used to study monetary asset substitution and structural demand stability blackorby and russell showed that the aes is uninformative and that the morishima elasticity of substitution mes is the appropriate measure a point overlooked in the monetary literature use of improper measures can lead to incorrect inferences this article considers five alternative measures of substitution the aes the mes the hicksian and marshallian elasticities of demand and mundlak s unencountered but appealing constant cost elasticity of substitution selection of the substitution measure appropriate to respective research questions is addressed

on the welfare cost of inflation and the recent behavior of money demand post 1980 u s data trace out a stable long run money demand relationship of cagan s semi log form between the m1 income ratio and the nominal interest rate with an interest semi elasticity of 1 79 integrating under this money demand curve yields estimates of the welfare cost of modest departures from friedman s zero nominal interest rate rule for the optimum quantity of money that are quite small the results suggest that the federal reserve s current policy which generates low but still positive rates of inflation provides an adequate approximation in welfare terms to the alternative of moving all the way to the friedman rule jel e31 e41 e52

admissible monetary aggregates for the euro area we use the fleissig and whitney fleissig a r whitney g a 2003 a new pc based test for varian s weak separability conditions journal of business and economics statistics 21 1 133 144 weak separability test to determine admissible levels of monetary aggregation for the euro area we find that the euro area monetary assets in m2 and m3 are weakly separable and construct admissible divisia monetary aggregates for these assets we show that real growth of the admissible divisia aggregates enters the euro area is curve positively and significantly for the period from 1980 to 2005 out of sample we show that divisia m2 and m3 appear to contain useful information for forecasting euro area inflation

short run money demand abstract the conventional wisdom holds that the short run demand for money is unstable this paper challenges the conventional view by finding a stable demand for m1 in u s data from 1959 through 1993 the approach follows previous work in interpreting long run money demand as a cointegrating relation and it uses goldfeld s partial adjustment model to interpret short run dynamics the key innovation is the choice of the interest rate in the money demand function most previous work uses a short term market rate but this paper uses the average return on near monies the savings accounts and money market mutual funds that are close substitutes for m1 this choice helps rationalize the behavior of money demand in particular the increase in the volatility of velocity after 1980 is explained by increased volatility in the returns on near monies

why do firms do basic research with their own money abstractthe question to be addressed is why do private firms perform basic research with their own money interest in this question derives from both analytical and utilitarian considerations there is empirical evidence in the united states which provides the main context for this paper supporting the view that basic research makes a significant contribution to the productivity growth of the economy 4 7 it is widely held that social returns from basic research are significant and higher than private returns and it is for this reason that most such activities continue to be financed by the taxpayer this also implies that measures aimed at increasing basic research by the private sector will be welfare improving in the united states the federal government in the years since the second world war has provided the vast majority of all funds devoted to basic research although the federal share has been declining in recent years and although that share is at its lowest level in about 20 years it still constitutes about two thirds of the total 10 this abstract was borrowed from another version of this item

the own price of money and a new channel of monetary transmission traditionally the effects of monetary policy actions on output are thought to be transmitted via monetary or credit channels real business cycle theory by contrast highlights the role of real price changes as a source of revisions in spending and production decisions motivated by the desire to focus on the effects of price changes in the monetary transmission mechanism this paper incorporates a direct measure of the real own price of money into an estimated vector autoregression and a calibrated real business cycle model consistent with the rbc view of the monetary transmission mechanism both approaches reveal that movements in the own price of money are strongly related to movements in output

company sector liquid asset holdings a systems approach liquid asset holdings of the u k company sector are modeled using a money in the utility function theoretical approach symmetry homogeneity and negativity but not homotheticity restrictions are found to hold in a dynamic model using quarterly data the authors examine the usefulness of cointegration techniques in a systems framework the preferred dynamic equations are estimated using the engle granger two step procedure and have coefficients that are satisfactory on a priori grounds and are stable copyright 1992 by ohio state university press

imitation costs and patents an empirical study it has long been recognised that the costs of imitating new products have an important effect on the incentives for innovation in a market economy as arrow i962 and others have pointed out if firms can imitate an innovation at a cost that is substantially below the cost to the innovator of developing the innovation there may be little or no incentive for the innovator to carry out the innovation in their discussions of the innovation process economists frequently have called attention to the major role played by the costs of imitation but there has been little or no attempt to measure these costs to test various hypotheses concerning the factors influencing them or to estimate their effects in this paper we report some findings of what seems to be the first study of this topic in addition we present data regarding the effects of patents on imitation costs and on the rate of innovation

market and welfare effects of the u s livestock mandatory reporting act author affiliation kenneth njoroge department of accounting the fuqua school of business duke university box 90120 durham nc 27708 0120 usa kn14 duke eduamalia yiannaka department of agricultural economics 314d filley hall university of nebraska lincoln lincoln ne 68583 0922 usa yiannaka unl edukonstantinos giannakas department of agricultural economics 216 filley hall university of nebraska lincoln lincoln ne 68583 0922 usa kgiannakas unl eduazzeddine m azzam department of agricultural economics 103b filley hall university of nebraska lincoln lincoln ne 68583 0922 usa aazzam1 unl edu corresponding author acknowledgment senior authorship is shared authors names appear in reverse seniority order 1 introductionthe livestock mandatory reporting act the act was enacted in 2001 to provide market participants with information on all cash and noncash transactions reported by packers to the agricultural marketing service ams on a daily basis the information is aggregated under specific confidentiality guidelines1 to preserve the anonymity of the source2 and published in the mandatory livestock and meat market news reports reports 3 ams is responsible for setting the confidentiality guidelines as well as for enforcing the act as stated in the act federal register 2000 the reports intend to provide information that can be readily understood by producers packers and other market participants improve the price and supply reporting services of the department of agriculture and encourage competition in the marketplace for livestock and livestock products the rationale is that as more animals have been purchased under marketing arrangements neither the arrangements nor the final purchase prices are publicly disclosed 4about two years after the act went into effect schroeder grunwald and ward 2002 reviewed the early literature on livestock mandatory reporting lmr a consensus appeared to be forming that while lmr could be beneficial by reducing uncertainty and increasing competition in cattle markets revealing too much information about rival pricing could facilitate collusion and reduce competition among packers schroeder grunwald and ward 2002 p 11 the uncertainty reducing effect of lmr was deduced from two experimental studies by anderson et al 1998 and bastian koontz and menkhaus 2001 in the first experiment price and quantity information in the fed cattle market simulated through the fed cattle market simulator fcms 5 was varied and market outcomes were observed uncertainty measured by price dispersion was found to increase with the amount and type of information withheld in the second experiment also using the fcms market participants were provided with price and quantity information on cattle sold through the spot markets as well as through forward contracts the authors observed a substantial reduction in the variance of forward contract prices the effect of the forward market information on the variance of spot prices was negative but not statistically significant maintaining the hypothesis that mandatory reporting reduces uncertainty through the provision of more information azzam 2003 studied the effects of the reduction in uncertainty on the structure conduct and performance of livestock markets azzam s theoretical findings suggest that in a setting where cattle feeders and packers are risk averse and packers hold consistent conjectures increased transparency due to mandatory reporting promotes competition and results in higher livestock prices however since increased transparency can make it easier for packers to collude wachenheim and devuyst 2001 azzam s assumption of consistent conjectures is restrictive because it rules out the possibility of collusion njoroge 2003 provides a formal model of collusion that is in line with the arguments in wachenheim and devuyst 2001

changes in beef packers market power after the livestock mandatory price reporting act an agent based auction controversy remains about the effectiveness of the 1999 livestock mandatory price reporting act mpra we determine the likely changes in beef packers market power after the mpra by using an agent based first price common value auction past research has employed cournot models but we use an auction model which more closely resembles the actual cattle procurement process we find that feeders benefit from the mpra regardless of whether price uncertainty decreases for packers and or feeders if the packers price uncertainty is reduced the feeder benefits from an increase in competition between the packers if the feeder s price uncertainty is reduced the feeder benefits from imposing more accurate reserve prices copyright 2013 oxford university press

sweep programs the fall of m1 and rebirth of the medium of exchange this paper investigates the effect of sweep programs on m1 using dynamic simulations of money demand over 1994 2000 the postsample period constitutes when sweep programs have been in effect all models generate predictions systematically above reported m1 using data on newly initiated programs test findings indicate that sweeps account for the overprediction within the conventional money demand model with a long term interest rate we construct a medium of exchange measure m1s equal to m1 plus estimated holdings of sweep balances m1s velocity compares favorably with that of broader aggregates evidence indicates cointegration within m1s money demand

sectoral money demand and the great disinflation in the united states estimates of the welfare costs of inflation based on bailey 1956 are typically computed using aggregate money demand models yet the behavior of money demand may vary across sectors thus the impact on welfare of inflation regime shifts may differ between households and firms we specifically investigate the sectoral welfare implications of the shift from the great inflation to the present regime of low and stable inflation for this purpose we estimate different functional specifications of money demand for u s households and nonfinancial firms using flow of fund data covering four decades we find that the benefits were significant for both sectors

the demand for assets and optimal monetary aggregation this paper uses a highly disaggregated demand system to estimate the degree of substitutability among monetary assets and to address the issue of optimal monetary aggregation in the united states we address the problems of dimensionality and nonlinearity estimating a very detailed monetary asset demand system encompassing the full range of assets based on the locally flexible normalized quadratic expenditure function we treat the concavity property as a maintained hypothesis and provide evidence consistent with neoclassical microeconomic theory statistical tests reject the appropriateness of the aggregation assumptions for all the money measures published by the federal reserve as well as for a large number of groupings suggested by earlier studies this supports and reinforces barnett s 2016 assertion that we should employ the broadest m4 monetary aggregate published by the center for financial stability

results of a study of the stability of cointegrating relations comprised of broad monetary aggregates abstract we find strong evidence of a stable money demand relationship for mzm and m2m through the 1990s though the m2 relation breaks down somewhere around 1990 evidence has been accumulating that the disturbance is well characterized as a permanent upward shift in m2 velocity which began around 1990 and was largely over by 1994 taken together our results support the hypothesis that households permanently reallocated a portion of their wealth from time deposits to mutual funds although this reallocation may have been induced by depository restructuring we argue that the substitution could be explained by appropriately measured opportunity cost

a penny for your quotes patent citations and the value of innovations the use ofpatents in economic research has been seriously hindered by the fact that patents vary enormously in their importance or value and hence simple patent counts cannot be informative about innovative output the purpose of this article is to put forward patent counts weighted by citations as indicators of the value of innovations thereby overcoming the limitations of simple counts the empirical analysis of a particular innovation computed tomography scanners indeed shows a close association between citation based patent indices and independent measures of the social value of innovations in that field moreover the weighting scheme appears to be nonlinear increasing in the number of citations implying that the informational content of citations rises at the margin as in previous studies simple patent counts are found to be highly correlated with contemporaneous rd however here the association is within afield over time rather than cross sectional

the future of monetary aggregates in monetary policy analysis this paper considers the role of monetary aggregates in modern macroeconomic models of the new keynesian type the focus is on possible developments of these models that are suggested by the monetarist literature and that in addition seem justified empirically both the relation between money and inflation and between money and aggregate demand are considered regarding the first relation it is argued that both the mean and the dynamics of inflation in present day models are governed by money growth this relationship arises from a conventional aggregate demand channel claims that an emphasis on the link between monetary aggregates and inflation requires a direct channel connecting money and inflation are wide of the mark the relevance of money for aggregate demand in turn lies not via real balance effects or any other justification for money in the is equation but on money s ability to serve as a proxy for the various substitution effects of monetary policy that exist when many asset prices matter for aggregate demand this role for monetary aggregates which is supported by empirical evidence enhances the value of money to monetary policy

the stability of long run money demand in five industrial countries abstract this study provides strong evidence for the stability of long run demand functions for narrowly defined money m1 in five industrial countries u s japan canada u k and west germany using post war quarterly data evidence of stability is examined using two different estimation techniques and through a formal test of parameter constancy designed specifically for cointegrating vectors in the majority of these countries the key to stability is the imposition of a unitary long run income elasticity that is rarely rejected by the data

absorptive capacity coauthoring behavior and the organization of research in drug discovery we examine the interface between for profit and publicly funded research in pharmaceuticals firms access upstream basic research through investments in absorptive capacity in the form of in house basic research and pro publication internal incentives some firms also maintain extensive connections to the wider scientific community which we measure using data on coauthorship of scientific papers between pharmaceutical company scientists and publicly funded researchers connectedness is significantly correlated with firms internal organization as well as their performance in drug discovery the estimated impact of connectedness on private research productivity implies a substantial return to public investments in basic research

monetary aggregation and the demand for assets in this paper we consider and illustrate a solution to the inter related problems of monetary aggregation and estimation of money demand the problem with the definition of money is that the relative prices of the monetary components fluctuate over time rendering simple sum aggregates inefficient the authors apply revealed preference tests to the u s monthly data to determine admissible and separable components these components are then aggregated using the divisia technique to deal with the problem of money demand the dynamic fourier expenditure system is used to provide estimates of the elasticities of substitution these while showing general substitution among the liquid assets studied are quite variable over time this finding underscores the inefficiency of both simple sum aggregation and single equation log linear money demand estimation copyright 1997 by ohio state university press

how should central banks determine and control their bank note inventory abstract this paper looks at a relatively unresearched but important area in money and banking namely the provision of currency by the central bank one of the most important functions of central banking is the provision of liquidity to the economy however in fulfilling this function central banks have to be prepared for unexpected money demand shocks as well as production transportation and cost of capital constraints the paper develops a dynamic cost minimizing note inventory model that solves for the central bank s optimal note order size and frequency as part of the modeling exercise a value at risk model is used to solve for an inventory cushion

unraveling the process of creative destruction complementary assets and incumbent survival in the typesetter industry when radical technological change transforms an industry established firms sometimes fail drastically and are displaced by new entrants yet other times survive and prosper drawing upon an unusually rich data set that covers the technological and competitive history of the typesetter industry from 1886 to 1990 this paper uses a combination of quantitative and qualitative analysis to unravel this process of creative destruction it argues that the ultimate commercial performance of incumbents vs new entrants is driven by the balance and interaction of three factors investment technical capabilities and appropriability through specialized complementary assets in this industry specialized complementary assets played a crucial role in buffering incumbents from the effects of competence destruction and an analysis that examined investment or technical capabilities in isolation would have led to misleading results this work thus highlights the importance of considering multiple perspectives when examining the competitive implications of technological change 1997 by john wiley sons ltd

u s narrow money for the twenty first century i introduction though money retains its fundamental role in a market economy money measures have been noticeably de emphasized within the conduct of u s monetary policy the federal open market committee fomc stopped reporting annual growth objectives for monetary aggregates although it states that money supply still has value for gauging economic conditions board of governors 2000 however a growing body of research calls for returning monetary aggregates to a more prominent role within monetary policy meltzer 1998 asserts that the view of persistent money growth as being the source of inflation is again widely accepted perhaps more firmly held by some central bank governors now than at any time in the twentieth century nelson 2002 provides evidence that base money has a significant effect on output relative to potential in the united states and united kingdom even after controlling for the short term real interest rate nelson 2003 argues that money growth governs the mean and dynamics of inflation in present day new keynesian models leeper and roush 2003 find evidence of an essential role for m2 within the transmission of monetary policy even after controlling for the nominal interest rate 1 this article focuses on the role of sweep programs in properly measuring narrow money in a sweep program banks move a portion of funds from customer demand deposits dds or other checkable deposits ocds into instruments with zero statutory reserve requirements we examine the effects of two types of sweep programs in the united states retail sweep programs and commercial demand deposit sweep programs narrow transactions based money historically has played a key role in the conduct of monetary policy as hafer and wheelock 2001 explain m1 served as the measure of money within the st louis model although monetarists had long been divided over whether a narrow or broad aggregate was the preferable target for monetary policy the fomc appeared to focus on m1 during the 1970s and early 1980s publishing their target ranges for money growth in terms of m1 hafer and wheelock 2001 though state that deviations in m1 velocity from its upward trend beginning in the early 1980s caused instability within the st louis model hoffman and rasche 1991 and hoffman et al 1995 place dummy variables in their vector error correction mechanisms to capture observed shifts in m1 velocity what attention remains on the money supply seems to be focused on broad rather than narrow aggregates but the broad aggregates have not escaped difficulties duca 2000 and hafer and wheelock 2001 document a deviation of m2 velocity from its long run trend in the early 1990s sometimes characterized as the missing m2 episode duca and vanhoose 2004 state that one response was to replace m2 with mzm consistent with the view that heightened substitution between small time deposits and mutual funds other than money market mutual funds mmmfs largely accounted for the instability in m2 velocity but as they go on to discuss m2 and mzm velocity encountered problems in the early 2000s plunging in ways not in line with opportunity cost variables duca and van hoose 2004 state that broader aggregates may have become more vulnerable to portfolio substitution involving stock and mutual funds other than mmmf narrow money has also been used extensively in examining money demand a sizable body of research has emerged that empirically investigates the demand for m1 especially using cointegration techniques hoffman and rasche 1991 hoffman et al 1995 dutkowsky and atesoglu 2001 and ball 2001 provide evidence of a stable long run money demand equation using m1 ball 2002 generates further support with m1 and establishes a correspondence between the partial adjustment formulation and the vector error correction model yet research and policy making using narrow money is currently being hampered by the lack of an accurate measure of transactions based money

the conduct of monetary policy nowadays the central bank of a country is the monopoly supplier of legal tender currency the commercial banks are committed to making their deposits convertible at par into such currency so the banks need to keep reserves in the form of currency and deposits at the central bank the central bank primarily conducts its policy by buying and selling financial securities e g treasury bills or foreign exchange in exchange for its own liabilities i e open market operations academic economists generally regard such operations as adjusting the quantitative volume of the banks reserve base and hence of the money stock with rates prices in such markets simultaneously determined by the interplay of demand and supply central bank practitioners almost always view themselves as unable to deny the banks the reserve base that the banking system requires and see themselves as setting the level of interest rates at which such reserve requirements are met with the quantity of money then simultaneously determined by the portfolio preferences of private sector banks and non banks this difference in perceptions is discussed again in section iii whether the monetary policy operations of central banks should be viewed primarily in terms of quantity or rate setting actions though of course one is the dual of the other these had allowed inflation and inflationary expectations to become entrenched by the end of the i970s a selection of representative statistics for a number of the leading industrialised countries is given in table i below this table indicates a common pattern among the countries of interaction between interest rates inflation and the growth of output the first period i969 78 is marked by high inflation negative real interest rates and slightly above average growth the second period i979 82 by very high nominal and high real interest rates high but falling inflation and very low output growth the final period i983 7 is marked by much lower inflation lower nominal but still high real interest rates and a recovery in output growth in some cases to above average rates in contrast the relationship in these countries between the growth of their chosen key monetary aggregate and nominal incomes appears much weaker also see clinton and chouraqui i987 especially p 7 whether measured in terms of monetary growth or in terms of real interest rates i e after adjustment for prospective future inflation policy during the

a note on inflation and welfare abstract this note provides an analytical confirmation and a refinement of lucas jr r e 2000 inflation and welfare econometrica 68 62 247 274 march numerical findings regarding the characterization of optimality in the shopping time model presented in that paper the original numerical analysis concludes that a coefficient of risk aversion greater than 0 01 is sufficient for optimality here we use arrow s sufficiency theorem to confirm this result and more importantly to show without more calculations how changes in parameters can affect it

marketing margins market power and price uncertainty this paper provides a conceptual and empirical framework for analyzing marketing margins in a noncompetitive food processing industry facing output price uncertainty the framework allows the decomposition of observed margins into components reflecting the marginal cost of the processing industry oligopoly oligopsony price distortions and an output price risk component the empirical procedure is applied to a time series of spreads between wholesale pork prices and farm prices of market hogs the principal finding is that while farm wholesale margins are more consistent with competitive performance now than they were fifteen years ago the output price risk component persisted throughout the sample period

money demand function estimation by nonlinear cointegration conventionally the money demand function is estimated using a regression of the logarithm of money demand on either the interest rate or the logarithm of the interest rate this equation is presumed to be a cointegrating regression in this paper we aim to combine the logarithmic specification which models the liquidity trap better than a linear model with the assumption that the interest rate itself is an integrated process the proposed technique is robust to serial correlation in the errors for the usa our new technique results in larger coefficient estimates than previous research suggested and produces superior out of sample prediction copyright 2007 john wiley sons ltd

consumer theory and the demand for money the following sections are included introductionthe definition of moneythe microeconomic theory of a monetary economythe aggregation theoretic approach to money demandindex number theorythe links between aggregation theory index number theory and monetary theoryunderstanding the new divisia aggregatesthe optimal level of monetary subaggregationeconometric considerationsapproximating the monetary services subutility functionan exampleempirical dimensionsempirical comparisons of index numbersempirical results for the demand system approachextensionsconclusions this abstract was borrowed from another version of this item

are risky assets substitutes for monetary assets i introduction financial innovation over the past couple of decades has enhanced the liquidity of many financial assets particularly noncapital certain risky assets further financial assets previously not regarded as monetary assets such as mutual funds and particularly money market mutual funds now provide monetary services such as liquidity and transactions services l given the increased liquidity of such funds the question arises as to whether risky assets are substitutes for capital certain monetary assets if noncapital certain assets are indeed substitutes for capital certain assets and are also being used for transactions purposes then agents may be treating risky assets as money although this issue has been addressed in the united states in the context of the addition of bond funds to m2 by for example duca 1995 no such research has yet been conducted in the united kingdom including risky assets in the analysis contradicts the work of ando and shell 1975 spencer 1986 appendix i pp 184 93 and spencer 1994 broadly they argue that since some nonrisky assets provide monetary services and probability also liquidity individuals would not hold risky assets for these purposes 2 in contrast hicks 1935 states that falling transaction costs and rising wealth encourages individuals to increase the proportion of risky assets in portfolio holdings most studies generally assume that risky assets fail to provide significant monetary services and for example have been excluded from the asset demand analysis of barr and cuthbertson 1991a drake fleissig and swofford 1997 and money demand studies such as taylor 1987 belongia and chrystal 1991 drake and chrystal 1994 and drake 1996 alternatively barr and cuthbertson 1991b use only risky assets in their asset demand system analysis the degree of substitution between risky assets and capital certain assets is an empirical issue while noncapital certain risky assets mutual funds and other financial assets may well be becoming closer substitutes for what people are using as money they are in no way perfect substitutes for the highly liquid cash assets to evaluate the role of noncapital certain assets we construct a noncapital certain risky divisia aggregate consisting of equities government bonds and unit trusts the divisia index allows for less than perfect substitution between assets and weights component assets according to their differing degrees of moneyness which may vary over time due to many factors for example financial innovation see barnett 1980 this methodology has been widely applied to monetary aggregation and money demand studies in a number of countries as in belongia 1996 drake 1996 drake and chrystal 1997 and anderson jones and nesmith 1997 to determine whether risky assets are substitutes for capital certain assets we use two other divisia aggregates constructed from traditional measures of money the first of these is an aggregate of highly liquid zero yield cash assets given that the component assets all have zero own rates of return however divisia aggregation is equivalent in this case to simple summation the second aggregate is a divisia aggregate of interest bearing capital certain assets including risky assets complicates the analysis because the degree of risk aversion will affect the estimates of substitution between capital certain and noncapital certain assets thus we also analyze how different degrees of risk aversion affect the results the substitution relationship between assets is estimated from an asymptotically ideal model aim the choice of an aim is in line with the recommendation of barnett fisher and serletis 1992 that flexible systems of demand equations should be used that allow for nonlinear optimizing behavior by economic agents furthermore this paper can be seen as an extension of the recent application of this model to u

relative prices in the uk personal sector money demand function nonparametric demand analysis is used in order to establish admissible monetary aggregates and also to establish a potential role for relative prices in the money demand function a conventional money demand specification is then contrasted with a money demand function which contains the relative prices of durables nondurables and services as additional regressors evidence from long run cointegration analysis short run error correction models and nonnested testing all confirm a role for relative prices in the u k personal sector s money demand function copyright 1996 by royal economic society

monetary policy and monetary asset substitution abstract this paper shows that changing the target federal funds rate induces changes in relative user costs of monetary assets estimated morishima elasticities of substitution from the fourier flexible form reveal greater substitution from transactions assets and savings deposits into small time deposits than into retail money market mutual funds

getting competition down to a science the effects of technological competition on firms scientific publications prior research about the interaction between private firms and the scientific community has largely viewed firms articles in scientific publications as a means to improve research and development productivity by encouraging their researchers to publish scientific papers firms can maintain linkages with the scientific community attract talent and access external knowledge on which they can build to create innovations this paper in contrast emphasizes the role of scientific publications in firms battles for market dominance and examines how competitive conditions shape firms propensities to publish scientific articles about their innovations focusing on the context of pharmaceutical drugs we develop propositions about how the competition that one drug faces from similar drugs and potential substitutes influences the innovating firm s inclination to publish articles in the top medical journals about that drug to facilitate its assessment by the u s food and drug administration and the medical community we also propose that scientific articles about competing drugs compel a firm to highlight its own drug in scientific papers to assert the drug s uniqueness and mitigate the threat of substitution whereas prior research has elucidated how science contributes to enhancing firms competence at creating innovations which is critical to their ability to compete in technology intensive environments this paper draws attention to how competition in turn permeates into the scientific arena creating inducements for firms to use scientific publications to position their innovations in the marketplace