a model based indicator of the fiscal stance we argue that the conventional approach to assessing the fiscal stance based on econometric tests of the government present value budget constraint pvbc is of limited practical use we propose an alternative measure that focuses on short run fluctuations in the fiscal stance namely a model based indicator that compares a target level of the debt gdp ratio at a given point in the future with a forecast based on the government budget constraint gbc where the forecasts are obtained using a recursively estimated var by log linearising the gbc the index can be decomposed into the various different components of which it is comprised using data from 1970 to 2011 we conduct a detailed time series study of the fiscal stances of four countries the united states the united kingdom germany and greece and we calculate the index for 11 other eu countries for most countries the index shows that their fiscal stances vary from being too loose to too tight almost without exception the index drops sharply from 2007 showing the harmful effect on their fiscal stances of the recent recession

nonlinear effects of exchange rate volatility on the volume of bilateral exports in this paper we investigate empirically the impact of exchange rate volatility on real international trade flows utilizing a 13 country data set of monthly bilateral real exports for 1980 1998 we compute one month ahead exchange rate volatility from the intra monthly variations in the exchange rate to better quantify this latent variable we find that the effect of exchange rate volatility on trade flows is nonlinear depending on its interaction with the importing country s volatility of economic activity and that it varies considerably over the set of country pairs considered copyright 2003 john wiley sons ltd

criteria of external sustainability abstract this paper examines the problem of assessing external sustainability that is determining whether present paths of external imbalance can continue indefinitely conditional on present policies being maintained the main contribution of the analysis is to show how conditional forecasts of external imbalance may be generated in a consistent way that explicitly incorporates a mechanism for achieving sustainability an index of external unsustainability is derived that reflects the probability of future changes in policy expected by private agents over time

u s bilateral trade flows and exchange risk during the floating period abstract this paper tests for real exchange rate risk effects on u s bilateral trade flows during the floating period using several new as well as previously used risk measures significant negative effects occur in five of six u s import flows and in two of six u s export flows with one export flow showing a significant positive effect these results are consistent with several previous findings for aggregate u s trade two risk measures using the forward exchange rate and assuming a time varying risk premium provide marginally more significant results than the others

market performance in an open developing economy technical and allocative efficiencies of korean industries this paper first examines determinants of technical efficiency in terms of competition and government regulation including protection in korean industries relying heavily upon the concepts of x efficiency and rentseeking activities allocative efficiency measured as profitability is then considered with technical efficiency as a determinant the outcome of the regression shows that both the sheltering of industries from international competition and the financial market distortions strongly affect technical efficiency and that technical efficiency as well as effective protection rate are important determinants of profitability

time preference and international lending and borrowing in an overlapping generations model two economies represented by diamond type overlapping generations models and differing only in their pure rates of time preference are joined together capital formation balance of payments behavior and welfare are compared under autarky and openness with a positive natural rate of growth the low time preference country runs a current account surplus in the steady state but not necessarily outside it if preexisting capital is not shiftable between countries integration in the world economy makes the high time preference country worse off in the short run the ranking of stationary utility levels under autarky and openness is ambiguous

the role of information provision as a policy instrument to supplement environmental taxes this paper examines within a dynamic framework the role of information provision as a policy instrument to supplement environmental taxation several products are responsible for health as well as environmental damages many consumers do not possess the required information to optimally substitute away from these products however as the stock of information regarding the negative effects of these products builds up an increasing fraction of consumers behaves optimally the government uses two policy instruments environmental taxation and information provision we show that as the accumulated stock of information increases the optimal tax rate declines over time information provision can shift market demand towards environmentally friendly goods over time and thus reduce the required level of the tax rate our results provide strong evidence in support of information campaigns as a policy instrument to supplement traditional environmental policies

ex ante and ex post welfare optimality under uncertainty it is widely believed by economic theorists that if there were no transactions costs and if all information about the economy were perfectly shared by all then arrow debreu contingent commodity markets should bring about an ideal allocation the basis for this belief seems clear we have the two efficiency theorems of welfare economics which assure us that in the absence of external effects any competitive allocation is pareto efficient and that any pareto efficient allocation is competitive provided that appropriate lump sum transfers are made of course there are some reservations that need to be made local satiation and non convexities are well known to cause problems but these are not the problems i wish to discuss here to return to the usual argument the next step involves noticing how with contingent commodity markets the efficiency theorems of welfare economics carry over to an economy with uncertainty as explained for instance in chapter 7 of debreu s theorpj of value the fundamental value judgment that gives these efficiency theorems their normative interest is what may be called consumer sovereignty it is an assumption that the social welfare ordering should respect the preferences that govern consumers market behaviour it is a serious value judgment more serious than most economists have been prepared to concede but its seriousness increases when there is uncertainty we know full well that individuals misperceive the probabilities of certain events assuming that they even perceive any probabilities at all see for example kahneman and tversky 1979 nor are we always willing to accept as appropriate the attitudes to risk of individuals who seem either extremely reckless or extremely cautious societies are often willing to make some gestures towards property owners who have not insured themselves adequately against damage from fire flood or tempest and not just because of imperfect insurance markets or even misperceptions of probabilities in addition the inequalities of income that arise when some individuals take more risks than others are not necessarily seen to be desirable particularly if an individual has undertaken a useful but risky activity and has a very low income as a result of failure such gestures are examples of contingent lump sum transfers it seems clear that if such transfers occur to a sufficient extent they could supplant completely the securities markets which are usually sufficient to bring about pareto efficiency they may even be able to go further and correct the imperfections of an arrow debreu market allocation when individuals do misperceive probabilities or else have wrong attitudes to risk this is the main question i wish to consider here the idea that consumer sovereignty should not always extend to economies with uncertainty is not new it can be found in work by diamond 1967 dr6ze

a dynamic model of advertising and market shares this paper presents a model of strategic advertising and the battle for market shares between incumbents and entrants the lagged impact of advertising allows incumbents strategically to use preentry advertising to effect the postentry equilibrium solution however because the advantages to advertising are erodable by counter persuasive advertising strategies of entrants the threat of entry may cause incumbents to take retreative or aggressive strategies the incumbants retreative or aggressive posture depends crucially on the erosion impact on their advertising

information and securities a note on pareto dominance and the second best a unified analysis is provided of two related problems the first concerns the welfare impact of changing the set of tradeable securities in an incomplete market economy the second concerns the welfare implications of changing the common information structure faced by all agents both problems arise from a common second best framework in which expanding the set of trading opportunities can lead to a pareto worsening journal of economic literature classification number 026 rl 1987 academic press inc in this note we provide a unified analysis of two related problems the first concerns the welfare impact of changing the set of tradeable securities in an incomplete market economy the second concerns the welfare implifications of changing the common information structure faced by all agents we will discuss apparent paradoxial results that arise in both problems using a single geometric example the example provides a clear illustration of the source of the apparent paradoxes both problems arise from a common second best framework by second best we mean the lipsey lancaster 20 idea of additional constraints on allocations over and above resource availability constraints our discussion brings together two related but distinct literatures the we are greatly indebted to james ohlson for many constructive comments and to david kreps and n v long for comments on a previous draft

exchange rate volatility international trade and resource allocation a perspective on recent research abstract recent research on the effects of exchange rate volatility is discussed and directions for future research are explored the need to pay more attention to the effects of diversification and firms characteristic is emphasized it is suggested that while international risk has risen substantially since floating the differential between international and domestic risk may not this could help explain the failure of international trade to fall drastically and suggests that exchange rate volatility has been more a reflection than an independent cause of underlying instability

on the valuation of uncertainty in welfare analysis thisarticle developsa general model of private and public choice under temporal uncertainty the model incorporatesthe effectsof ris k preferencesand the pros pect of future learning into both the individual and aggregate valuationsof public projects the analys isprovidesnew ins ightson individual valuation itsimplicationsfor benefit cos t analys isand the characterization of paretoefficiency under uncertainty it also resolves some of the confusion in the option value and quasioption value literature private and public decisions typically involve many sources of uncertainty including uncertainty about prices income technology environmental quality health etc temporal uncertainty is also common where some of the risk 1 getsresolved over time due to learning additionally private and public decisions often exhibit some form of irreversibility implying that current choicescan affect the ability of decision makers to be flexible and to adjust their future choices in response to forthcoming information when uncertainty and irreversibility are both present welfare analys isgainscomplexity and importance although considerable progress has been made since weisbrod s seminal article a better understanding of the roles of uncertainty and irreversibility in welfare analys improve our ability aseconomis ts to communicate the importance of risk in project evaluation to public decision makers

the current account in the macroeconomic adjustment process macroeconomic adjustments to changes in the economic environment are to a large extent conditioned by the intertemporal choices of economic agents when agents face an intertemporal budget constraint a decision to alter current indebtedness implies changes in future consumption possibilities and will be based on expectations of the entire future path of key variables and not only current variables a formal model to show how today s current account is a function of both current and future economic variables is presented the determination of the current account under classical assumptions of market clearing and continuous full employment is emphasized

the resource reallocation costs of fixed and flexible exchange rates a multi country extension abstract for a sample of nineteen countries for 1972 79 we test the hypothesis that reallocation costs associated with temporary disturbances to the export sector of an economy are equal under fixed and flexible exchange rates this test is an extension of earlier work indicating that in the special case of canada reallocation costs do not differ significantly under fixed and flexible rates the degree of industrialization and openness of the countries included in the sample varies greatly so it is interesting that the canadian result generalizes to all but two cases these results suggest that even during periods of considerable exchange rate variability unnecessary resource reallocation costs may not be a significant disadvantage of a flexible exchange rate system

resource allocation to defensive marketing and manufacturing strategies abstract in this paper we investigate the coordinated use of marketing and manufacturing strategies to formulate a defensive business strategy for an incumbent firm upon market entry while defensive marketing strategies have been researched extensively little has been done on defensive manufacturing strategies and even less on coordinating these two we propose a formulation for the joint formation of a defensive strategy by the marketing and production functions under budget constraint considerations the incumbent firm may allocate its resourcesto advertising and distribution expenditures as well as to manufacturing investments to reduce the unit production cost the incumbent firm has also the option of simply allocating all of its resources purely to advertising and distribution we show that while there exist cases where the optimal reaction to entry involves investments in manufacturing improvements there are also cases where defense is in marketing strategies alone we identify the market conditions that promote such reactions to entry and also provide sensitivity analysis

financial interdependence and the state international monetary relations at century s end as the twentieth century draws to a close one can find sharply contrasting views among leading scholars on almost every key issue in positive international political economy how strong are international as opposed to domestic influences on policy how important are issues of national security high politics versus economic considerations low politics what role do institutions international and domestic play in influencing and constraining the behavior of governments why is international cooperation rare but not unheard of the list goes on and on

informative advertising with differentiated products in this paper we study the role of promotional expenditures by sellers in a model of product differentiation advertising conveys full and accurate information about the characteristics of products heterogeneous consumers who have no source of information other than advertisements seek to purchase the products that best fit their needs despite the roles played by advertising in improving the matching of products and consumers and in increasing the elasticity of demand faced by each firm we find that the market determined levels of advertising are excessive given the extent of diversity in the market we derive a promotional equilibrium based on a specific information transmission technology paying explicit attention to the structure of consumer information and its impact on firms demand curves this allows us to study the effects of changes in the advertising technology including an increased ability to target messages to specific groups of consumers on the equilibrium in the product market we find that decreased advertising costs may reduce profits by increasing the severity of price competition

ex post efficiency and ex post welfare some fundamental considerations ross starr 1973 demonstrates that a competitive equilibrium while ex ante pareto efficient may not be ex post efficient the authors contend that an implicit second best issue requires that this assertion be substantively qualified specifically the ex ante efficiency concept is second best while its ex post counterpart is first best they est ablish the equivalency of first best ex post and ex ante concepts whe never the second best ex ante efficiency conditions hold the second best elements derive from the timing of information flows starr s theorem is shown to concern the social gains from improved information additional results deal with varying concepts of ex post welfare copyright 1988 by the london school of economics and political science

protectionist pressures and aggregate economic conditions comment on takacs this paper explores the influence of u s macroeconomic conditions and the international trade position on protectionist pressures as measured by escape clause cases brought before the international trade commission several possible difficulties with takacs pioneering empirical study of this topic are considered it is argued that while further support is found for her principal conclusion that the state of the domestic economy is a significant determinant of such protectionist pressures the quantitative strength of such aggregate factors is less than was suggested by takacs original study

entry by foreign firms in the united states under exchange rate uncertainty this paper tests the effects that real exchange rate fluctuations had on foreign direct investment into the united states during the 1980s using a sample of foreign investments in sixty one four digit sic u s wholesale industries this paper finds exchange rate volatility to be negatively correlated with the number of foreign investments that occur in these industries this negative effect is most pronounced for industries where sunk investments in physical and intangible assets are relatively high although exchange rate volatility deters investment from all countries its effect was most significant for investments by japanese companies copyright 1993 by mit press

advertising and economies of scale critical comments on the evidence the general issue to be discussed in this review article is does the advertising cost per dollar of sales increase as increases in total advertising expenditures occur stated in this fashion however the question of economies of scale and increasing returns to advertising is vague and equivocal the difficulty of formulating the question in a rigorous enough fashion is the root cause of much of the controversy and confusion about the efficiency of advertising at various levels of advertising expenditures or other forms of advertising input regardless of the formidable theoretical and methodological problems involved the economies of scale in advertising remain an important issue more often than not antitrust measures and public regulation of the marketplace are based on or legitimized by assumptions of substantial scale economies enabling established large corporations to maintain market power keeping competitors out and prices up the purpose of this article is critically to review the most important empirical evidence relating to economies of scale in advertising the article

exchange rate effects on the volume and variability of trade flows abstract this paper investigates the effects of exchange rate uncertainty on the volume and variability of trade flows employing a signal extraction framework we show that the direction and magnitude of importers and exporters optimal trading activities depend upon the source of the uncertainty general microstructure shocks fundamental factors driving the exchange rate process or a noisy signal of policy innovations providing a rationale for the contradictory empirical evidence in the literature we also show that exchange rate uncertainty emanating from general microstructure shocks and the fundamental factors reduces the variability of trade flows while that related to a noisy signal of policy innovations increases variability

exchange rate uncertainty and foreign trade abstract this paper starts with reviewing the existing literature on exchange rate uncertainty and trade flows it then argues that potential costs of medium term uncertainty in exchange rates and competitiveness are likely to be much larger than that of exchange risk which has been the focus of the existing literature two measures of medium term exchange rate uncertainty are constructed one is a weighted function of the magnitude of past movements in nominal exchange rates and the current deviation of the exchange rate from equilibrium while the second depends on both the duration and the amplitude of misalignment from equilibrium exchange rates the empirical evidence reported in the paper suggests that when exchange rate uncertainty is defined over a medium term period it does affect adversely trade flows of the industrial countries under review with the notable exception of the united states

advertising expenditure and consumer prices this paper studies the effect of a change in the marginal costs of advertising on advertising expenditures of firms and on consumer prices i make use of a policy change in austria that involved an increase of the taxation of advertising in parts of the country and a simultaneous decrease in other parts i show that advertising expenditures of firms move quickly in the opposite direction of the marginal costs of advertising consumer prices increase with advertising in some industries and decrease in others this effect correlates with informational differences in advertisements across industries

strategic entry deterrence in analyzing deterrence of large scale entry two classes of entry barriers may be distinguished an innocent entry barrier is unintentionally erected as a side effect of innocent profit maximization in contrast a strategic entry barrier is purposely erected to reduce the possibility of entry two types of innocent barriers may also be distinguished a postentry absolute advantage has the property that if entry did occur the established firm would be at a profit advantage over the entrant examples are superior technology or product design patents and lower input prices a preentry asymmetry advantage arises from the fundamental preentry asymmetry between established firm and potential entrant before the entrant makes his entry decision the established firm has already committed resources this prior existence gives first move advantages the preentry asymmetry is independent of symmetry or asymmetry in the rules the equilibrium concept of the postentry game that might ensue even if the postentry game will be played according to nash cournot or entrant as leader rules the preentry leadership

assessing the fiscal stance in the european union and the united states 1970 2011 the huge increases in debt gdp ratios following the 2007 2009 global financial crisis which are unprecedented except in times of war has focused attention on the viability of the fiscal positions of eu countries and the us how to assess this and the likely future evolution of these positions this paper proposes an indicator of the fiscal stance which computes the fiscal adjustment required to reach a specific debt gdp targeted given the forecasts of future deficit and interest rates obtained from an unrestricted recursively estimated var model the index is easy to compute and can be decomposed to disclose the different contribution of revenue expenditure nominal yields inflation and growth to the fiscal stance for this reason it provides a transparent and detailed measure of the fiscal stance particularly suitable for multi country surveillance as a result the index improves on the tax gap indicators widely used by governments and international agencies and is far more informative than formal econometric tests of fiscal sustainability the time series of the indicator for individual eu countries and the us show that their fiscal position has fluctuated considerably over the last 40 years and has particularly deteriorated since 2007 the index predicts that the adjustment required to restore pre crisis debt gdp levels are higher for high debt countries like greece italy and portugal they become more severe the shorter is the time horizon for the adjustment as a large degree of uncertainty surrounds the assessment of the fiscal stance in the medium and long run we argue that policy makers should inform their policy based on the worst case scenario predicted by the indicator

real exchange rate variability and the choice of exchange rate regime by developing countries abstract this paper draws together two distinct strands of the exchange rate literature it proposes that real exchange rate variability and the choice of exchange rate regime are jointly determined i test this claim by estimating a simultaneous limited dependent variable model with data from a cross section of developing countries during the recent floating period drawing on the relevant exchange rate literature the paper examines a number of exogenous determinants of exchange rate variability and the choice of exchange rate regime

noisy advertising and the predation rule in antitrust analysis can advertising by dominant firms pose a predatory threat theoretically the answer clearly is yes however empirical evidence indicating the importance of this theoretical finding is largely missing economists empirical studies of advertising which typically focus on the question of whether high levels of advertising are indicative of the presence of a barrier to entry or signal that advertising information can substitute for consumption experience usually employ average advertising levels that hide strategically focused price cuts or changes in short term advertising rates

would international currency taxation and currency stabilisation in developing countries completely flexible exchange rates may be excessively volatile with the implied currency misalignments leading to real inefficiencies in resource allocation and detrimental effects on economic growth this paper analyses whether international currency taxation would be effective in calming exchange rate volatility and avoiding currency crises within the context of a simple model of exchange rate determination it is found that the effects of a tax on foreign exchange volatility depend on the nature of speculation and whether the focus is on capital inflows or outflows

exchange rate volatility and international trading strategy abstract it is usually argued that an increase in exchange rate volatility reduces the volume of international trade as trading firms are risk averse this paper shows that exporting firms benefit under fairly general conditions from an increase in exchange rate volatility firms optimally adjust their export volumes to the level of the exchange rate exporting is an option which is exercised if profitable in addition the paper presents conditions under which the volume of international trade grows with exchange rate volatility

environmental groups in monopolistic markets we examine a market in which a monopolistic firm supplies a good the production of the good causes damage to the environment consumers are heterogeneous with respect to their disutility of the environmental damage an environmental group can enter the market and set up a campaign in order to influence consumers preferences we characterize the equilibrium of the resulting entry deterrence game and investigate its properties it turns out that the aggregated environmental damage is lowest if the firm is able to deter entry of the environmental group and moreover the fixed entry cost of the environmental group is small enough

valuing amenity resources under uncertainty a skeptical view of recent resolutions abstract this paper questions colby and cory s recent characterization 1987 1988 1989 of the appropriate benefit measures to be used to value improvements in the quantity quality or conditions of access to environmental resources under uncertainty the paper uses graham s 1981 analysis of individual and aggregate welfare measurement under uncertainty to demonstrate the problems with colby and cory s recommendations it evaluates their classification of important research issues and summarizes in general terms the difficulties that arise in the practical implementation of the conceptual measures for benefits under uncertainty

information and the dynamics of environmental protection the concept of the critical period earlier work on environmental decisions under uncertainty is extended from two periods to many permitting treatment of a richer variety of problems implications for pollution control policy of several different kinds of ecosystem recovery dynamics are considered in the context of improving information about ecosystem behavior and preferences for environmental goods multiperiod analogs of the two period concept of quasi option value are developed

information manipulation and climate agreements it appears that news media and some pro environmental organizations have the tendency to accentuate or even exaggerate the damage caused by climate change this article provides a rationale for this tendency by using a modified international environmental agreement iea model with asymmetric information we find that the information manipulation has an instrumental value as it ex post induces more countries to participate in an iea which will eventually enhance global welfare from the ex ante perspective however the impact that manipulating information has on the level of participation in an iea and on welfare is ambiguous

on continuous time optimal advertising under s shaped response continuous time monopolistic models of advertising expenditure that rely on strict response concavity have been shown to prescribe eventual spending at a constant rate however analyses of discrete analogs have suggested thats shaped response convexity for low expenditure levels may allow for the periodic optima encountered in actual practice casting the dynamic between advertising and sales in a common format an autonomous first order relationship the present paper explores extensions along three dimensions an s shaped response function the value of the discount rate and the possibility of diffusion like response supplementing the treatment by mahajan and muller 1986 a flexible class of s shaped response models is formulated for which it is demonstrated that in contrast to findings in the literature on discretized advertising models continuous periodic optima cannot be supported further a set of conditions on the advertising response function are derived that contains and extends that suggested by sasieni 1971 collectively these results both suggest a set of baseline properties that reasonable models should possess and cast doubt on the ability of first order models to capture effects of known managerial relevance

ex post welfare economics and the theory of merit goods in recent years a number of papers have questioned the extension of the main theorems of welfare economics to a world of uncertainty stemming from the work of arrow 1953 and debreu 1959 the arrow debreu extension is based on the idea that consumer preferences may be defined on state contingent commodities as a special but important case these preferences may be represented by von neumann morgenstern utilities with this interpretation of the commodity space the main theorems of weltare economics remain valid in a world of uncertainty a competitive equilibrium is a pareto optimum a pareto optimum can be sustained as a competitive equilibrium and the diagnosis of the causes of market failure remains as before there are several reasons why one may feel uneasy about this construction a good deal of attention has been paid to the assumption of universality of markets necessary to establish the connection between equilibrium and optimum on a deeper level perhaps are the doubts that one may have about the criterion of welfare or efficiency first should social welfare be a function of individuals expected utilities or should the appropriate concept be that of expected welfare second if probability beliefs are not identical across individuals whose probabilities if any should be used for welfare evaluation in the next section we review some concepts and results in the recent literature on ex post welfare economics and in section ii it is argued that this literature can provide the foundations for a more satisfactory theory of merit goods a concept originally introduced by musgrave 1959 this idea is applied in section iii to a model with a complete set of markets in the arrow debreu sense and in sections iv and v to an incomplete markets model which provides the most natural framework for the study of merit goods various remarks on further aspects of the problem are collected in the concluding section of the paper

collapsing exchange rate regimes some linear examples abstract we construct a pair of linear examples to study the collapse time of a fixed exchange rate regime the first example is a perfect foresight continuous time model which allows calculation of the exact collapse time and the tracking of reserves the second example is a discrete time stochastic model which yields an endogenous probability distribution over the collapse time and produces a forward discount of the exchange rate

exchange rate policy options for post crisis southeast asia is there a case for currency baskets following the recent financial crises in southeast asia and elsewhere the perennial issue of the exchange rate policy options for small and open developing countries has resurfaced there seems to be an emerging consensus that the frequency with which soft pegs have been susceptible to speculative attacks in this era of escalating global capital flows has increased pressure for developing countries to adopt corner exchange rate regimes this paper takes issue with this popular one size fits all prescription of exchange rate arrangements for developing countries and explores exchange rate policy options for post crisis southeast asia the principal purpose of this paper is to discuss the case for currency baskets as a general regime in its own right for southeast asia as opposed to being a compromise between the two corner solutions

has exchange risk depressed international trade the impact of third country exchange risk abstract this paper argues that the effect of exchange risk on bilateral and aggregate trade flows should be analyzed by including the impact of third country exchange risk factors in addition to direct bilateral or multilateral risk after a theoretical examination of these effects us bilateral export flow to its six largest trading partners are analyzed empirically i find individuality and jointly significant third country risk effects in most cases in contrast to some recent bilateral efforts i find a steadily growing negative impact on trade flows from exchange risk during floating and in contrast to recent aggregate trade flow studies i conclude that there was no temporary decline in exchange risk during the late 1970s

the effect of exchange rate variability on trade the case of the west african monetary union s imports abstract the west african monetary union during the period of this study 1976 1982 comprised six countries benin burkina faso co te d ivoire niger senegal and togo since their common currency the cfa franc has been pegged to the french franc at an unchanged rate since 1948 the entire nominal exchange rate variability that traders in the region face is due to movements in the french franc with respect to other currencies in the face of exchange rate risk that is not always coverable trade should be adversely affected using three measures of variability in the nominal effective exchange rate index this paper finds that exchange rate variability has not affected the union s real imports or the diversification of trade away from the franc zone

simultaneous equations models of the structure performance paradigm abstract this paper is concerned with determining the dimension of the simultaneous equations model surrounding the basic profits concentration relationship a very general model is considered and then simplified using a simple test for exogeneity and it is concluded that the model is nonlinear in concentration and that simultaneous interaction occurs between profits and foreign competition variables

green markets eco certification and equilibrium fraud abstract consumers voluntarily pay significant price premiums to acquire unobservable environmental attributes in green markets this paper considers the performance of eco certification policy under circumstances where consumers cannot discern environmental attributes in goods but are able to form rational expectations regarding the extent of illicit activities in the green market the main results are i fraud is less prevalent in green markets when entry barriers limit the number of firms ii conventional environmental policies on polluting techniques increase the incidence of fraud and can even preclude the use of non polluting techniques which would otherwise emerge in green markets iii voluntary eco certification policies can decrease fraud increase output and raise profits per firm and iv in cases where the socially optimal resource allocation can be supported the optimal policy involves negative unit certification fees positive fixed certification fees and is revenue generating for the certifying agent

what role for imf surveillance abstract this paper reviews two recent reports on the international monetary system one by the group of 10 industrial countries and the other by the group of 24 developing countries it contrasts their recommendations for improving policy surveillance by the international monetary fund its own recommendations include the strengthening of enhanced surveillance to make it more formal without making it more onerous the introduction of shadow conditionality to give guidance to governments about their eligibility to draw on the fund and the further development of multilateral surveillance along lines proposed at the tokyo summit it would broaden that process however by shifting the focus from policy compatibility defined with reference to exchange rate behavior to policy quality defined with reference to the behavior of global aggregates such as the growth rate of world trade the paper examines the use of target zones to manage exchange rates and argues that it would not weaken the case for multilateral surveillance which is needed not only in setting the zones but also to make sure that policies adopted by participating countries do not impart an inflationary or deflationary bias to the international economy

on welfare analysis under temporal uncertainty the implications of uncertainty for costbenefit analysis remain controversial one issue raised in the evaluation of welfare compensation tests has been the appropriate use of observable economic behavior in the measurement of agents willingnessto pay or willingness to receive in the context of surplus measure this question has received considerable attention in the analysis of the welfare impact of price changes under certainty e g willig 1976 chipman and moore 1980 hausman 1981 mckenzie and pearce 1982 moreover the introduction of uncertainty has raised a number of questions about the appropriateness of alternative welfare measures e g schmalensee 1972 1975 graham 1981 for example graham 1981 has argued that there is little basis to recommend either option price or expected surplus for a role of prominence in welfare analysis the issue rather is whether or not there exists a distribution of individual payments or receipts that maximizes aggregate willingness to pay and passes the pareto improvement test i e that leaves no individual worse off and makes at least one individual better off graham 1981 but in the implementation of the pareto improvement test how is the aggregate willingness topay supposed to be measured empirically more specifically what is the influence of uncertainty and its temporal resolution on the validity of agent surplus the welfare triangle given by the area between a compensated choice function and its corresponding price as a welfare measure some progress has been made in this direction by chavas bishop and segerson 1986 in the context of option price however as shown by graham 1981 while option price is the appropriate measure of benefits in situations involving similar individuals and collective risk it may not be the appropriate welfare measure in more general situations therefore there is a need to refine our understanding of how agent surplus can be used as a welfare measure in the general context of a potential pareto improvement test under temporal uncertainty the objective of this paper is to investigate how temporal uncertainty can affect the measurement of willingness to pay in general welfare compensation tests temporal uncertainty corresponds to the situation where new information becomes available over time which resolves at least part of current uncertainty facing economic agents this new information can influence future individual decisions as well as individual willingness to pay particular attention will be given here to the case where income compensation is conditional on the new information that will become available in the future and results in a more efficient allocation of risk among individuals this paper focuses on competitive agents e g households or firms for which welfare changes can be expressed in terms of price changes this includes the analysis of the welfare effects of various government pricing policies this also includes the evaluation of public projects based on the travel cost method which under a weak complementarity condition consists in using price changes of related private goods as an indirect means of measuring the value of a public project maler 1974 the analysis is presented in the context of a general two period model where the agents are uncertain about the state of the world as suggested by graham 1981 it is shown that the option price provides a lower bound on