the choice of a monetary instrument in a small open economy the case of korea abstract using a small macroeconometric model of korea this paper evaluates the correct choice of a monetary instrument either the money stock or the interest rate the optimal multiperiod policy and the value of current information on some monetary varialbles

the determination of technology and commodity policy in the us dairy industry united states dairy policy includes both predatory and productive components the milk price support program is designed to transfer income to dairy farmers while research and extension expenditures are designed to increase social welfare the purpose of this chapter is to provide an empirical example of the theory developed in chapter 4

choosing a monetary instrument the case of supply side shocks abstract this paper examines the monetary instrument choice problem in models with an explicit supply sector and endogenous prices and price expectations we use the popular linear quadratic certainty equivalence framework to obtain analytic solutions the results indicate that interest rate policies generally are better able to insulate the real sector from unanticipated supply shocks we also show that at this level of abstraction the optimal choice of an instrument is independent of the specification of expectations e g rational vs adaptive price expectations the paper then reports empirical evidence from two experiments on the large nonlinear mit penn ssrc econometric model the evidence is consistent with the hypothesis that interest rate policies are preferable if the supply sector is the major source of uncertainty

prospect theory mental accounting and differences in aggregated and segregated evaluation of lottery portfolios if individuals have to evaluate a sequence of lotteries their judgment is influenced by the presentation mode experimental studies have found significantly higher acceptance rates for a sequence of lotteries if the overall distribution was displayed instead of the set of lotteries itself mental accounting and loss aversion provide an easy and intuitive explanation for this phenomenon in this paper we offer an explanation that incorporates further evaluation concepts of prospect theory our formal analysis of the difference in aggregated and segregated portfolio evaluation demonstrates that the higher attractiveness of the aggregated presentation mode is not a general phenomenon as suggested in the literature but depends on specific parameters of the lotteries the theoretical findings are supported by an experimental study in contrast to the existing evidence and in line with our theoretical results we find for specific types of lotteries an even lower acceptance rate if the overall distribution is displayed

measuring research benefits in an imperfect market voon 1994 recently analyzed the benefits of research in an imperfectly competitive market for an agricultural input studies of this type are important because the agricultural industries are becoming more concentrated and agricultural economists have begun to focus more attention on the implications of imperfect competition in the food and fiber sector the magnitude and distribution of research benefits under alternative market structures are important from both the perspective of agents incentives to undertake investments in research and allocating public monies to support research voon specifically compared the welfare benefit from a cost reducing innovation for an agricultural input under conditions of monopoly to perfect competition in the supply of the input the analysis was based on a framework of linear farm demand for the input and linear and rising marginal cost of supplying the input the key result based on simulations of the market equilibrium under alternative demand and cost elasticity configurations was that research benefits were greater under monopoly than under perfect competition this result is wrong specifically for

profitability of incremental generic promotion of australian dairy products the motivation for this study rests on two factors first australian dairy farmers spend around 20 million annually on generic promotion and estimates of the returns from this expenditure are required to facilitate efficient investment decisions second while the australian dairy industry has been highly regulated there has been a substantial reduction in assistance over the past decade and farm gate milk prices were deregulated on 1 july 2000 the profit potential of promotion may vary with the degree of regulation so past estimates of the returns from promotion may not hold in the competitive environment of the future hence the aim of this study is to examine the effects of government intervention on the profitability for dairy farmers of incremental changes in generic dairy promotion expenditure using a perfectly competitive market as a reference point competitive market price and quantity outcomes for the australian dairy industry are estimated the impacts of increments in dairy product and competing product generic promotion expenditures on dairy farmers profits are assessed using equilibrium displacement modelling finally graphical procedures are used to examine the effects of dairy industry regulation on the profitability of dairy promotion

price level determinacy with an interest rate policy rule and rational expectations abstract this paper reconsiders a result obtained by sargent and wallace namely that price level indeterminacy obtains in their model if the monetary authorities adopt a feedback rule for the interest rate rather than the money stock it is shown that the indeterminacy vanishes if the interest rate rule is chosen so as to have a desired effect on the expected quantity of money demanded this holds even if considerable weight is given in the choice of a rule to the aim of smoothing interest rate fluctuations

measuring research benefits in an imperfect market second reply in a recent comment on voon 1994 holloway 1999 has made the following conclusions under conditions that are almost identical to ones considered by voon 1994 and by sexton and sexton 1996 pivotal shifts in marginal costs generate strictly greater benefits under monopoly this paper reconsiders the above conclusion a simple geometric approach similar to alston et al 1988 and voon and edwards 1991 is used for the reassessment the analysis shows that a pivotal shift in the marginal costs generates greater benefits under perfect competition than it does under monopoly this is opposite to holloway s finding the model is depicted in fig 1 instead of a parallel shift in the mc curve as in voon 1994 a pivotal shift above the origin is assumed this implies that the supply price elasticity is greater than unity e 1 see voon and edwards 1991 under monopoly

achieving external and internal targets with exchange rate and interest rate intervention abstract this paper analyses how exchange rate and interest rate intervention rules can be computed so as to stabilize price and output and real exchange rate in the face of a variety of random shocks the major finding is that there exist a unique optimal intervention rule for both internal and external targets in the face of all random disturbances except for lm and foreign interest rate disturbances

impacts of foreign policies on the gains from research and promotion abstract this paper compares the direct and indirect effects of rest of the world row policy on welfare in country a the direct effect due to the change in world price caused by the policy in the absence of research promotion induced shifts in supply demand and the additional or indirect effect of the policy on the welfare gain to country a from its investment in research and promotion the results showed that the reduction in aggregate economic benefits from research promotion due to a world price reducing policy in row could be in the range of 25 50 of the direct reduction in social welfare due to the row policy in the case of australian beef veal it is possible for the welfare impact of the row policy via research payoff in country a to exceed the direct welfare cost

the political economy of public research investment and commodity policies in agriculture an empirical study the paper tests a political economy theory of simultaneous government decision making on income redistribution through commodity policies and on public research investment in agriculture we use data from 37 countries on agricultural protection and public agricultural research expenditures pari the empirical results are consistent with the political economy hypotheses the analysis suggest that structural changes in the economy have important effects on the political incentives for governments not only to subsidize or tax farmers but also to invest in public agricultural research furthermore the analysis supports the hypotheses that the impact of such structural changes on government decision making on pari is non linear and conditional on other factors regarding the impact of political institutions the results suggest that more democracy neither leads to more distortionary transfers agricultural protection nor to lower investment in public goods pari

the rate of return to public sector agricultural r d in the uk 1965 80 1989 the rate of return to public sector agricultural r d in the uk 1965 80 applied economics vol 21 no 8 pp 1063 1086

the gains from research into tradable commodities this paper develops a model for assessing the aggregate level and distribution of the benefits of reseach into tradable commodities it estimates gains to australia and to the rest of the world from research into the wool and wheat industries

the information content of the interest rate and optimal monetary policy optimal monetary policy rules are derived in a rational expectations cum contracting framework monetary policy is redundant if wage setters exploit the incomplete current information embodied in today s nominal interest rate however the monetary authorities can save wage setters the costs of indexing to the interest rate a contemporaneous money supply feedback rule is as effective as wage indexation a lagged rule relevant under a regime of money supply targeting is also as effective if investors use the interest rate both rules have the same implications for the real interest rate as poole s combination policy however the two rules have strikingly different implications for the nominal interest rate

market distortions and benefits from research the benefits from cost reducing research and their distribution under a range of price policies are compared with those that would arise in the absence of the policies while any price policy affects the distribution of research benefits the net national or world benefits may be reduced lef unchanged or increased depending on the nature of the policy and the significance of the country in the world market for the commodity some implications for decisions on price policies and for distortions in incentives for the allocation of resources to research are raised

recent and prospective adoption of genetically modified cotton a global computable general equilibrium analysis of economic impacts abstract this article provides estimates of the economic impact of initial adoption of genetically modified gm cotton and of its potential impacts beyond the few countries where it is currently common use is made of the latest version of the gtap database and model our results suggest that if other developing countries especially in sub saharan africa were to follow the lead of china south africa and most recently india adoption of gm cotton varieties could provide even larger proportionate gains to farmer and national welfare than in those early adopting countries furthermore those estimated gains are shown to exceed and reinforce those from a successful campaign under the wto s doha development agenda to reduce remove cotton subsidies and import tariffs globally

a dual approach to evaluating research benefits in the presence of trade distortions we present a new approach for evaluating the welfare consequences of technical change a major feature is its ability to incorporate multiple distortions and multiple sources of technical change in interrelated markets a modified balance of trade function provides money measures of welfare change in terms of producer profits consumer expenditures and tax revenues alternative specifications of technical change are presented to capture the effects of differences in the form of technical change in an illustrative numerical example the approach is applied to a case involving two distortions and technical changes in two related markets the example shows that the approach is reasonably easy to use and that accounting correctly for price distortions can have important implications for research benefit measures

genetic improvements in major us crops the size and distribution of benefits the distribution of welfare gains of genetic improvements in major us crops is estimated using a world agricultural trade model multi market welfare estimates were 75 larger than estimates based on the price exogenous change in revenue method frequently used by plant breeders annual benefits of these genetic improvements range from us 400 600 million depending on the supply shift specification of this 44 60 accrues to the us 24 34 accrues to other developed countries developing and transitional economies capture 16 22 of the welfare gain the global benefits of a one time permanent increase in us yields are us 8 1 billion discounted at 10 and us 15 4 billion discounted at 5 gains to consumers in developing and transitional economies range from us 6 1 billion 10 discount rate to us 11 6 billion 5 discount rate

the calculation of returns to research in distorted markets comment abstract in a recent article oehmke reported that a high internal rate of return for investment in research when the interaction between research and price policy costs was disregarded could become very low or even negative when the effects of research on the costs of price policy were considered in this paper the social returns from research in the presence of the price policies considered by oehmke are reexamined using a simple geometric approach the analysis suggests that an output subsidy in a small importing economy an output subsidy in a closed economy and a target price in a large exporting economy will on oehmke s assumptions cause only small reductions in the internal rate of return from investment in research this implies that the apparent underinvestment by governments in agricultural research cannot be explained away by a large upward bias known to governments in measured rates of return due to failure to account for interactions between research and the costs of price policy measures