interpreting economic time series this paper explores some of the implications for econometric practice of the principle that people s observed behavior will change when their constraints change in dynamic contexts a proper definition of people s constraints includes among them laws of motion that describe the evolution of the taxes they must pay and the prices of the goods that they buy and sell changes in agents perceptions of these laws of motion or constraints will in general produce changes in the schedules that describe the choices they make as a function of the information that they possess until very recently received dynamic econometric practice ignored this principle the practice of dynamic econometrics should be changed so that it is consistent with the principle that people s rules of choice are influenced by their constraints this is a substantial undertaking and involves major adjustments in the ways that we formulate estimate and simulate econometric models

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

some empirical evidence on the effects of shocks to monetary policy on exchange rates this paper investigates the effects of shocks to u s monetary policy on exchange rates we consider three measures of these shocks orthogonalized shocks to the federal funds rate orthogonalized shocks to the ratio of nonborrowed to total reserves and changes in the romer and romer index of monetary policy in sharp contrast to the literature we find substantial evidence of a link between monetary policy and exchange rates specifically according to our results a contractionary shock to u s monetary policy leads to i persistent significant appreciations in u s nominal and real exchange rates and ii significant persistent deviations from uncovered interest rate parity in favor of u s interest rates

derivation of marginal effects of determinants of technical inefficiency in efficiency studies using the stochastic frontier approach the main focus is to explain inefficiency in terms of some exogenous variables and computation of marginal effects of each of these determinants although inefficiency is estimated by its mean conditional on the composed error term the jondrow et al 1982 estimator the marginal effects are computed from the unconditional mean of inefficiency wang 2002 in this paper we derive the marginal effects based on the jondrow et al estimator and use the bootstrap method to compute confidence intervals of the marginal effects

when do long run identifying restrictions give reliable results many recent articles have identified behavioral disturbances in vector autoregressions by imposing restrictions on the long run effects of shocks this article demonstrates that this approach will be unreliable unless the underlying economy satisfies three types of strong restrictions although many aspects of these issues have been raised before this article draws out and illustrates the implications for inferences under the long run scheme furthermore it provides strategies for dealing with the problems

optimal policy with limited commitment abstract this paper uses whiteman s 1986 frequency domain optimization methodology to parameterize the commitment horizon in a standard rational expectations policy design model it is shown that the commitment horizon can be estimated by running restricted regressions of the policy maker s instrument variable on past values of its target variable the results are applied to us and german monetary policy assuming the monetary authority attempts to stabilize inflation using a federal funds like interest rate as an instrument the results point to a 1 month ahead commitment horizon for the us federal reserve and to a 12 month ahead commitment horizon for the german bundesbank however these horizons are estimated imprecisely

the quantitative significance of the lucas critique doan litterman and sims dls have suggested using conditional forecasts to do policy analysis with bayesian vector autoregression bvar models their method seems to violate the lucas critique which implies that coefficients of a bvar model will change when there is a change in policy rules in this article we attempt to determine whether the lucas critique is important quantitatively in a bvar macro model that we construct we find evidence following two candidate policy rule changes of significant coefficient instability and of a deterioration in the performance of the dls method

a coevolutionary framework for analysing a transition to a sustainable low carbon economy this paper proposes a coevolutionary framework for analysing a transition to a sustainable low carbon economy based on the coevolution of ecosystems technologies institutions business strategies and user practices within a multi level micro meso macro perspective this builds on and develops previous coevolutionary analyses of long term technological and industrial change and recent renewed interest within ecological economics on coevolutionary approaches previous work has analysed how the coevolution of technologies and institutions has led to the lock in of current high carbon energy systems and how the coevolution of physical and social technologies and business strategies has brought significant material and welfare benefits to the minority of the world s population living in industrialised countries the coevolutionary framework proposed here may be used to undertake 1 detailed empirical analyses at a micro meso level of the challenges relating to the innovation and adoption of particularly low carbon technologies 2 as a framework for analysing the multi level interaction of social and technological elements within potential transition pathways to a low carbon energy system 3 to assess the implications for economic growth and prosperity of a transition to a low carbon economy and 4 to assist in the development of more formal multi level evolutionary economic models

organisation and governance of urban energy systems district heating and cooling in the uk a number of uk urban authorities are developing combined heat and power chp with district heating and cooling dhc networks as a means to achieve local sustainable and affordable energy and to contribute to economic regeneration findings from case study research in three uk cities are used to explore the local energy governance and organisation lego models adopted in the context of privatised centralised energy markets local developers are reliant on sources of social capital to make systems work given limited support from public policy and limited access to finance local actors drawing on non local community energy and commercial and technical networks of expertise work to introduce the technology into strategic planning establish its legitimacy and the legitimacy of a form of multi organisation suited to numerous stakeholders secure finance negotiate risks and responsibilities and engage with energy markets designed for large scale centralised provision for dhc to make a fully effective contribution to uk sustainable urban energy a more supportive government policy framework offsetting the difficulties of a centralised energy market will be needed to maximise the benefit of locally knowledgeable action the policy framework must be responsive to the specificity of locally appropriate configurations of actors and material infrastructure

computable general equilibrium models and monetary policy advice this paper argues that variations of extant general equilibrium monetary models are capable of generating real time economic forecasts comparable in accuracy to those generated under the standard federal reserve board staff methodology specifically we argue that over the 1984 1990 period forecasts generated by versions of the limited participation models developed by fuerst 1992 and christian0 and eichenbaum 1992a 1992b compare favorably with those contained in the board staff s greenbook briefing documents we conclude that further development of these models holds promise for fully integrating the forecasting and policy analysis elements of the federal reserve s monetary policy advice process

does money matter the robustness of evidence from vector autoregressions traditionally empirical macroeconomic research begins with the use of theory to construct a highly restricted structural econometric model the determination of the nature of those restrictions is fraught with difficulty and thus many specification decisions turn out to be largely ad hoc and of dubious validity once these specification issues have been probably inadequately addressed and a structural model constructed it is then estimated using complicated econometric techniques requiring sophisticated computer programs recently an alternative approach to modeling macroeconomic time series has come into wide use this alternative introduced by sims 1980a 1980b suggests the use of vector autoregression var models to analyze time series relationships among macroeconomic variables the fact that the use of this approach has proliferated widely in a relatively brief period of time is due not only to the very persuasive criticisms of traditional methods made by sims see especially sims 1980a but perhaps even more to the perception that specification and estimation problems are greatly simplified the user of the var approach imposes few restrictions and can generally use ordinary least squares estimation procedures the var approach is thus believed to be largely free of the spurious specification assumptions and consequent specification errors necessitated by traditional macroeconometric procedures

monetary policy shifts and the term structure we estimate the effect of shifts in monetary policy using the term structure of interest rates in our no arbitrage model the short rate follows a version of the taylor s 1993 discretion versus policy rules in practice carnegie rochester conference series on public policy 39 195 214 rule where the coefficients on the output gap and inflation vary over time the monetary policy loading on the output gap has averaged around 0 4 and has not changed very much over time the overall response of the yield curve to output gap components is relatively small in contrast the inflation loading has changed substantially over the last 50 years and ranges from close to zero in 2003 to a high of 2 4 in 1983 long term bonds are sensitive to inflation policy shifts with increases in inflation loadings leading to higher short rates and widening yield spreads

the role of intermediaries in low carbon transitions empowering innovations to unlock district heating in the uk abstract the literature on socio technical transitions considers how technological innovations can be established within the context of an incumbent regime that is often resistant or inflexible to change strategic niche management is an approach to catalysing a transition to a new regime using protected niche spaces to enable development and experimentation with an innovation intermediary actors play an important role in establishing these niches as they facilitate knowledge sharing and build the wider networks and systems needed to support an innovation the influence of intermediaries within socio technical transitions and strategic niche management is still an under researched area in this paper we use a decision theatre research process to collect empirical evidence from a range of local stakeholders involved in establishing new district heating projects in the united kingdom uk this method carried out in a group workshop format enables understanding of the interactions between stakeholders throughout the stages of the district heating development process the study suggests that intermediaries can play a role in supporting niche empowering processes the existing institutional framework surrounding intermediary actors and the geographical scale at which they work within that framework are shown to be influential on actors agency to choose their approach to empowering an innovation the work highlights the potential for intermediaries to support the restructuring of this institutional framework to enable more radical stretch and transform empowering activities

interpreting the macroeconomic time series facts the effects of monetary policy existing theory and evidence on the effects of monetary policy are reviewed substantial room for disagreement among economists remains new evidence based on multivariate time series studies of several countries is presented while certain patterns in the data consistent with effective monetary policy are strikingly similar across countries others particularly the tendency of interest rate increases to predict high inflation are harder to reconcile with effective monetary policy

tax disturbances and real economic activity in the postwar united states abstract this paper investigates the macroeconomic effects of cyclical fluctuations in marginal tax rates it finds that systematically including tax variables in a standard real business cycle model substantially improves the model s ability to reproduce basic facts about postwar u s business cycle fluctuations in particular modeling fluctuations in personal and corporate income tax rates increases the model s predicted relative variability of hours and decreases its predicted correlation between hours and average productivity fluctuations in tax rates produce large substitution effects that alter the leisure labor supply decision

business cycle dynamics under rational inattention we develop a dynamic stochastic general equilibrium dsge model with rational inattention and compare its predictions to data households and decision makers in firms have limited attention and optimally allocate their attention rational inattention is the only source of slow adjustment the model matches the empirical impulse responses to monetary policy shocks and aggregate technology shocks at the same time profit losses and utility losses from inattention are very small furthermore it matters whether one uses this model or a conventional dsge model for policy analysis

openness imperfect exchange rate pass through and monetary policy abstract this paper analyses the implications of imperfect exchange rate pass through for optimal monetary policy in a linearised open economy dynamic general equilibrium model calibrated to euro area data imperfect exchange rate pass through is modelled by assuming sticky import price behaviour the degree of domestic and import price stickiness is estimated by reproducing the empirical identified impulse response of a monetary policy and exchange rate shock conditional on the response of output net trade and the exchange rate it is shown that a central bank that wants to minimise the resource costs of staggered price setting will aim at minimising a weighted average of domestic and import price inflation

staggered price setting translog preferences and endogenous persistence abstract this paper generates persistent real effects of a monetary disturbance in the context of staggered price setters the model combines two related and reinforcing features a translog demand structure and a particular input output production structure these features offer a rationale why a firm when computing its own optimal contract price is influenced by the prices set in other overlapping contracts practically the two features interact in a positive manner and provide a way to generate significant endogenous persistence

the governance of sustainable socio technical transitions a quasi evolutionary model of socio technical transitions is described in which regimes face selection pressures continuously differentiated transition contexts determine the form and direction of regime change in response to these pressures the articulation of pressures and the degree to which responses are coordinated and based on resources available within the regime define the transition context four alternative contexts are described endogenous renewal re orientation of trajectories emergent transformation and purposive transitions agency and power in the governance of regime transformation are analysed power to affect change depends on regime membership the distribution of resources for change and expectations

rational expectations and the paradox of policy relevant natural experiments abstract policy experiments using large microeconomic datasets have recently gained ground in macroeconomics imposing rational expectations we examine robustness of evidence derived from ideal natural experiments applied to atomistic agents in dynamic settings paradoxically once experimental evidence is viewed as sufficiently clean to use it then becomes contaminated by ex post endogeneity measured responses depend upon priors and the objective function into which evidence is fed moreover agents policy beliefs become endogenously correlated with their causal parameters severely clouding inference e g sign reversals and non invertibility may obtain treatment control differences are contaminated for non quadratic adjustment costs constructively we illustrate how inference can be corrected accounting for feedback and highlight factors mitigating contamination

systematic departures from the frontier a framework for the analysis of firm inefficiency departures from a production or cost frontier may reflect the systematic effect of conditions that contribute to inefficiency to test whether some portion of frontier function departures can be systematically explained the frontier inefficiency error component is modeled as a function of various causal factors and a random component the functional form of the inefficiency error term model is chosen to assure strict one sidedness preliminary empirical results generated from electric utility data suggest the superiority of including both systematic and random components in the inefficiency error term

are preliminary announcements of the money stock rational forecasts abstract we develop a theoretical framework of analyzing preliminary announcements of economic data and then apply this framework to the money stock we find that preliminary announcements of the money stock are best characterized as measured with classical errors in variables that is the revision is not correlated with the true value of the series the revision is however forecastable using information available at the time of the preliminary announcement our ability to forecast the revision implies that preliminary announcements are not rational estimates of the true money stock

intermediaries and innovation support in the design for sustainability field cases from the netherlands turkey and the united kingdom abstract companies face challenges and need support when applying specific knowledge to their innovation processes such as design for sustainability the providers of innovation support in innovation systems are intermediaries while the literature on intermediaries focuses on various roles and approaches the way in which intermediaries function in specific fields such as design for sustainability remains underexplored this paper investigates how intermediaries provide innovation support in the design for sustainability field today with a focus on the services and support they offer the approaches and drivers that shape them as well as the challenges of the intermediation process particularly concerning sustainability and design to do this 14 intermediaries from the netherlands the united kingdom and turkey were investigated through case studies the role of design in support processes especially during implementation the importance and types of collaborations among various actors of innovation systems and the emergence of a new type of intermediary that promises radical innovation in sustainability are among the findings in addition based on the empirical data we suggest a framework for describing the roles and attributes of a group of five intermediaries that meets the needs of all types of companies engaged in design for sustainability finally we offer suggestions for turkey on how to raise the capacity of its intermediaries operating in the design for sustainability field which might be applicable to other similar contexts as well this study contributes to the theory and practice of innovation support in the sustainability field from which all innovation system s actors especially intermediaries and governmental institutions might benefit in designing support programs

monetary policy shocks what have we learned and to what end this paper reviews recent research that grapples with the question what happens after an exogenous shock to monetary policy we argue that this question is interesting because it lies at the center of a particular approach to assessing the empirical plausibility of structural economic models that can be used to think about systematic changes in monetary policy institutions and rules the literature has not yet converged on a particular set of assumptions for identifying the effects of an exogenous shock to monetary policy nevertheless there is considerable agreement about the qualitative effects of a monetary policy shock in the sense that inference is robust across a large subset of the identification schemes that have been considered in the literature we document the nature of this agreement as it pertains to key economic aggregates

the causal direction between money and prices abstract causality is viewed as a matter of control controllability is captured in simon s analysis of causality as an asymmetrical relation of recursion between variables in the unobservable data generating process tests of the stability of marginal and conditional distributions for these variables can provide evidence of causal ordering the causal direction between prices and money in the united states 1950 1985 is assessed the balance of evidence supports the view that money does not cause prices and that prices do cause money

liquidity loanable funds and real activity abstract this paper develops a general equilibrium model of two traditional explanations of the monetary black box linking money and real activity the liquidity effect and the loanable funds effect these effects are modeled with a monetary production economy in which central bank injections of cash are funnelled into the economy through the credit market since only borrowers have direct access to the newly injected cash monetary injections cause nominal interest rates to fall if firms are borrowers then monetary injections also increase current and future real activity

asset markets tariffs and political risk abstract this paper examines a simple model in which exogenous political risk creates uncertainty about tariffs the model predicts a relation between consumption and tariffs that differs radically from that implied by models without asset markets or political risk given the probability distribution of tariffs domestic consumption and utility ex post are lower in states of the world with a domestic tariff and no foreign tariff than with a foreign tariff and no domestic tariff this conclusion emerges despite the fact that the opposite would be obtained in the absence of asset markets so economists should not be surprised if observed relations between consumption and tariffs differ from the predictions of static theory in either time series or cross sections

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

monetary policy and the stability of macroeconomic relationships summary estimates of the effect of different international monetary regimes on the parameters of the phillips curve the keynesian consumption function and other reduced form macroeconomic relationships are given the estimates provide a quantitative assessment of the importance of the lucas critique for such regime shifts the estimates are calculated by stochastically simulating an estimated multicountry economic model with rational expectations under a fixed exchange rate regime and a flexible exchange rate regime in both regimes interest rates are the primary instrument of monetary policy noticeable shifts occur in most of the macroeconomic relationships especially in the consumption function and the phillips curve and these shifts have simple economic interpretations based on the changes in the variance and the serial correlation of income and prices in the two regimes however in most cases the shifts are not large quantitatively at least as implemented here this type of regime shift does not seem to generate much instability in the conventional macroeconomic relationships several possible reasons for this finding are discussed in the paper in this paper i plan to follow in a tradition pioneered by a w phillips almost 40 years ago phillips 1954 evaluated monetary and fiscal policy by examining the operating properties of simple policy rules in a fully specified economic model he did this by applying control theory ideas from the engineering literature by examining the performance of the model economy under different types of policy rules for example proportional derivative and integral rules he attempted to determine which policy rule would work well and which would not work well in practice following in the phillips tradition does not mean that i will use the same theoretical models econometric methods or computational techniques that phillips used to do so would in my view pass by fundamental developments in dynamic economic theory econometrics and solution procedures that have been achieved since the time that phillips wrote phillip s 1954 analysis was based on keynesian islm multiplier accelerator models that were popular in the early 1950s the policy evaluation i describe in this lecture differs from phillips s policy evaluation in several ways first it makes use of a dynamic rational expectations model with forward looking behaviour in consumption investment wage setting and interest rates second the model is international and exchange rate determination reflects the current high degree of international capital mobility which did not exist when phillips wrote third the model is empirically estimated most of phillips s work was based on simulation models with calibrated parameters fourth the simulations are done stochastically with an empirically

searching for a break in gnp it has been suggested that existing estimates of the long run impact of a surprise move in income may have a substantial upward bias due to the presence of a trend break in postwar u s gross national product data this article shows that the statistical evidence does not warrant abandoning the no trend break null hypothesis a key part of the argument is that conventionally computed p values overstate the likelihood of the trend break alternative hypothesis this is because they do not take into account that in practice the date is chosen based on pretest examination of the data

the role of policy in shielding nurturing and enabling offshore wind in the netherlands 1973 2013 it is widely acknowledged that many renewable energy technologies cannot yet compete with incumbent fossil fuel options e g in terms of price transitions literature argues that sustainable innovations can nevertheless break out of their niches if properly shielded nurtured and empowered most studies using this perspective have focused on how innovation champions engage in shielding nurturing and empowering sne activities none have so far focused specifically on the role that policy plays in relation to these three processes this paper therefore aims to analyze the way in which policy constrains and enables the shielding nurturing and empowering of renewable energy innovations to do so it presents a qualitative review of the development of offshore wind power owp in the netherlands over the past four decades based on interpretation of a wide variety of written sources academic histories reports policy documents parliamentary debate transcripts news media and nine semi structured interviews it discerns six periods of relative stability in the history of dutch offshore wind it then analyzes the effects of various policies on the shielding nurturing and empowering of offshore wind in these periods the paper contributes to transitions literature 1 by providing an analysis of how policies can enable and constrain the shielding nurturing and empowering of renewable energy innovations and 2 by bringing together for the first time fragmented accounts of the surprisingly long history of dutch offshore wind development and implementation both contributions are timely given the recent reprioritization of owp on the dutch policy agenda

innovation intermediaries accelerating environmental sustainability transitions abstract institutions in the united states are undergoing modifications that present direct challenges for the environment and society and may result in institutional uncertainty and instability this article explores whether innovation intermediaries can be employed as a key component of a strategy to create a window of opportunity for green job creation infrastructure changes and technological innovation in response to these types of institutional modifications based on a systematic literature review this article outlines a framework that combines institutional modifications with technological innovation and infrastructure development as part of an economic development strategy important findings are that connections between innovation intermediaries such as incubator and accelerator centers niche actors such as green champions and regime actors such as policy entrepreneurs show potential to contribute to a green economic development strategy but require further examination for the specific roles played by policy entrepreneurs to help create the conditions for scaling niche experiments and simultaneously disrupting the regime the key contribution is in defining the role of sustainability oriented innovation intermediaries at linking local state and business actions in order to scale up and influence green economic development in a politically feasible manner during times of institutional uncertainty and instability

models and their uses it is argued that economists ought to recognize that modeling in different styles will be appropriate for different purposes or different stages in the development of an area of economics as an example the paper displays simulations of a stochastic general equilibrium model which shed light on the interpretation of widely discussed small macroeconomic vector autoregressive models connecting monetary variables to output and prices this abstract was borrowed from another version of this item

business tax policy the lucas critique and lessons from the 1980 s in 1976 robert lucas published a devastating critique of the then current practice for quantifying the effects of alternative policies he argued that in formulating plans economic agents necessarily look into the future and thus the decision rules guiding their actions depend on parameters describing the expectations of future variables as well as parameters of taste and technology lucas viewed economic policy as the selection of rules that generate the values of policy variables rather than the selection of arbitrary sequences of policy variables thus any change in policy will systematically alter the structure of econometric models 1981 p 126 and the estimated coefficients in the then current consumption wageprice or investment models could not be considered structural that is invariant to alternative policy regimes the important and damning implication for policy analysis is that these econometric relationships will prove unstable in precisely those situations in which they are called upon to analyze proposed policies this paper seeks to exploit the substantial variation in business tax policy during the 1980 s to shed some light on the quantitative importance of the lucas critique lc and to evaluate the ability of explicit theory to enhance econometric analysis in august of 1981 the economic agenda of the reagan revolution began to be put in place with the passage of the economic recovery tax act erta this was followed by the tax equity and fiscal responsibility act of 1982 the deficit reduction act of 1984 and the tax reform act of 1986 other changes such as the increase in defense spending and growth of and restrictions on the federal deficit indicate that expectations of the current and future course of fiscal policy were altered radically during the reagan administration maintained in this paper is the assumption that these changes in tax and other aspects of fiscal policy can be viewed as an unanticipated change in policy regime in regard to the 1981 legislation the economic report of the president claimed that t his tax policy is a sharp break from the policies of the recent past it reflects a different understanding of the way tax policy affects the u s economy 1982 p 109 under the assumption that the 1980 s witnessed a fundamental change in the stochastic process characterizing fiscal policy econometric equations susceptible to the lc should become temporally unstable those models that successfully address the lc by isolating expectation parameters should remain stable the quantitative importance of the lc is evaluated by examining the stability of four different econometric models of business investment that to varying degrees are vulnerable to the lc the neoclassical model studied extensively by robert hall and dale jorgenson 1967 robert eisner and m ishaq nadiri 1968 and their numerous collaborators the q model associated with james tobin the vector autoregressive model var s advanced by christopher sims 1982 and a hybrid var model var h used to study investment by robert gordon and john veitch 1986 since the four models differ in the extent to which they are guided by explicit theoretical frameworks these results will also be useful in assessing the impact of economic theory on econometric performance university of chicago chicago il 60637 i thank charles hulten robert lucas and allen sinai for critical comments on a preliminary draft all errors omissions and conclusions remain my sole responsibility

identifying monetary policy in a small open economy under flexible exchange rates abstract previous empirical study on the effects of monetary policy shocks in small open economies has generated puzzling dynamic responses in various macroeconomic variables this paper argues that these puzzles derive from an identification of monetary policy that is inappropriate for such economies to remedy this it is proposed that a structural model be estimated to explicitly account for the features of the small open economy such a model is applied to canada with tightly estimated results overall the dynamic responses to the identified monetary policy shock are consistent with standard theory and highlight the exchange rate as a transmission mechanism

unanticipated monetary policy and real economic activity some cross regime evidence abstract classical equilibrium models of business cycles predict several consequences of policy regime shift this paper examines these predictions using evidence from the post 1979 period and by comparing several pre war monetary regimes the policy invariance proposition and the lucas hypothesis receive some support from the evidence although some discrepancies remain

exchange rate stabilization in the erm identifying european monetary policy reactions abstract we develop the structural var models for european countries france denmark and germany during the erm period to examine the monetary policy reactions especially the within erm exchange rate stabilization in addition to analyzing the impulse responses and variance decomposition we present the full monetary reaction function in an interpretable manner without introducing additional assumptions the results suggest some asymmetry in exchange rate stabilization non german exchange rate stabilization is stronger than german exchange rate stabilization but do not support the hypothesis that german monetary policy was independent of the erm

a framework for assessing credit risk in depository institutions toward regulatory reform abstract this paper develops and illustrates a new method for evaluating the credit risk borne by depository institutions that may prove to be an important element in a regulatory mechanism sensitive to risk in our framework depository institutions are forced to bear the costs of their risk exposure and hence to internalize this cost when extending loans using various loan portfolios and alternative macroeconomic scenarios we present numerical calculations demonstrating the ability of our framework to capture variations in risk exposure and highlighting the significance of portfolio concentrations these calculations are based on an important new source of information that permits an econometric analysis of loan losses by industry

macroeconomics and methodology probabilistic reasoning is essential to discourse in economics this is true in any discipline in which as in economics data collection is constrained and beliefs about the phenomena being studied are crucial to decisions that cannot be delayed some economists have recently turned away from form probabilistic inference in part because of legitimate discontent with the prescriptions of specialized econometricians however this turning away has gone in mutually inconsistent directions and is in the long run unsustainable it should be more widely recognized that careful applied work in macroeconomics using steadily advancing probabilistic modeling techniques has been steadily increasing

do central banks act asymmetrically empirical evidence from the ecb and the bank of england the paper attempts to exploit whether monetary authorities have a different behaviour during recession and expansion to this end a multivariate extension of hamilton markov switching model is adopted first regime dependent taylor type rules are estimated for the euro area and the united kingdom in order to capture the systematic behaviour of central banks then impulse response functions that account for the different phases of the business cycle are analysed in addition a comparative analysis concerning the estimated rules as well as the different reaction of real economy to monetary shocks is implemented the study strongly suggests that central banks cannot neglect the regime where the monetary action takes place it follows that the phase of business cycle is an important matter in monetary policy decision process

a generalized production frontier approach for estimating determinants of inefficiency in u s dairy farms this article investigates farm level efficiency of u s dairy farmers by estimating their technical and allocative efficiency technical inefficiency is assumed to be composed of a deterministic component that is a function of some farm specific characteristics and a random component by doing this we extend the stochastic frontier methodology in which determinants of technicial inefficiency are explicitly introduced in the model given the inputs variations in efficiency of farms are then explained by both deterministic and random components of technical inefficiency the empirical results indicate that a levels of education of the farmer are important factors determining technical inefficiency and b large farms are more efficient technically than small and medium sized farms both technical and allocative inefficiency are found to decrease with increase in the level of education of the farmer

causal parameters and policy analysis in economics a twentieth century retrospective the major contributions of twentieth century econometrics to knowledge were the definition of causal parameters within well defined economic models in which agents are constrained by resources and markets and causes are interrelated the analysis of what is required to recover causal parameters from data the identification problem and clarification of the role of causal parameters in policy evaluation and in forecasting the effects of policies never previously experienced this paper summarizes the development of these ideas by the cowles commission the response to their work by structural econometricians and var econometricians and the response to structural and var econometrics by calibrators advocates of natural and social experiments and by nonparametric econometricians and statisticians this paper considers the definition and identification of causal parameters in economics and their role in econometric policy analysis it assesses different research programs designed to recover causal parameters from data at the beginning of this century economic theory was mainly intuitive and empirical support for it was largely anecdotal at the end of the century economics has a rich array of formal models and a high quality database empirical regularities motivate theory in many areas of economics and data are routinely used to test theory many economic theories have been developed as measurement frameworks to suggest what data should be collected and how they should be interpreted econometric theory was developed to analyze and interpret economic data most econometric theory adapts methods originally developed in statistics the major exception to this rule is the econometric analysis of the identification problem and the companion analyses of structural equations causality and economic policy evaluation although an economist did not invent the phrase correlation does not imply causation 1 economists clari

u s soviet chinese relations routine reciprocity or rational expectations international relations theorists disagree about whether great power behaviors reflect bureaucratic routine or reciprocity recently some have suggested that these behaviors result from great powers rational expectations rather than from simple routine or reciprocity the debate is flawed in several respects the quasi experimental studies of great power behavior suffer from specification and measurement errors furthermore most studies of great power behavior focus exclusively on the superpowers without adequately appreciating china s role in world politics we present an improved analysis that recognizes the potential effects of chinese behavior and ameliorates the methodological flaws in existing work the results indicate that the behaviors of the united states the soviet union and china are a relatively stable mix of bureaucratic routine and reciprocity the results also indicate complex asymmetrical connections among u s soviet u s chinese and soviet chinese relations consistent with the notion of a strategic triangle

information from financial markets and var measures of monetary policy exogenous measures of monetary policy shocks directly derived from nancial market information are used in close us and open us germany economy var models to evaluate the robustness of the dynamic e ect of monetary policy obtained from traditional identi ed var the empirical analysis con rms the main features of the monetary policy transmission mechanism in us and germany explicitly addressing the issue of simultaneity between the german policy interest rate and the us dollar dmark exchange rate 1999 elsevier science b v all rights reserved jel classixcation e44 e52 f41

centralisation and decentralisation in strategic municipal energy planning in denmark denmark s future energy system is to be entirely based on renewable energy sources municipalities will play an important role as local energy planning authorities in terms of adopting and refining this vision in different local contexts based on a review of 11 municipal energy plans this paper examines to what extent municipal energy planning matches national 100 renewable energy strategies the results indicate a willingness among danish municipalities to actively carry out energy planning and the plans reveal a large diversity of new activities at the same time however there is a strong need for better coordination of municipal energy planning activities at the central level it is suggested that the role of municipalities as energy planning authorities needs to be outlined more clearly in e g strategic energy planning which integrates savings efficiency and renewable energy in all energy sectors this requires the state to provide municipalities with the necessary planning instruments and establish a corresponding planning framework consequently there is a need for a simultaneous centralisation and decentralisation during the implementation of the 100 renewable energy vision the paper outlines a basic division of tasks between the central and the local level within such a strategic energy planning system

government affiliated intermediary organisations as actors in system level transitions the article draws from two theoretical fields innovation intermediation and sustainability transitions to examine the role of government affiliated intermediary organisations in system level transitions the role of intermediaries working between actors producers and users entrepreneurs and adopters idea generators and funders has seldom been specifically addressed in the transitions literature thus the role of intermediary organisations in enacting change in socio technical regimes particularly of intermediaries falling between traditional public sector and private sector actors is of interest in this article empirical analyses of two finnish organisations sitra and motiva show that government affiliated intermediaries are likely to engage in strategic niche management processes in diverse ways each organisation having its own distinct characteristics the analysis also points out that to get from niches to transition sustained systemic intermediaries are crucial in articulating new visions and expectations government affiliated intermediaries may make an important contribution to sustainability transitions by initiating and managing new policy or market processes and by acting as an impartial contact point or voice for new networks of actors while independence from public administration is likely to facilitate networking too neutral a stance or limited temporal engagement may reduce the transition facilitating effects

realising local government visions for developing district heating experiences from a learning country abstract district heating dh has an important role to play in enabling cities to transition to low carbon heating although schemes are commonplace in some countries in learning countries where building level technologies make up the majority of heating systems there are numerous barriers to introducing dh local governments are seen as key actors in helping to create a shared vision for dh amongst stakeholders this study uses interviews with stakeholders from a range of sectors in the uk an example of a learning country to examine the visions of local actors for developing dh and the types of national policy that would support local implementation of these visions the analysis shows that in engaging with dh development local governments seek multiple types of value realising this value will most likely happen by taking a long term planned approach to development in contrast national government policy is geared towards techno economic criteria and may lead to only a minority of potential sites being developed without realisation of wider social or environmental benefits aligned to local visions the work highlights the importance of local strategic planning enabled by aligned national policy in realising the full economic environmental and social benefits of dh

measuring regional effects of monetary policy in canada this article measures monetary policy shocks and examines whether the effects of such shocks have differential regional effects in canada we identify three possible sources of regional effects differences in the importance of interest sensitive industries differences in the contribution of exports to output and differences in the proportion of small relative to large firms using the overnight interest rate as the instrument of monetary policy we present impulse responses of industry output from a recursive vector autoregression which incorporates a cointegrating relation the results show that manufacturing and primary industries are the most interest sensitive we conduct impulse responses of provincial employment from a monetary contraction the results show that newfoundland and prince edward island pei primary industry based provinces are strongly and adversely affected by a monetary contraction manitoba saskatchewan and alberta also primary based are also affected ontario which is man

the impact of money on short term interest rates this study reviews empirical evidence from four research methods related to the impact of money on short term nominal rates the studies consistently fail to find evidence supporting the much hypothesized short term negative relationship between money and nominal rates since at least april 1975 reasons for the absence of a negative relationship include the tendency of financial markets to anticipate corrective action by the fed whenever ml deviates from targeted growth ranges and a rapid adjustment of inflationary expectations to changes in money growth

endogenous monetary policy and the business cycle the correlations and volatilities of real variables seem to be stable over time but the relation between real and nominal variables is unstable presumably one important factor behind this observation is the nature of money supply in this paper i look at a business cycle model where the central bank sets money supply to minimize the volatility of in ation and output i nd that small changes in the central bank s preferences can generate large changes in the derived money supply rule and in correlations between real and nominal variables although wages are assumed to be sticky changes in the money supply rule do not generate any major changes in the behavior of real variables 2000 elsevier science b v all rights reserved jel classixcation e32 e52

the intermediary organisation of low carbon cities a comparative analysis of transitions in greater london and greater manchester making a low carbon economic future for the uk has been declared a key priority by both the previous labour government and also the current coalition government yet there is a large gap between th

monetary shocks in the g 6 countries is there a puzzle les auteurs cherchent a clarifier la dynamique du mecanisme de transmission de la politique monetaire l identification des chocs de politique monetaire est au coeur de ce genre d analyse divers chercheurs ont reussi recemment a isoler de tels chocs en imposant des restrictions de suridentification a des modeles vectoriels autoregressifs var

measurement of production inefficiency in a technology and inefficiency heterogeneity setting this study shows how the estimates of production inefficiency and of the marginal effects of its determinants can be distorted if not accounting for technology and inefficiency heterogeneity this

spillover effects of public capital formation evidence from the spanish regions maybe because of the inconclusive nature of the results on the impact of public capital on output at the regional level the issue of the po ssible existence of the regional spillovers from public capital formation has received little attention the objective of this paper is to provide evidence on the possible existence of such spillovers we consider the case of spain and its seventeen regions our methodological approach consists in estimating an aggregate var model for spain as well as seventeen region specific var models in which both capital installed in the region and capital installed outside the region are allowed to play a role in en hancing regional output the estimation results can be summarized as follows the aggregate effects of public capital formation in spain are important they cannot however be captured in their entirety by the direct effects in each region from public capital installed in the region itself when for each region both the capital installed in the region and the capital installed outside the region are considered the total disaggregated effect from the seventeen regional models are very much in line with the aggregate results furthermore the aggregate effect seems to be due in almost equal parts to the direct and spillover effects of public capital formation ultimately this paper establishes the relevance of both capital installed in each region and s pillover effects in the understanding of the regional decomposition of the aggregate effects of public capital formation in doing so it opens the door to some tantalizing and potentially highly charged research issues in terms of the determination of the optimal location of public investment projects

structural changes in the us economy is there a role for monetary policy this paper investigates the contribution of monetary policy to the changes in output growth and inflation dynamics in the us we identify a policy shock and a policy rule in at ime varying coefficients var using robust sign restrictions the transmission of policy shocks has been relatively stable the variance of the policy shock has decreased over time but policy shocks account for a small fraction of the level and of the variations in inflation and output growth volatility and persistence we find little evidence of a significant increase in the long run response of the interest rate to inflation a more aggressive inflation policy in the 1970s would have produced large output growth costs

does conservatism matter a time series approach to central bank behaviour empirical studies crediting independent and conservative central banks with lowering inflation and inflation volatility have been criticised for their focus on policy outcomes instead of policies and for their unsystematic conflation of independence and conservatism we present results from time series models for the german bundesbank that avoid these shortfalls conservatism matters in the following sense i more conservative bundesbank councils tend to react stronger to changes in inflation and output and ii an increase in conservatism leads to a more activist stabilisation policy this is in line with simple policy models incorporating economic persistence with implementation lags for monetary policy

would the bundesbank have prevented the great inflation in the united states abstract policy counterfactuals based on estimated structural vars routinely suggest that bringing alan greenspan back in the 1970s united states would not have prevented the great inflation we show that a standard policy counterfactual suggests that the bundesbank which is near universally credited for sparing west germany the great inflation would also not have been able to prevent the great inflation in the united states the implausibility of this result sounds a cautionary note on taking the outcome of svar based policy counterfactuals at face value and raises questions on the reliability of such exercises