multidimensional mechanism design for auctions with externalities abstract in an auction with externalities a buyer s type is multidimensional and specifies the payoff he would get for each of the n 1 possible outcomes the seller keeps the object or buyer i i 1 n gets the object we provide a characterization of multidimensional incentive compatible mechanisms similar to that for one dimensional mechanisms although reservation utilities are endogenous and type dependent the participation constraint is binding for only one critical type a main difficulty in a multidimensional setting is the integrability condition we present a geometric characterization for discontinuous conservative vector fields in auctions where the buyers submit scalar bids and the seller transfers the object to one of the buyers for sure a second price auction maximizes revenue with two buyers this auction remains optimal even if the seller can set a reservation price journal of economic literature classification numbers c7 c72

the forecasting approach to efficiency in the wool market this paper develops and presents estimates of a simultaneous equations model of the australian wool market the world s largest producer and exporter of fine wool the model contains functional relationships for unhedged inventories consumption of raw wool and the activities of both hedgers and speculators in wool futures expectations are represented by the adaptive hypothesis this model extends the work of leuthold and hartmann 1979 and leuthold and garcia 1988 by including expectations in the spot futures model and that of goss and giles 1986 by including composite equations for hedger speculators extending the expectations hypothesis to the consumption equation and by using the model to test the efficient markets hypothesis wald tests and likelihood ratio tests for unit roots in wool cash prices are conducted and in no case can the hypothesis of a single unit root be rejected estimation is by three stage least squares with correction for first order serial correlation the model provide

a reexamination of purchasing power parity a multicountry and multiperiod study abstract this paper re examines the purchasing power parity ppp theory in a multiple exchange rate world owing to a lack of precision in estimating the parameters many authors concluded that ppp did not hold very well in the 1970s using a time series cross sectional estimation procedure we are unable to reject the hypothesis that ppp holds in several currencies simultaneously in addition the parameters are precisely estimated this result follows from the estimation procedure which allows us to exploit the cross sectional variation in the data and the contemporaneous correlation in the deviations from ppp

purchasing power parity modeling and testing mean reversion abstract a model of mean reversion of exchange rates to purchasing power parity is developed and tested where exchange rates are assumed to follow a mean reverting elastic random walk toward a stochastic ppp rate the model recognizes the possibility that mean reversion towards ppp may be nonlinear which allows greater flexibility in the adjustment process regression equations consistent with the theoretical model are derived the model is tested using long and short term data for six countries while the results are generally consistent with the findings of previous studies evidence is presented which demonstrates that the mean reversion process is not linear for some countries

sequential procurement auctions abstract two auctions are held in sequence with the possibility of learning between the second and the first the buyer optimally chooses to discriminate against the winner of the first auction in the second the optimal mechanism has a discontinuity in the winner s second bid this strictly dominates a sequence of independent sealed bid auctions

the speculative efficiency hypothesis the hypothesis that forward prices are the best unbiased forecast of future spot prices is often presented in the economic and financial analysis of futures markets this paper considers the hypothesis independently of its implications for rational expectations or market efficiency and in order to stress this fact the term speculative efficiency is used to characterize the state envisaged under the hypothesis if a market is subject to efficient speculation the supply of speculative funds is infinitely elastic at the forward price that is equal to the expected future spot price the expected future spot price is a market price determined as the solution to the underlying rational expectations macroeconomic model although the paper is primarily concerned with testing this hypothesis in the foreign exchange market the methodology introduced in the paper is of general application to all futures markets this abstract was borrowed from another version of this item

asymmetric exchange rate exposure theory and evidence abstract this paper tests the hypothesis that exchange rate exposure is asymmetric over appreciation depreciation cycles more specifically it investigates whether returns on nine sector indexes across four major countries are asymmetrically affected by exchange rate movements the results show that in several instances exposure is asymmetric asymmetries are found to be more pronounced in the financial and non cyclical sectors possible theoretical explanations are provided regarding the particular type of exposure found across sectors and countries

imperfect price discrimination and welfare we develop a model in which a monopolist uses differences across consumers in their valuation of time to imperfectly price discriminate though it is customary to analyse price discrimination problems by the calculus of variations after postulating a continuum of types we assume a finite number of types and exploit the geometry and duality of the contract set and the structure of the programming specification we analyse in detail the qualitative properties of the model s solution and show by construction that our results exhaust the implications of the model for equilibrium contract pairs we show that imperfect discrimination is not bounded in welfare terms between perfect discrimination and single price monopoly and that the deadweight loss consumer surplus and output comparisons between single price monopoly and imperfect discrimination are ambiguous

revenue and efficiency in multi unit uniform price auctions abstract this paper analyzes efficiency in a uniform price multi unit auction with a positive reservation price i demonstrate that the reservation price is an important policy tool that may increase efficiency or welfare in multi unit uniform price auctions i show that the higher the reservation price is the higher is the seller s revenue and the higher is the efficiency of a final allocation of units that could be attained in a multi unit uniform price auction the reservation price increases the bidder s equilibrium strategy in a specific way that is inherent to the uniform price auction thus the reservation price effect on efficiency is in contrast to other auction formats e g the reservation price decreases efficiency in the vickrey auction and single unit auctions with symmetric bidders therefore the main result can be added to the list of results from mechanism design and auction theory that fail to extend the single unit single dimensional context to the multi unit multi dimensional one

monopoly provision of product quality and warranties an exploration in the theory of multi dimensional screening we address the monopoly problem of designing and pricing a product line of goods distinguished by different quality and warranty levels consumers vary in their evaluations of these attributes so that the problem is one of screening it is sufficiently complex that the local approach commonly used does not work instead we use new techniques for dealing with incentive constraints between nonadjacent consumer types these techniques allow us to characterize optimal allocations that may not be monotonic in particular although the more eager types of buyer do pay higher prices and yield the monopoly higher profit they may receive lower quality or lower warranty coverage we find preference restrictions that restore monotonicity concave risk tolerance implies that warranty coverage increases in type and constant absolute risk aversion implies that quality increases in type

multidimensional incentive compatibility and mechanism design abstract incentive compatibility conditions are characterized in general for problems in which several goods are to be allocated and agents types are multidimensional two questions of monopoly pricing under multidimensional uncertainty are then analyzed first we find the optimal nonlinear pricing scheme when the monopolist knows only the distribution of an arbitrarily parameterized family of demand curves and second we solve for the optimal bundling policy for a multiproduct monopolist

standard auctions with financially constrained bidders we develop a methodology for analyzing the revenue and efficiency performance of auctions when buyers have private information about their willingness to pay and ability to pay we then apply the framework to scenarios involving standard auction mechanisms in the simplest case where bidders face absolute spending limits first price auctions yield higher expected revenue and social surplus than second price auctions the revenue dominance of first price auctions over secondprice auctions carries over to the case where bidders have access to credit these rankings are explained by differences in the extent to which financial constraints bind in different auction formats

a flexible finite horizon alternative to long run restrictions with an application to technology shocks abstract recent studies using long run restrictions question the validity of the technology driven real business cycle hypothesis we propose an alternative identification that maximizes the contribution of technology shocks to the forecast error variance of labor productivity at a long but finite horizon in small sample monte carlo experiments our identification outperforms standard long run restrictions by significantly reducing the bias in the short run impulse responses and raising their estimation precision unlike its long run restriction counterpart when our max share identification technique is applied to u s data it delivers the robust result that hours worked responds negatively to positive technology shocks

bundling of substitutes or complements abstract the adams yellen two good bundling framework is generalized to allow the goods to be substitutes or complements general theorems on price change effects are given a monopolist may find it most profitable to offer the goods only as a bundle even if they are imperfect substitutes or to not bundle the goods even if they are complements if one good is competitively sold a monopoly producer of the other good can never increase profits by offering his good only as part of a bundle however such a monopolist might profitably offer his good in both bundled and unbundled form to price discriminate even if the two goods are substitutes

real exchange rate behavior abstract using random simulations with artificial data with identical sample characteristics to the long sample exchange rate data employed by lothian and taylor lothian j r and taylor m p 1996 the recent float from the perspective of the past two centuries journal of political economy 104 488 509 we show that standard unit root tests have extremely low power over sample sizes corresponding to the recent float the probability of rejecting the null hypothesis when it is false is extremely low with 20 years or even 50 years of data and only reaches an acceptable level over much longer spans

optimal bidding in auctions from a game theory perspective abstract the game theoretic perspective in auction bidding has provided a powerful normative framework for the analysis of auctions and it has generated an impressive volume of research contributions tracing this research we review key recent advances which have greatly expanded our understanding of the operation of auctions and produced a more accurate analysis of mechanism design and optimal bidding we follow various experimental studies which have shown that the predictive power of auction theory remains in many cases limited for this reason we concentrate on research themes which enhance the applicability of auction theory leading to more realistic descriptions of bidding behaviors we identify important innovations which expand the environment of auction bidding and carry us beyond rational decision making we conclude providing directions of future research and discussing their implications

optimal sequential auctions sequential sealed first price and open descending price procurement auctions are studied we examine which procurement auction rule achieves the low procurement cost we show that the answer to this policy question depends on whether the items are complements or substitutes with substitutes the first price procurement auction is preferred while with complements the open descending price procurement auction is preferred we also illustrate the procurement cost minimizing auction and the auction rule preferred by the bidders with substitutes bidders prefer the open descending price procurement auction while with complements bidders prefer the first price procurement auction

will the new technologies turn the page on u s productivity growth abstract is the recent slowdown in productivity likely to persist into the foreseeable future amazon com data are used to create updated indicators of technical change and to establish the relationship between them and productivity growth they reveal a slowdown in innovative activity in the early 2000s but register a recent uptick linked to innovations in robotics ai and cloud computing estimates suggest that if these trends were to continue large productivity gains are likely to be achieved in the near future

sectoral tfp news shocks abstract we document a strong similarity in the macroeconomic effects of consumption specific and investment specific tfp news shocks this co linearity suggests a diffusion channel of technological innovations from the investment to the consumption sector that forecast future changes in aggregate tfp this finding connects two views of the literature on news shocks aggregate tfp news and investment specific news

investment specific news shocks and u s business cycles we provide robust evidence that news shocks about future investment specific technology ist constitute a significant force behind u s business cycles positive ist news shocks induce comovement that is raise output consumption investment and hours these shocks account for 70 of the business cycle variation in output hours and consumption and 60 of the variation in investment and have played an important role in 9 of the last 10 u s recessions our findings provide strong support for shifting focus to ist news shocks when investigating the role of news in driving u s business cycles

dividend policy and earnings a study of short and long term causality this research examines whether earnings per share eps and dividends per share dps exhibit a short and long causality the data employed in this study consist of quarterly eps and dps for 28 of the djia companies obtained from bloomberg over a recent 10 year period the companies under investigation all have eps and dps data available over the period studied dividends are generally paid out of earnings the amount and timing of the dividend paid is a function of the respective company s dividend policy therefore the epst can be expressed in terms of the dpst as follows epst dpst where is a nonnegative constant the equation suggests that there is a linear relationship between the epst and the dpst the results of this study indicate that bi directional causality exists for some of the companies

a note on the determinants of unexpected exchange rate movements abstract in this paper we study the relative importance of surprises in fundamentals in explaining unexpected exchange rate movements employing a unique survey dataset that contains matched exchange rate and interest rate expectations we are able to derive a number of interesting conclusions a variance decomposition of unexpected exchange rate movements into various components reveals that interest rate news is relatively unimportant but that changes in perceptions about risk premia and more importantly revisions of expectations with regard to future exchange rate levels are crucial in explaining unexpected exchange rate movements

an empirical analysis of the macroeconomic effects of government debt evidence from canada 1989 an empirical analysis of the macroeconomic effects of government debt evidence from canada applied economics vol 21 no 1 pp 113 124

bundling decisions in procurement auctions with sequential tasks abstract this paper investigates the principal s bundling decision during a procurement auction for a project consisting of two sequential tasks in which task externality exists and information arrives sequentially we show that although increasing the number of bidders in the market for the second task always tilts the principal s choice toward unbundling increasing the number of consortiums that can perform both tasks tilts the principal s preference toward bundling if the externality is negative

cross hedging foreign currency risk abstract this paper provides empirical evidence on the effectiveness of cross hedging to reduce foreign exchange risk simple cross hedges for currencies with and without futures contracts multiple cross hedges portfolio hedges and commodity cross hedges are examined cross hedges are found to be less effective than traditional similar asset hedges in some instances inter temporal instability causes hedged positions to be riskier than unhedged ones although on the whole cross hedging is shown to be a useful risk reduction technique

are predictable improvements in tfp contractionary or expansionary implications from sectoral tfp we investigate the effects of predictable changes in tfp at the sectoral level our findings can reconcile the seemingly contradictory findings in the literature shocks to predictable changes in investment sector tfp are also found important for us business cycle fluctuations

making markets for structured mortgage derivatives abstract this paper distinguishes between securitization in which simple pass through instruments are created and structuring in which mortgages derivative claims are created the point is to explain how structuring a transaction brings value to a deal s underwriter briefly an underwriter must defeat arbitrage between pass throughs and derivatives the potential for market segmentation and price discrimination by the underwriter is used to analyze the structuring process in the course of the analysis the legal rules for trusts the algebraic rules for structuring and the limits on permissible price discrimination are discussed results for an actual transaction illustrate the important features of the analysis

the j curve effect and us agricultural and industrial trade this paper examines the j curve hypothesis for us agricultural and manufactured goods using the shiller lag model the results support the j curve effect for agricultural goods but not for manufactured goods these findings explain why many studies in the literature fail to support the j curve phenomenon there are two explanations for these findings 1 the aggregation bias of data that combine both agricultural and manufactured goods and 2 the country under study is often an industrial nation like the us or japan with a high proportion of manufactured goods in both exports and imports

an application of variance ratio test to the korean securities market abstract the efficient market hypothesis emh has recently been under attack as a result of the methodology employed in the early tests of the theory more recent evidence has shown that the traditional tests of random walks are susceptible to errors because of spurious autocorrelation induced by non synchronous trading which is characteristic of stock markets in developing countries this is the first study to apply the recently introduced lo mackinlay variance ratio test to the korean stock exchange kse the kse is chosen because it represents a typical emerging stock market the results show that under the assumption of homoscedastic error term the random walk hypothesis is rejected however with heteroscedastic stochastic disturbance term we could not reject the hypothesis of random walk for daily data when the test is applied to longer horizons such as weekly monthly 60 day and 90 day interval data we could not reject the random walk hypothesis there is also evidence that suggests the presence of spurious autocorrelation and heteroscedasticity in the market these could be due to official intervention and nonsynchronous trading in the market

mixed bundling auctions we study multi object auctions where agents have private and additive valuations for heterogeneous objects we focus on the revenue properties of a class of dominant strategy mechanisms where a weight is assigned to each partition of objects the weights influence the probability with which partitions are chosen in the mechanism this class contains efficient auctions pure bundling auctions mixed bundling auctions auctions with reserve prices and auctions with pre packaged bundles for any number of objects and bidders both the pure bundling auction and separate efficient auctions for the single objects are revenue inferior to an auction that involves mixed bundling

an economic perspective on auctions the recent spectrum auctions in europe have shown that serious problems can wise in auctions where multiple complementary objects are being sold such as blocks of radio spectrum that will subsequently be used by the wining bidders to compete against each other in downstream markets other important instances of such situations include take off and landing slots at airports and rights for electricity and gas transmission t i first review some of the theory describing multi object auctions i i next outline the importance of strategic effects arising in auctions that are followed by competition between the bidders and the tension arising between various goals such as efficiency and revenue maximization although more flexible auction formats can have virtues particularly in taking into account complementarities they can also be manipulated by bidders to build market power to the detriment of consumers we next apply these insights to the recent european umts licence auctions finally we draw the main conclusions and policy implications

exchange rate models and exchange rate expectations an empirical investigation a non parametrictest of popular modern exchange rate models under alternative expectation specifications is presented it is found that there is little difference in the predictive success of the alternative exchange rate models however there are significant differences in the performance of a model depending upon the expectations mechanism specified our most important finding is that the flexible price monetary model the portfolio balance model and a hybrid model under extrapolative and adaptive expectations mechanisms provide statistically significant information about the direction of exchange rate movements by contrast the same models when employing static regressive and rational expectation mechanisms do not provideany satistically significant information

procurement when price and quality matter a buyer seeks to procure a good characterized by its price and its quality from suppliers who have private information about their cost structure xed cost and marginal cost of providing quality we characterize the buyer s optimal buying mechanism we then use the optimal mechanism as a theoretical and numerical benchmark to study simpler buying procedures such as scoring auctions and bargaining scoring auctions can extract a signifi cant proportion of the buyer s strategic surplus the difference between the expected utility from the optimal mechanism and the e cient auction bargaining does less well and often does worse than the e cient auction

optimal bundling strategies under heavy tailed valuations we develop a framework for the optimal bundling problem of a multiproduct monopolist who provides goods to consumers with private valuations that are random draws from a distribution with heavy tails we show that in the vickrey auction setting the buyers prefer separate provision of the goods to any bundles we also provide a complete characterization of the optimal bundling strategies for a monopolist producer who provides goods for profit maximizing prices for products with low marginal costs the seller s optimal strategy is to provide goods separately when consumers valuations are heavy tailed and in a single bundle when valuations are thin tailed these conclusions are reversed for goods with high marginal costs for simplicity we use a specific class of independent and identically distributed random variables but our results can be generalized to include dependence skewness and the case of nonidentical one dimensional distributions

syndicated euro credit sovereign risk assessments market efficiency and contagion effects this study investigates the informational efficiency of the syndicated euro credit market by analyzing the adjustment of spreads to news characterizing the state of sovereign borrowers creditworthiness in addition the potential for an interlinked crisis contagion effects between three major borrowing countries is examined that is contagion tests are conducted to see how news for one borrower affects the spreads charged to the others the evidence suggests that the euro credit pricing process has been informationally efficient however with respect to the contagion effects it was found that noncountry specific risk factors systematically influence country specific spreads

exchange rate based stabilization in latin america abstract this paper examines the use of the exchange rate as a nominal anchor for achieving price stability in latin america it will explore the impact of exchange rate anchoring on the real sector by analyzing five stabilization programs the paper will identify conditions that make exchange rate based stabilization successful and those that lead to its failure it will also demonstrate that while the income effect can be instrumental in describing consumption booms associated with exchange rate based stabilizations the popular view based on the credibility hypothesis fails to explain key events associated with such programs

flexible exchange rates prices and the role of news lessons from the 1970s recent experience with flexible exchange rate systems has led to renewed interest in the operation of foreign exchange markets as reflected in many recent studies of the principal determinants of exchange rates the 1970s witnessed the dramatic alteration of the international monetary system from a regime of pegged exchange rates which prevailed for about a quarter of a century since the bretton woods conference into a regime of flexible though managed rates as a consequence of the emergence of the new legal and economic system traders national governments and international organisations were confronted with new economic problems choices and instruments during the 1970s ex change rates fluctuated widely and inflation rates accelerated the international monetary system had to accommodate extraordinarily large oil related shocks which affected trade flows in goods and assets huge oil payments had to be recycled uncertainties concerning future developments in international politics reached new heights and the prospects for the world economy got gloomier these developments placed unprecedented pressures on the markets for foreign exchange as well as on other asset markets they were associated with a large slide in the value of the us dollar and resulted in speeding up the creation of new institutions like the european monetary system which provided the formal framework for the management of exchange rates among members

to bundle or not to bundle commodity bundling is studied in an environment where the dispersion of valuations unambiguously decreases when two or more goods are sold as a bundle only bundling is more likely to dominate separately selling the goods if marginal costs are low relative to the average valuation or if the distribution of valuations is very peaked around the mean

a jump diffusion model for the european monetary system abstract we propose a general continuous time bivariate jump diffusion representation for the exchange rates of european currencies our model captures key features of the exchange rate mechanism fluctuation within bilateral limits is modeled by appropriate diffusion dynamics while discontinuous variation in the level of the fluctuation band is posited to have a jump structure under specific assumptions the probability distribution of the exchange rate process is derived analytically we also perform an empirical investigation of these exchange rates comparing the fit of alternative models we find some evidence of mean reversion inside the bands for these exchange rates jel f33 c51

optimal bundling strategies in multiobject auctions of complements or substitutes we consider a problem at the interface of auctions and bundling our revenue maximizing seller seeking to auction one unit each of two complements or substitutes in the best of three formats the auction of the bundle separate auctions of the individual items and a combinatorial auction we draw on an analytical model to address the following questions i which of the auctioning strategies is optimal under the second price sealed bid format ii what is the optimal strategy for the bidders iii when the objects are asymmetrically valued e g super bowl ticket versus souvenir what is the optimal auctioning sequence under the pure components strategy our results suggest that separate auctions of the two objects are superior to the auction of the bundle for most substitutes and even moderate complements when there are at least four bidders the auction of the pure bundle is better suited for strong complements or with too few bidders when the combinatorial auction is an available option it weakly dominates the auction of the pure bundle but has domains of inferiority relative to the separate auctions when the objects are asymmetric in value it is optimal to auction the higher valued object first

news driven business cycles insights and challenges there is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations the news view of business cycles offers a formalization of this perspective in this paper we discuss mechanisms by which changes in agents information due to the arrival of news can cause business cycle fluctuations driven by expectational change and we review the empirical evidence aimed at evaluating their relevance in particular we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations while at the same time we emphasize the many challenges that must be addressed before a proper assessment of the role of news in business cycles can be established jel d83 d84 e13 e32 o33

complements and substitutes in sequential auctions the case of water auctions we use data on sequential water auctions to estimate demand when units are com plements or substitutes a sequential english auction model determines the estimating structural equations when units are complements one bidder wins all units by paying a high price for the first unit thus deterring others from bidding on subsequent units when units are substitutes different bidders win the units with positive probability paying prices similar in magnitude even when the same bidder wins all units we re cover individual demand consistent with this stark pattern of outcomes and confirm it is not collusive but consistent with non cooperative behavior demand estimates are biased if one ignores these features

the ecu as international money abstract the ecu is compared with alternative foreign currencies to determine how adequately it performs the various functions of international money for the period april 1979 through december 1984 it is found that for most european economic agents the ecu was superior to the sdr the us dollar and a representative foreign currency the netherlands guilder as a unit of account as a store of value and as a means of deferred payment an examination is made of the distribution of the series of exchange rate changes so that appropriate statistical methods are employed in making a final assessment about the variability of the ecu

competitive equilibrium in an exchange economy with indivisibilities abstract we analyze an exchange economy in which i all commodities except money are indivisible ii agents preferences can be described by a reservation value for each bundle of indivisible objects and iii all agents are price takers we obtain a necessary and sufficient condition under which market clearing prices exist implications for market mechanisms are discussed journal of economic literatureclassification numbers d51 c78

news shocks and business cycles abstract this paper proposes and implements a novel structural var approach to the identification of news shocks about future technology the news shock is identified as the shock orthogonal to the innovation in current utilization adjusted tfp that best explains variation in future tfp a favorable news shock leads to an increase in consumption and decreases in output hours and investment on impact more suggestive of standard dsge models than of recent extensions designed to generate news driven business cycles though news shocks account for a significant fraction of output fluctuations at medium frequencies they contribute little to our understanding of recessions

no news in business cycles this paper uses a structural large dimensional factor model to evaluate the role of news shocks shocks with a delayed eect on productivity in generating the business cycle

beyond the purchasing power parity testing for cointegration and causality between exchange rates prices and interest rates abstract this paper reexamines the causality between the dollar and the yen in a multivariate framework with the aid of cointegration and error correcting modeling for the 1951 94 period the phillips perron tests and johansen s tests are performed while causality from interest rates to exchange rates is found in the short run no causality between prices and exchange rates is found in the short run however causality is found running from relative prices to exchange rates along with interest rates between the u s and japan in the long run which supports the long run ppp hypothesis

bundling decisions by a multiproduct monopolist with incomplete information this paper analyzes bundling decisions of a rnultiproduct monopolist facing uncertain demand the monopolist sells his products using an auction mechanism and the market is analyzed as a game with incomplete information in which the buyers as well as the seller are strategic agents with a small number of buyers a profit maximizing seller will bundle all his output this makes buyers uniformly worse off compared to the case where the same monopolist does not bundle in the sense that any buyer is worse off regardless of his demand for the monopolist s outputs with a larger number of buyers the seller will have a tendency to unbundle his output and high demand buyers are worse off than they would be if the monopolist bundled his output low demand buyers on the other hand are always better off when the monopolist unbundles his output regardless of the number of competing buyers despite the fact that high demand buyers are the typical purchasers of the monopolist s output the net effect of increasing the number of buyers is greater market efficiency since bundling creates market inefficiencies both ex post and ex ante

searching for stationarity purchasing power parity under the current float abstract using panel data methods we investigate long run purchasing power parity by testing for unit roots in real exchange rates of industrial countries under the current float the evidence against the unit root hypothesis is stronger for larger than for smaller panels for monthly than for quarterly data and when the german mark rather than the united states dollar is used as the base currency while we find that accounting for serial correlation considerably weakens the evidence against the unit root null the results as a whole are consistent with long run purchasing power parity

forward and futures prices evidence from the foreign exchange markets empirical studies of the treasury bill markets have revealed substantial differences between the futures price and the implied forward price these differences have been attributed to taxes transaction costs and the settling up procedure employed in the futures market this paper examines the forward and futures prices in foreign exchange in an attempt to distinguish between the competing explanations empirical studies of the treasury bill market have revealed differences between the futures price or rate and the implicit forward price derived from the term structure of interest rates 1 these differences have generally been attributed to market imperfections such as taxes and transaction costs see for example arak 1 capozza and cornell 2 and rendelman and carabini 6 recently however cox ingersoll and ross 3 henceforth cir derived a model in which forward and futures prices need not be equal even in perfect markets without taxes as long as interest rates are stochastic the significance of the cir effect may be hard to investigate using only data from the bill market because of the potentially complicating effects of taxes and transaction costs unique to this market by using data from the foreign exchange market we are able to eliminate the tax effect and reduce the impact of transaction costs the question we address is whether the discrepancies observed in the treasury bill market are also observed in the foreign exchange market if they are then we have evidence that the differences are due to a combination of the cir effect and the transaction costs common to both markets if they are not then either the magnitude of the cir effect is much less in the foreign exchange market or the treasury bill results are due to the unique tax treatment and transaction costs of that market this paper is organized as follows in section i the trading mechanics of the forward and futures markets in foreign exchange are discussed section ii reviews the explanations for the discrepancies between the forward and futures prices for treasury bills the institutional differences between the foreign exchange and bill markets are also summarized to show which of these explanations cannot apply to the foreign exchange market in section iii the data are decribed and the empirical results are presented the conclusions are summarized in the final section

optimal multi object auctions this paper analyses optimal auctions of several objects in the first model bidders have a binary distribution over their valuations for each object in which case the optimal auction is efficient the optimal auction takes one of two formats either objects are sold in independent auctions or a degree of bundling is introduced in the sense that the probability a bidder wins one object is increasing in her value for the other the format of the optimal auction may depend upon the number of bidders in the second model the restriction to binary distributions is relaxed and the optimal auction is then inefficient

understanding the empirical literature on purchasing power parity the post bretton woods era abstract this paper argues that the empirical failure of statistical tests of ppp in post bretton woods data is largely due to the low power of the tests employed this result is demonstrated using monte carlo experiments on the size and power of different testing procedures a new procedure based on horvath and watson econometric theory 11 pp 984 1014 1995 has greater power than previous approaches using the horvath watson procedure we find moderate evidence in favor of ppp in the post bretton woods era

long and short term interest rates in a risky world abstract the paper develops and tests a general equilibrium model in which variability or risk affects the choice of portfolios our measures of variability include only the variability of unanticipated growth in monetary and non monetary aggregates and our tests use data ending with the change in federal reserve procedures in october 1979 we find that increased variability of unanticipated money growth raises demands for debt and money and reduces the demand for real capital interest rates on both short and long term debt rise by a risk premium we estimate the size of the risk premium before and after the october 1979 change and we show that the change in federal reserve procedures moved the economy to a less efficient point

unit roots tests evidence from the foreign exchange futures market in this paper tests are conducted for the presence of unit roots in the autoregression representation of foreign exchange currency futures price series the results obtained from five different currency futures over the 1977 1983 period suggestthat foreign currency futures rates have autoregressive representations with a singleunit root i e borderline nonstationarity in view of this result it appears thatthe process generating the natural logarithm of foreign currency futures rates may well be approximated by random walks