the new classical macroeconomics and stabilization policy the new classical macroeconomics ncm is not particularly useful in explaining stark episodes to be successful the new classical approach will have to be developed in a number of areas including coordination problems and political economy issues of stabilization these modifications can in principle be worked into the ncm classical approach but that will change the main thrust so far the message reads markets clear productivity shocks are the dominant source of fluctuations intertemporal substitution in consumption and labor supply are the chief amplifying factors and government policy is substantially irrelevant on these key propositions the evidence fails and the emphasis is misdirected the issue is not whether markets work but rather how they work a concern rightly emphasized by the new keynesian economics

profit maximising goes global the race to the bottom we explore four decades of cyclical and long run dynamics in income distribution and economic activity for a panel of 13 oecd countries as measured by the wage share and output gap when modeled as predator prey dynamics economic activity in oecd countries is weakly profit led convergence to a long run equilibrium is relatively slow delaying the profit squeeze stage for many years our race to the bottom model suggests that the oecd countries have been engaged in undercutting each other s real unit labour costs an extension of the model shows that the long run equilibrium has been shifting south west towards a lower wage share it may even be that this race has the undesirable consequence of decreasing economic activity

strategic export policy with foreign direct investment and import substitution abstract the paper examines discretionary and strategic foreign direct investment fdi incentives in the export sector relative to a non interventionist policy the analysis is based on a two country model with both countries seeking to attract fdi countries differ in cost levels and in their levels of tariff protection on intermediate inputs a shift in the trade policy regime toward the strategic promotion of exports results in a decrease in fdi allocated to the low cost country when it has a low level of protection on intermediate inputs and an increase in fdi when it has a high level of protection on intermediates inputs furthermore even if fdi increases with export policy activism relative to non intervention welfare may be lower

reputation in dynamic games abstract we analyze reputation in a game between a large player and a continuum of long lived small players in which state variables affect players payoffs the large player s type is private information we give conditions under which in every nash equilibrium a very patient large player will get almost the largest payoff consistent with the small players choosing a best response in a large finite truncation of the game while our results apply to the time inconsistency problem of optimal government policy we show that for the durable goods monopoly reputation may fail to improve the monopolist s payoff journal of economic literatureclassification numbers c72 c73

perfect equilibria in a trade liberalization game the credibility of temporary protection is examined in a simple infinite horizon perfect information game of timing in which the domestic government uses the threat of future liberalization to induce the domestic firm to invest all pure strategy subgame perfect equilibria are cyclical and surprisingly one of them implements optimal temporary protection however this equilibrium fails to pass another credibility criterion called renegotiation proof the game has a unique stationary subgame perfect equilibrium in mixed strategies copyright 1990 by american economic association

excess demand functions when new assets are introduced abstract we demonstrate that information on the aggregate excess demand function of an incomplete real asset market economy is not helpful toward predicting the equilibrium of a new economy to which unredundant assets are added an innovation of assets can completely change the aggregate excess demand functions

can a liberalization of capital outflows increase net capital inflows abstract facing massive capital inflows that put downward pressure on the real exchange rate some policymakers and analysts have recommended a liberalization of capital outflows empirically however the removal of capital outflow controls has apparently stimulated a net inflow of capital in several experiences such as britain since 1979 italy new zealand and spain in the mid to late 1980s and colombia egypt and mexico in the 1990s numerous measures to liberalize capital outflows in chile during the 1990s have not had a noticeable effect in offseting a surge of net capital inflows how can we explain the apparent paradox that reducing controls on capital outflows can actually increase net capital inflows our theoretical model provides one such explanation a liberalization of capital outflows understood here as a reduction in the minimum capital repatriation period for foreign investment reduces the degree of irreversibility of the decision to invest in a given country this in turn lowers the option value of waiting until uncertainty about a possible change in the rules of the game that affect investment in domestic assets is resolved because in this event foreigners investing at home will be stuck with the low return asset for a shorter period of time thus a reduction in the minimum repatriation period is likely to increase not decrease net capital inflows this result has an important policy implication liberalizing capital outflows may have significant benefits on its own but it may not be the appropriate policy to defend the real exchange rate in the presence of massive capital inflows because it is likely to strengthen those very capital inflows

credibility of protection and incentives to innovate in recent trade policy debates it is often argued that temporary protection stimulates innovation this paper shows that the validity of the argument depends on the perceived credibility of protection policy if it is suspected that temporary protection will be removed early should innovation occur before its terminal date the protected firm invests less in r d than it does under free trade if it is expected that protection will be extended should no innovation have occurred by its terminal date investment falls below the free trade level and eventually to zero as the terminal date is approached

what do market calibrated stochastic processes indicate about the long term price of crude oil abstract stochastic process models of commodity prices are important inputs in energy investment evaluation and planning problems in this paper we focus on modeling and forecasting the long term price level since it is the dominant factor in many such applications to provide a foundation for our modeling approach we first evaluate the empirical characteristics of crude oil price data from 1990 to 2013 using unit root and variance ratio tests statistical evidence from these tests shows only weak support for the applicability of stationary mean reverting type processes up through 2004 with non stationary brownian motion type processes becoming more plausible when the data from 2005 to 2013 is added we then apply a kalman filtering method with maximum likelihood approach to estimate the model parameters for both a single factor geometric brownian motion gbm process as well as the two factor schwartz and smith 2000 process the latter process decomposes the spot price into unobservable factors for the long term equilibrium level and short term deviation and it accommodates aspects of both a gbm process and a mean reverting process both empirical and simulated data are analyzed with these models and we quantify the increases in both the drift rate and volatility of these processes that result from developments in the crude oil markets since the middle of the last decade we conclude by comparing and contrasting both historical accuracy and forecasts from the parameterized models and show that when the emphasis is on the long term expectations a single factor gbm forecast may be sufficient

estimation and forecasting in models with multiple breaks this paper develops a new approach to change point modelling that allows the number of change points in the observed sample to be unknown the model we develop assumes that regime durations have a poisson distribution it approximately nests the two most common approaches the time varying parameter tvp model with a change point every period and the change point model with a small number of regimes we focus considerable attention on the construction of reasonable hierarchical priors both for regime durations and for the parameters that characterize each regime a markov chain monte carlo posterior sampler is constructed to estimate a version of our model which allows for change in conditional means and variances we show how real time forecasting can be done in an efficient manner using sequential importance sampling our techniques are found to work well in an empirical exercise involving u s gdp growth and inflation empirical results suggest that the number of change points is larger than previously estimated in these series and the implied model is similar to a tvp with stochastic volatility model

the impact of oil price shocks on the term structure of interest rates in a structural var framework we study the impact of oil price shocks in the global crude oil market on the dynamics of the entire yield curve in four industrialised countries with different positions on the oil market the us canada norway and south korea responses of the term structure factors to oil market shocks are shown to differ contingent on the underlying sources that drive oil price shocks and the country s dependence on oil oil market specific demand shocks result in increases in the level factor in oil importing countries but have no such effect in oil exporting countries oil supply disruptions have short lived negative responses of the slope factors in the us and canada associated with loosening monetary policy whilst demand side shocks tend to lead to increases the slope in all countries overall oil supply and demand shocks jointly account for a considerable amount of the observed variation in the term structure of interest rates

the identification of preferences from equilibrium prices under uncertainty the competitive equilibrium correspondence which associates equilibrium prices of commodities and assets with allocations of endowments identifies the preferences and beliefs of individuals under uncertainty this is the case even if the asset market is incomplete

the political economy of declining industries senescent industry collapse revisited many observers have noted a strong tendency for protection once it is instituted to persist over time this paper first shows that persistent protection arises whenever lobbying is an alternative to costly adjustment with endogenous protection the level of tariffs is an increasing function of past tariffs the more an industry lobbies the greater the current protection it receives and the less it adjusts and the less the industry adjusts the more effective it is as a lobby in the future when the costs of lobbying and adjustment are fully variable declining industries contract more slowly over time and never fully adjust however the paper shows that adding a fixed cost of lobby formation or maintenance is sufficient to generate an endogenous collapse of protection such as that predicted by cassing and hillman 1986 american economic review 76 516 523 in which an industry abruptly terminates its lobbying and loses its protection finally the paper examines the well documented bias against growing industries in the lobbying process

imports as competitive discipline the role of the productivity gap abstract this paper addresses the impact of foreign competition on the competitive advantage of domestic firms and the role of trade policy in an endogenous growth framework it shows that the impact of foreign competition on r d and productivity depends on the industry s relative position trade liberalization promotes innovation and enhances welfare in mature industries but hinders growth and leads to market exit in infant industries with a large productivity gap in the latter case temporary protection promotes the survival of the firm and increases welfare at the margin hence we integrate the old argument for the temporary protection of infant industries with the notion that foreign competition fosters innovation and productivity

principles of fiscal and monetary policy abstract this paper describes a complete and internally consistent set of principles for the conduct of a welfare maximizing fiscal and monetary policy issues of time consistency that arise in applying these principles to actual economics are also discussed

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

modeling structural breaks in economic relationships using large shocks abstract this paper introduces a new model of structural breaks in the coefficients of economic relationships which allows them to be driven by large past economic shocks the breaks generated by these shocks can be taken to reflect stochastic changes in agents decisions or beliefs triggered by extraordinary economic events our model specifies that both the timing and size of breaks are stochastic the last property of it enables us to investigate qualitative effects that large shocks can have on economic relationships as an empirical application of our model the paper investigates the stability the oil economy relationship since the early sixties from the six large oil shocks identified by our data the paper shows that only the first oil shock at the end of 1973 has caused a major long term adverse effect on economic activity all the large oil price shocks that have happened since then did not have any significant negative effects on the slope of the oil economy relationship

did us safeguards resuscitate harley davidson in the 1980s abstract this paper examines us safeguards applied to the motorcycle market in the 1980s after receiving temporary protection by means of a maximum tariff of over 45 harley davidson sales recovered dramatically simulations based on structural demand and supply estimates indicate that while safeguard tariffs did benefit harley davidson they only account for a fraction of its increased sales this is primarily because consumers perceived that harley davidson and japanese large motorcycles were poorly matched substitutes for each other our results provide little evidence that safeguard provisions triggered restructuring in harley davidson

excess demand functions and incomplete markets abstract this paper is aimed at characterizing excess demand functions around noncritical spot price systems in two period exchange economies with incomplete markets and real assets journal of economic literature classification numbers d52 c62

on the dynamic effects of oil price shocks a study using industry level data abstract this paper analyzes the effects of oil price shocks on demand and supply in various industries the impulse responses of identified var models indicate that for industries that have a large cost share of oil such as petroleum refinery and industrial chemicals oil price shocks mainly reduce supply in contrast for many other industries with the automobile industry being a particularly important example oil price shocks mainly reduce demand the paper suggests that oil price shocks influence economic activities beyond that explained by direct input cost effects possibly by delaying purchasing decisions of durable goods

labor adjustment and gradual reform when is commitment important we analyze a model in which a government uses a second best policy to affect the reallocation of labor following a change in relative prices we consider two extreme cases in which the government has either unlimited or negligible ability to commit to future actions we discuss the factors that determine the importance of commitment ability and provide numerical examples the degree of commitment ability can alter the equilibrium policy both quantitatively and qualitatively in both extreme cases the dying sector is protected during the transition to a free market in order to decrease the amount of unemployment

time consistent protection with learning by doing abstract can a government induce efficiency gains in his domestic industry by protecting it against foreign competition would such trade protection be time consistent the present paper builds a dynamic equilibrium model that accounts for learning by doing effects that link firms strategies over time the model shows that the existence of dynamic economies of scale suffices to overcome the traditional government s lack of commitment of its tariff policy this paper compares the infinite horizon markov perfect equilibrium of this game with the dynamic equilibrium under commitment as well as the static nash equilibrium equilibrium strategies are derived in closed form by solving a linear quadratic differential game optimal trade policy involves higher tariff levels than in the static setup in order to account for future gains in efficiency under reasonable assumptions the unique stable mpe is characterized by a domestic price and tariff that decrease as experience accumulates thus supporting the future liberalization of trade as an equilibrium feature of this dynamic game

do effective state business relations matter for economic growth evidence from indian states summary effective state business relations are a set of highly institutionalised responsive and public interactions between the state and the business sector this paper examines the impact of effective state business relations on economic growth across indian states over the period 1985 2006 we propose a measure that captures the various dimensions of effective state business relations at the sub national level and estimate standard growth regressions using dynamic panel data methods our results show that effective state business relations contribute significantly to economic growth and appear to be driven by the intensity of the interactions between the state and the private sector

economic growth inflation and oil shocks are the 1970s coming back this article analyses the relationship between oil price shocks and the macroeconomic evolution of the group of seven g7 countries using the qu and perron 2007 methodology we endogenously identify three breaks in the nonlinear relationship across our 1970 to 2008 sample we compute long term multipliers and find that the response of output and inflation to oil price shocks is greatest in the 1970s and progressively disappears until the late 1990s in contrast to the previous literature we observe that both effects reappear in the 2000s especially on inflation nevertheless the transmission of oil price shocks to the economy is weaker than in the 1970s which means that oil price shocks have lost some of their explanatory power precisely identifying these effects is crucial for the design of adequate economic measures to control or smoothen them

a comparison of the effects of exogenous oil supply shocks on output and inflation in the g7 countries a comparison of the effects of exogenous shocks to global crude oil production on seven major industrialized economies suggests a fair degree of similarity in the real growth responses an exogenous oil supply disruption typically causes a temporary reduction in real gdp growth that is concentrated in the second year after the shock inflation responses are more varied the median cpi inflation response peaks after three to four quarters exogenous oil supply disruptions need not generate sustained inflation or stagflation typical responses include a fall in the real wage higher short term interest rates and a depreciating currency with respect to the dollar despite many qualitative similarities there is strong statistical evidence that the responses to exogenous oil supply disruptions differ across g7 countries for suitable subsets of countries homogeneity cannot be ruled out a counterfactual historical exercise suggests that the evolution of cpi inflation in the g7 countries would have been similar overall to the actual path even in the absence of exogenous shocks to oil production consistent with a monetary explanation of the inflation of the 1970s there is no evidence that the 1973 1974 and 2002 2003 oil supply shocks had a substantial impact on real growth in any g7 country whereas the 1978 1979 1980 and 1990 1991 shocks contributed to lower growth in at least some g7 countries jel e31 e32 q43

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

on the costs of temporary policy abstract the effects and costs of a temporary trade liberalization experiment are studied in terms of a model with an infinitely lived individual under perfect capital mobility and no static gains from trade it is shown that the current account deteriorates during liberalization and becomes more negative the shorter is the liberalization period the costs are non monotonic with respect to the latter and timing of their maximum varies widely with parameters the analysis is extended to include durable and home goods money and static gains from trade

incentives to create jobs regional subsidies national trade policy and foreign direct investment a national authority wishes to attract foreign direct investment fdi to create local jobs we analyse the optimal national trade policy when local authorities might offer subsidies to convince a multi national enterprise mne to invest in their jurisdiction with centralised decision making or with allocation of investment to particular localities the central authority s optimal policy is to use a high tariff to avoid payment of any subsidy to the mne despite this some socially undesirable but locally desirable fdi cannot be avoided if local authorities compete to offer subsidies to attract local investment then the central government s optimal policy is to try to discourage fdi by choosing a low tariff despite this some socially undesirable and even locally undesirable fdi prevails we conduct our analysis both assuming an upper bound on tariffs as would be consistent with trade liberalisation and allowing tariffs to vary freely the effect of increasing trade liberalisation depends heavily on the system of granting local subsidies if the system is centralised trade liberalisation decreases the range of parameters for which fdi occurs if the system is decentralised and competitive it increases this range

credibility of trade policy reform and investment the mexican experience abstract this paper assesses whether the program of trade liberalization undertaken by mexico after 1985 was undermined by lack of credibility it provides an empirical counterpart to some of the credibility issues that have been discussed elsewhere in the literature and proposes a methodology based on the estimation of a probit model to measure the probability of trade policy reversal due to the likelihood of occurrence of a balance of payments crisis it is shown that the probability of trade policy reversal reduced indeed the rate of capital accumulation during the first years of the reform

excess demand functions with incomplete markets a global result abstract the purpose of this paper is to give a global characterization of excess demand functions in a two period exchange economy with incomplete real asset markets we show that continuity homogeneity and walras law characterize the aggregate excess demand functions on any compact price set which maintains the dimension of the budget set

inflation tax rules and investment some econometric evidence this paper presents econometric evidence on the effect of tax incentives on business investment in the united states in the period from 1953 through1978 the analysis emphasizes that the interaction of inflation and existing tax rules has contributed substantially to the decline of business investment since the late 1960 s because the investment process is far too complex for any simple econometric model to be convincing i have estimated three quite different models of investment behavior the strength of the empirical evidence rests on the fact that all three specifications support the same conclusion more generally the analysis and evidence show that theoretical models of macroeconomic equilibrium should specify explicitly the role of distortionary taxes especially taxes on capital income the failure to include such tax rules can have dramatic and misleading effects on the qualitative as well as the quantitative properties of macroeconomic theories this paper was presented as the fisher shultz lecture at the fourth world congress of the econometric society 29 august 1980 in aix en province this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this abstract was borrowed from another version of this item

opportunity cost trade policies and the efficiency of firms abstract this paper analyzes the effects of trade policies on the technological effort of a firm entering a new market in the context of a developing country we depart from previous literature by bringing into focus the opportunity cost of technological effort a firm that spends time in acquiring a more efficient technology delays the commercialization of its products thus incurring an opportunity cost in terms of profits forgone protection increases both the opportunity cost and the benefits from technological effort in the case of linear demand function and constant returns to scale technology protection is shown to unambiguously reduce the protected firm s technological effort export subsidy is also shown to reduce technological effort when the potential level of exports under free trade is high

inefficient foreign borrowing a dual and common agency perspective studying the implications of uncoordinated borrowing the paper first looks at whether and when countries borrow too much in the aggregate it then revisits the original sin debate analyzing whether and when equity portfolio investment international portfolio diversification domestic currency denomination and longer maturities enhance borrowing countries access to international lending the paper thereby relates a country s level and quality of access to international capital markets to a variety of institutional features such as the level of domestic savings their location the extent of control rights held by political authorities and the interests of dominant domestic political forces

changing beliefs and systematic rational forecast errors with evidence from foreign exchange this paper addresses a new interpretation to the appearance in the early 1980s of systematic errors in forecasting the dollar exchange rate following a change in the process of a fundamental variable market participants revise their beliefs about the process using bayes rule since the market does not immediately recognize the change forecast errors are on average wrong during a period when the market is rationally learning for conservative parameter values the learning behavior of the dollar exchange rate in the early 1980s appears consistent with about half of the dollar s underprediction implied by the forward market copyright 1989 by american economic association

large shocks small shocks and economic fluctuations outliers in macroeconomic time series summary we analyse fifteen post world war i1 us macroeconomic time series using a modified outlier identification procedure based on tsay 1988a large shocks appear to be present in all the series we examined furthermore there are three basic outlier patterns i outliers seem to be associated with business cycles 2 outliers are clustered together both over time and across series 3 there appears to be a dichotomy between outlier behaviour of real versus nominal series also after controlling for outliers much of the evidence of non linearity in many of the time series is eliminated

infant industry tariff protection with pressure groups abstract this paper analyzes the increasing tariff protection in the spanish iron and steel industry over the first third of the 20th century learning effects are explicitly included to model a dynamic game of trade liberalization the government chooses the tariff level while firms decide how much to produce each period firms production decisions determine their future cost levels assuming that learning reduces only fixed costs the dynamic game may be solved in closed form so that the optimality and time consistency of the actual policy can be evaluated furthermore the model is used to measure the relative importance of producers and consumers on the government s equilibrium tariff strategy the model is calibrated for year 1913 and it is shown that the existence of important unexploited dynamic economies of scale may have justified high tariff levels at that time in addition the results also show that the spanish iron and steel producers behaved more competitively than what is commonly assumed and that the government s protection policy was not significantly conditioned by steel producers

market demand functions in the capital asset pricing model abstract we demonstrate that in a capm economy homogeneity walras law and the tobin separation property characterize market demand on finite sets of prices consequently for any number n there exist capm economies which have at least n equilibria and hence have n different beta pricing formulas endowment perturbations in these economies cannot decrease the number of equilibria below n journal of economic literature classification numbers c62 d51 d52 g12

trade reform aggregate investment and capital flight on credibility and the value of information abstract in this paper we demonstrate that uncertainty about future policy reversals coupled with irreversible investment confers an option value to foreign exchange and may lead to capital flight and a fall in aggregate investment after a trade reform the analysis focuses on the value of information and the credibility of the policy reform the conclusion points to a potential role for international institutions to prevent such problems

informational benefits of international treaties international treaties allow a minister in one country to learn about the beliefs held by a minister in another country so allowing each to make better decisions when the net benefits of environmental policy are uncertain a country which participates in negotiating an environmental treaty or which supports strong environmental action thereby provides information to another country that such action can be worthwhile this dimension of international environmental agreements helps explain why countries negotiate treaties why these treaties often implement the nash non cooperative equilibrium why agreement to a treaty by a country deemed not particularly favorable to it can strengthen environmental action and why treaties may invoke a minimum participation clause the informational mechanism we discuss holds even if physical spillovers are absent and even if monitoring and enforcement are infeasible our approach can explain additional phenomena how requirements for approval by several bodies within a country can increase support for a policy and why simultaneous action can lead to better outcomes than sequential action

shifts in volatility driven by large stock market shocks abstract this paper presents an extension of the stochastic volatility model which allows for level shifts in volatility of stock market returns known as structural breaks these shifts are endogenously driven by large return shocks innovations reflecting large pieces of market news these shocks are identified from the data as being bigger in absolute terms than the values of two threshold parameters of the model one for the negative shocks and one for the positive shocks the model can be employed to investigate different sources of stock market volatility shifts driven by market news without relying on exogenous information in addition to this it has a number of interesting features which enable us to study the effects of large return shocks on future levels of market volatility the above properties of the model are shown based on a study for the us stock market volatility

governance and real estate markets performance in nigeria are they related governance has been identified as a key determining variable capable of influencing the performance of any economy activity on this note the study undertakes to investigate the relationship between governance and the real estate markets performance in nigeria the study employs ardl methodology of bound testing approach for the quarterly series spanning 1996q1 to 2010q4 of the variables considered the prominent role of real gdp and governance index were clearly brought to fore both in the short and long run while that of inflation and interest rates were less pronounced statistically the result of ecm further accentuates connection between governance and the real estate market through the establishment a stable long run relationship between them in the final analysis a few policy prescriptions are advice for the attention of all stakeholders in the built environment

what happened to the oil price macroeconomy relationship abstract strong evidence is found that oil prices no longer granger cause many u s macroeconomic indicator variables in data after 1973 a number of potential explanations are explored that sample stability issues are responsible that oil prices are now endogenous and that linear and symmetric specifications misrepresent the form of the oil price interaction none of these hypotheses are supported by the data the opec price increases do appear to have had significant impacts while the effects of the price declines of the 1980s are smaller and harder to characterize these results have potentially important implications for the large body of research which utilizes oil prices as an instrumental or explanatory variable

oil and the macroeconomy since the 1970s economists have long been intrigued by empirical evidence that suggests that oil price shocks may be closely related to macroeconomic performance this interest dates back to the 1970s the 1970s were a period of growing dependence on imported oil unprecedented disruptions in the global oil market and poor macroeconomic performance in the united states thus it was natural to suspect a causal relationship from oil prices to u s macroeconomic aggregates since then a large body of work has accumulated that purports to establish this link on theoretical grounds and to provide empirical evidence in its support we do not attempt a comprehensive survey of this literature but rather provide an idiosyncratic synthesis of what we view as the key issues in this debate and the insights gained over the last 30 years the timing seems right for such an account although the experience of the 1970s continues to play an important role in discussions of the link between oil and the macroeconomy there have been a number of new oil price shocks since the 1970s notably the 1986 collapse of oil prices and the 2000 boom in oil prices as well as the oil price increases associated with the 1990 1991 gulf war and the 2003 iraq war given this richer case history we are arguably in a better position than two decades ago to distinguish the idiosyncratic features of each oil crisis from the systematic effects increases in oil prices have been held responsible for recessions periods of excessive inflation reduced productivity and lower economic growth in this paper we review the arguments supporting such views first we highlight some of the conceptual difficulties in assigning a central role to oil price shocks in explaining

the impact of oil shocks on the spanish economy abstract this paper analyses the impact of oil price shocks on both the gdp growth and on inflation in the economy of spain and its seventeen regions the qu and perron 2007 and the bai and perron 1998 2003a and 2003b methods identify different periods across the sample evidence of a diminishing effect of oil price shocks on gdp growth and on inflation is found from the 1970s until the mid 1980s however in contrast with previous literature we find a renewed effect on both these macroeconomic variables after the mid 80s in spain it recovers some of its initial importance in the second half of the 1990s for gdp and between 1986 and 1994 and the 2000s for inflation in the regions the influence of oil price shocks on the gdp progressively disappears while the impact on inflation decreases from 1986 onwards but becomes significant again ten years later the most outstanding result is that oil price movements explain at least some of the recent inflation therefore policy measures to control the economic impact of oil shocks should be implemented in the future

policy designs in a dynamic model of infant industry protection abstract this paper takes the neoclassical infant industry model allows agents to respond to future expectations and reveals previously unexplained relationships between protection and outcome policy which projects to protect the industry until international competitiveness may not necessarily succeed consistent to the mixed empirical evaluations to guarantee success protection has to last longer however for success to be an equilibrium protection can last shorter decline after take off is also an equilibrium when adjustment speed is bounded increasing the protection rate is not isomorphic to decreasing its duration in policy design adjustment speed critical industry scale and policy duration are all relevant

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

green industrial policy green growth requires green technologies production techniques that economize on exhaustible resources and emit fewer greenhouse gases the availability of green technologies both lowers social costs in the transition to a green growth path and helps achieve a satisfactory rate of material progress under that path the theoretical case in favour of using industrial policy to facilitate green growth is quite strong economists traditional scepticism on industrial policy is grounded instead on pragmatic considerations having to do with the difficulty of achieving well targeted and effective interventions in practice while these objections deserve serious attention i argue that they are not insurmountable a key objective of this paper is to show how the practice of industrial policy can be improved by designing institutional frameworks that counter both informational and political risks

how should structural adjustment programs be designed abstract more than seven years have elapsed since the onset of the generalized debt crisis of 1982 yet the affected countries have still not managed to stabilize their economies these countries must now attempt structural adjustment in the midst of pervasive macroeconomic and political instability structural adjustment packages should be designed with this reality in mind this paper argues that structural adjustment programs should strive for sustainability rather than the economic liberalization that they presently stress illiberal policies which do not damage overall macro stability are preferable to liberal policies which are inherently unsustainable or engender macro instability liberalization programs that are not sustainable are likely to bring few benefits but have high costs in terms of private investment the paper discusses some of the chief implications of this opinion for the design of adjustment programs

exogenous oil supply shocks how big are they and how much do they matter for the u s economy abstract the paper proposes a new measure of exogenous oil supply shocks the timing the magnitude and the sign of this measure may differ greatly from current state of the art estimates it is shown that only a small fraction of the observed oil price increases during oil crisis periods can be attributed to exogenous oil production disruptions exogenous oil supply shocks cause a sharp drop of u s real gdp growth after five quarters rather than an immediate and sustained reduction in economic growth and a spike in cpi inflation after three quarters overall exogenous oil supply shocks made remarkably little difference for the evolution of the u s economy since the 1970s although they did matter for some historical episodes

international interdependence of national growth rates a structural trends anakysis abstract this paper identifies two structural trends responsible for growth in per capita industrial production in the us the uk and japan first using johansen s multivariate cointegration approach the number of common trends in the three industrial production series and the real price of oil is estimated to be two next long run restrictions are used to separate structural errors with temporary effects from those with permanent effects finally it is assumed that the oil price is affected by only a single structural trend this identifies a trend which has a structural interpretation as a natural resource constraint and another trend with positive drift interpreted as productivity

commercial policy growth and the distribution of income in a dynamic trade model abstract this paper analyzes the effects of commercial policy in a dynamic three factor three sector model that allows for endogenous capital accumulation nontraded goods and both consumption and capital good imports simple well defined conditions are derived under which different trade strategies raise or lower the real wage and are effective in promoting capital accumulation

the taxation effect on gasoline price asymmetry nexus evidence from both sides of the atlantic this paper explores the degree of competition in various gasoline markets and infers possible causes of price asymmetry across the globe for this purpose we use the dynamic ordinary least square method in order to estimate price asymmetry in twelve european countries and the united states for a sample of weekly observations which spans the period from june 1996 to august 2011 the results indicate the common perception that less competitive gasoline markets exhibit price asymmetry while highly competitive gasoline markets follow a symmetric price adjustment path finally the inclusion of taxes vat and excise tax into retail gasoline prices supports the existence of price asymmetry in many european countries

political influence and the dynamic consistency of policy garfinkel department of economics university of fornia 3151 social science plaza irvine ca 92697 lee artment of economics university of california 3151 soscience plaza irvine ca 92697 and international monfund 700 19th street nw washington dc 20431 we k without implicating avinash dixit amihai glazer chel grossman luisa lambertini stergios skaperdas an ymous referee and seminar participants at the university alifornia los angeles california state universityerton and the 1998 winter meetings of the econometociety for helpful comments on previous drafts of this r which had been circulated under the title political ipline and the dynamic consistency of policy the s expressed in this paper are those of the authors and ld not be attributed to the international monetary fund see torsten persson and guido tabellini 1990 for a ul survey of this literature

markets and regulatory hold up problems abstract many regulatory programs such as environmental regulation are effective only if firms make irreversible investments that reduce the cost of compliance a firm potentially subject to regulation may therefore behave strategically by not investing thereby forcing the regulator to void the proposed regulation we show that such incentives which resemble a hold up problem may not be overcome when government s only tool is the imposition of an emissions tax the hold up problem can be overcome by the issuance of tradeable permits a time consistent equilibrium exists with all firms investing and the government imposing regulations even if no permits are traded and their market price is low indeed an observation of no trade may indicate that pollution abatement is great

do credible domestic institutions promote credible international agreements we examine the relationship between international policy coordination and domestic policy reputation when both are self sustaining we show that domestic policy commitment does not necessarily facilitate international cooperation rather efficient policies may be most easily sustained when governments are unable to pre commit to policy domestically moreover the lack of domestic commitment is more likely to facilitate international cooperation the larger the international spillovers of domestic policies are

time inconsistency of protectionist programs protectionist trade policies have long been advocated as second best instruments to achieve certain national objectives in situations where there is a market imperfection in essence protection provides time and resources for firms to undertake cost reducing investments recently there has been an emergence of new arguments to justify the implementation of a national industrial policy to encourage investment and to ensure the competitiveness of targeted industries also at the theoretical level a new argument known as strategic trade policy has emerged according to this argument protectionism gives domestic firms strategic advantage against foreign firms to capture a greater share of export markets where rents are not competed away actually the performance of protectionist programs has been grim industries have not adapted and protection has had to be renewed again and again arguments justifying protection have avoided this issue by implicitly assuming that authorities can credibly precommit to eliminate protection this is a very strong assumption in fact government actions are not exogenous but they are rather the result of an optimization process or they are best responses to political pressures as stressed in the public choice literature 2 therefore if authorities capitulate to protectionist pressures in the present they are unlikely to resist them in the future in the event that the targeted firm would not have adapted the inability of authorities to precommit to the unconditional elimination of protection generates a trade off for the firm if during the program the firm does not invest sufficiently in cost

an alternative semiparametric approach to the modelling of asymmetric gasoline price adjustment in this paper we revisit the wholesale and retail gasoline price adjustments to fluctuations in the input cost prices for a monthly panel dataset of 48 us states over the period 1994 to 2011 in doing so we employ for the first time in the empirical literature nonlinear semiparametric models with local generalized method of moments gmm estimators our findings indicate that wholesale and retail gasoline prices adjust more rapidly in an upward than a downward direction confirming the rockets and feathers hypothesis

tariffs as insurance optimal commercial policy when domestic markets are incomplete free trade is not optimal for a small country that faces uncertain terms of trade if some factors are immobile ex post and markets for contingent claims are incomplete the government can improve social welfare by using commercial policy that serves as a partial substitute for missing insurance markets using a combination of analytical and simulation techniques we demonstrate that optimal policy for this purpose will often have an anti trade bias we also show that the usual preference by economists for factor or product taxes and subsidies over tariffs and export subsidies may not be justified in this context this abstract was borrowed from another version of this item

do safeguard tariffs and antidumping duties open or close technology gaps abstract this paper examines how the country breadth of tariff protection can affect the technology adoption decisions of both domestic import competing and foreign exporting firms the contribution of the analysis is to show how firm level technology adoption changes under tariffs of different country breadth i show that a country specific tariff like an antidumping duty induces both domestic import competing firms and foreign exporting firms to adopt a new technology earlier than they would under free trade in contrast a broadly applied tariff like a safeguard can accelerate technology adoption by a domestic import competing firm but will slow down technology adoption by foreign exporting firms because safeguard tariffs can delay the foreign firm s adoption of new technology the worldwide welfare costs associated with using them may be larger than is generally believed

oil and the macroeconomy when prices go up and down an extension of hamilton s results in an important paper hamilton 1983 demonstrated a strong correlation between oil price changes and gross national product growth in u s data however his study pertained to a period in which all the large oil price movements were upward and thus it left unanswered the question whether the correlation persists in periods of price decline moreover the price variable he used was somewhat distorted by price controls in the 1970s this note investigates whether hamilton s results continue to hold when the sample is extended to include the recent oil market collapse and the oil price variable is corrected for the effects of price controls particular attention is given to the possibility of asymmetric responses to oil price increases and decreases as suggested in the structural employment literature loungani 1986 davis 1987 hamilton 1988 like hamilton i based my investigation on the gnp equation in sims s 1 980b six variable quarterly vector autoregressive model

oil shocks and aggregate macroeconomic behavior the role of monetary policy a recent paper by bernanke gertler and watson 1997 suggests that monetary policy could be used to eliminate any recessionary consequences of an oil price shock this paper challenges this conclusion on two grounds first we question whether the federal reserve actually has the power to implement such a policy for example we consider it unlikely that additional money creation would have succeeded in reducing the fed funds rate by 900 basis points relative to the values seen in 1974 second we point out that the size of the effect that bernanke gertler and watson attribute to oil shocks is substantially smaller than that reported by other researchers primarily due to their choice of a shorter lag length than that used by other researchers we offer evidence in favor of the longer lag length employed by previous research and show that under this specification even the aggressive federal reserve policies proposed would not have succeeded in averting a downturn