modelling seasonality in residential water demand the case of tunisia this article proposes to model seasonal patterns of residential water demand using the techniques of seasonal integration and cointegration the methodology is applied to quarterly aggregate time series data for tunisia 1980 2007 applying the same increasing multi step pricing scheme in the whole country first a seasonal cointegration analysis demonstrates the relevance of a pricing policy that increases the size of the lower consumption block in summer second the nonseasonal cointegration analysis reveals a relatively high price elasticity for the highest consumption block therefore we also propose to increase the tariff progressivity to promote water savings this modified pricing scheme will help to achieve goals of environmental protection and social equity

water markets market reform and the urban poor results from jakarta indonesia abstract roughly 20 of the eight million persons in jakarta receive water from municipal water connections to their homes remaining supplies are essentially private and include street vendors standpipes and wells the last of these an inexpensive but increasingly contaminated source in many areas an expansion of the network of in house connections is in progress but will take several decades to complete in the interim various strategies have been advanced to deal with persistent problems of access to good water by the poor this study examines the impacts of one such plan put to action the april 1990 deregulation measure permitting private homes with water connections to resell municipal water we present preliminary evidence that the primary social benefits of deregulation are the money savings and increased consumption by former vendor and standpipe customers in most respects the aggregate effect is equivalent to a costless expansion in the standpipe system with the difference on the supply side that significant transfers from vendors and standpipe operators to household resellers may occur

how much does water consumption drop when each household takes charge of its own consumption the case of the city of seville making individuals take charge of their own domestic water consumption is one of the measures used to reduce the growing demand for this resource and to achieve sustainable consumption compatible with the goal of equity the use of individual meters instead of communal meters and fixing tariffs by inhabitant rather than by household are two measures aimed at achieving these objectives this article assesses the measures put in place in the seville metropolitan area during the last 20 years with an unobserved component model set up in a state space framework estimated using maximum likelihood water consumption elasticity to individual meters has changed from 0 307 to 1 317 with the introduction of per inhabitant tariffs which demonstrates that there are water saving synergies when the two measures are implemented together the reductions in water consumption achieved with these measures are also longer lasting than the changes in consumption habits during the frequent droughts in seville

a simple model of sectoral adjustment despite the significance of limited labour mobility across sectors few attempts have been made to produce dynamic models of sectoral adjustment which are consistent with perfect foresight and yet flexible enough to allow for a variety of dynamic experiments this paper proposes a simple perfect foresight model of two sector economies in which aggregate sectoral movement of labour takes place through the process of demographic change the model is tractable enough that one can easily examine the effects of intertemporally complicated relative price shocks both exogenous and endogenous under a variety of assumptions on technology

have domestic or foreign factors driven european external imbalances abstract this paper examines whether domestic or foreign net saving predominantly influences an economy s international borrowing and lending with reference to the experience of western european economies that have had sizable current account surpluses and deficits since the turn of the century it proposes that if an international lender country s current account surplus is positively negatively related to its real long term interest rate then foreign domestic factors are driving its external imbalance on the contrary for a foreign borrower country if its current account deficit is positively negatively related to its real long term interest rate domestic foreign factors drive its external imbalance on this basis it shows econometrically for major european lender economies germany the netherlands switzerland and sweden that external imbalances this decade were mainly determined by foreign factors though by domestic factors for norway for major borrower economies italy spain portugal ireland and the united kingdom the results were not significant implying that neither domestic nor foreign factors predominated over this time

inflation capital taxation and housing the long run in a small open economy this paper deals with the consequences of inflation and capital income taxes for the accumulation of wealth in a small open economy with a housing sector particular attention is paid to the incentive and intergenerational redistribution effects stemming from the interaction of inflation and capital income taxation and to portfolio shifts between housing assets and other assets the authors find that the intergenerational distribution effects and the incentive effects on overall savings tend to offset and sometimes even to dominate several of the expected interasset substitution effects of a change in inflation and capital taxes

household debt and fiscal multipliers we study the size of government spending multipliers in a general equilibrium model with search and matching frictions in which we allow for different levels of household indebtedness the main results are a the presence of impatient households and private debt helps to generate government spending multipliers greater than 1 b as financial conditions worsen the size of the government spending multiplier falls c conversely employment vacancies and unemployment multipliers are larger in a credit crunch d the model explains the observed pattern of responses of labour market variables housing prices and private debt to a fiscal shock reasonably well

intertemporal price speculation and the optimal current account deficit abstract the paper studies the effects of terms of trade fluctuations in an infinite horizon optimizing model of a small open economy while the current account response to a transitory terms of trade shock is in part explicable by intertemporal smoothing an important additional factor is the effect of anticipated future terms of trade shifts on the ral value of the external debt in terms of the home consumption basket when foreign borrowing is indexed to the import good a temporary worsening of the terms of trade creates the expectation of a decline in the real value of external debt this fall in the relevant real interest rate leads households to increase consumption while export prices are low and to decrease consumption sharply once the terms of trade recover if an adverse price shock is of sufficiently brief duration instantaneous utility will rise initially

on exchange rate stabilization abstract this paper extends calvo s 1986 and obstfeld s 1985 analyses of stabilization policies through predetermined exchange rates in a few directions the graphic and analytical techniques used here make it possible to perform a variety of policy experiments under a general utility function and in the presence of a consumer durable good or under time nonseparable preferences it also shows that the dynamic process of exchange rate stabilization exhibits hysteresis effects that is the steady state behavior of the economy depends on the initial condition and a temporary stabilization policy has a permanent effect on the economy

habits and durability in consumption and the dynamics of the current account abstract a model in which consumption exhibits durability and habits develop over the flow of services provided by them is used to study current account dynamics durability leads to adjacent substitutability in consumption while habits are assumed to lead to adjacent complementarity the adjustment of the current account may be non monotonic if habit effects are dominant in the short run and durability effects in the long run then after a terms of trade deterioration we will have a current account deficit followed by a surplus the j curve in the opposite case a surplus will be followed by a deficit 1998 elsevier science b v

present value tests of the current account with durables consumption abstract the present value tests of the intertemporal model of the current account usually assume that all goods are traded and that aggregate consumption decisions can be closely approximated by a random walk process this paper extends these models by explicitly introducing durables and nontraded goods into an intertemporal model of the current account and tests the model using canadian data since aggregate consumption expenditures on durables do not exhibit random walk behavior even when the aggregate consumer has a quadratic utility function the model that includes durables makes predictions that differ from those of the basic approach when nontraded goods are also incorporated into the model the most appropriate income variable becomes output net of nontraded production these implications are examined using present value tests the results suggest that in the annual data introduction of both durables and nontraded goods improves upon the model with traded nondurables only this seems to be due to the combination of durables and nontraded goods as durables alone do not sufficiently refine the basic model

aggregate spending and the terms of trade is there a laursen metzler effect this paper investigates the spending and current account effects of terms of trade shifts in a model where households maximize utility over an infinite planning period in the framework developed here an economy specialized in production must experience a fall in aggregate spending and a current surplus as a result of an unanticipated permanent worsening in its terms of trade the paper s model thus provides a setting in which the current account deficit predicted by laursen and metzier harberger and others fails to materialize

tax subsidies to owner occupied housing an asset market approach inflation reduces the effective cost of homeownership and raises the tax subsidy to owner occupation this paper presents an asset market model of the housing market and estimates how changes in the expected inflation rate affect the real price of houses and the equilibrium size of the housing capital stock simulation results suggest that the accelerating inflation of the 1970s which substantially reduced homeowners user costs could have accounted for as much as a 30 percent increase in real house prices persistent high inflation rates could lead ultimately to a sizable increase in the stock of owner occupied housing

time specific disturbances and cross sectional dependency in a small sample heterogeneous panel data unit root test in their seminal work im et al 1997 2003 suggested that time series for several cross sectional units could be used to increase the power of the dickey fuller unit root test they argued that when cross sectional correlation is a problem that can be modelled by a time specific factor demeaning across the cross sectional units can solve the problem in this study this proposition is proven valid but it is also shown that previously supplied standardizing moments are inappropriate when the number of cross sections are small causing size to differ from the significance level to correct this size distortion the current paper supplies response surface parameters that can be used to obtain moments that are valid when a time specific factor suffices for modelling cross sectional correlation in the heterogeneous panel data unit root framework the correct size of the panel data unit root test comes at the cost of a somewhat lower power against a stationary alternative less

evaluating the integration of contiguous discontinuous markets this paper applies the concepts of structural models of markets market integration and market discontinuity to show that discontinuous markets alter the integration characteristics of continuous markets when analyzing systems of contiguous markets some of which are discontinuous it appears that the continuous markets are less well integrated when the discontinuous markets are operating than when they are not operating

an empirical survey of residential water demand modelling abstract the increased reliance on demand side management policies as an urban water consumption management tool has stimulated considerable debate among economists water utility managers regulators consumer interest groups and policymakers in turn this has fostered an increasing volume of literature aimed at providing best practice estimates of price and income elasticities quantifying the impact of non price water restrictions and gauging the impact of non discretionary environmental factors affecting residential water demand this paper provides a synoptic survey of empirical residential water demand analyses conducted in the last 25 years both model specification and estimation and the outcomes of the analyses are discussed

residential investment and the current account abstract residential investment is an important driving force in the current account this paper first builds the model to show that residential investment for the empirically relevant case where demand for housing services has nonzero income elasticity is fundamentally different from nonresidential investment owing to this income effect the dynamics of housing are subject to the additional integral constraint as well as the standard stock adjustment and euler equations the model is used to examine the effects of changes in government purchases on the tradeable good housing subsidies and productivity shocks on the current account

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

current account dynamics and the terms of trade harberger laursen metzler two generations later this is a study of the current account dynamics resulting from the savings and investment dynamics in a small open economy which is subject to exogenous changes in its terms of trade and in world interest rates anticipated and unanticipated as well as temporary and permanent terms of trade changes have very different effects there is however a general tendency towards cycles in both savings and investment which gives rise to cycles in the current account it is shown that the classic harberger laursen metzler effect on saving of a terms of trade deterioration can have any sign for plausible parameter values both for temporary and permanent disturbances

governance failure rethinking the institutional dimensions of urban water supply to poor households summary this paper applies a conceptual framework of governance failure to an analysis of the institutional dimensions of urban water supply provision to poor households focusing on the case of jakarta data from a household survey archives gis based mapping and interviews are used to document governance failures that create disincentives for utilities to connect poor households and for poor households to connect the paper concludes by suggesting that the debate over the relative merits of public and private provision has diverted attention from the pressing issue of governance reform and by raising the question of whether household provision of networked water supply by monopolistic providers whether public or private is universally feasible given the current water supply policy norms

temporary stabilization predetermined exchange rates the paper analyzes the impact of a stabilization policy based on a temporary reduction in the rate of devaluation against a background in which a constant rate of devaluation has no real effects it is shown that the temporary policy does and furthermore that the real effects tend to become bigger in absolute value as the horizon of the temporary policy is shortened the central discussion is carried out in terms of a one good cash in advance model with perfect capital mobility and ramsey type consumers results are extended to account for home goods and variable velocity the roles of capital mobility and banking liberalization are briefly discussed

designation and influence of household increasing block electricity tariffs in china abstract electricity is the guarantee of normal life and the electricity price is widely concerned as a developing country in the transition stage abundant policy implications are included in the electricity price in china thus whether to adjust the resident electricity price is a dilemma for the government however the current single tariff system cannot cope with the complex social and environmental problems a new price mechanism is indeed needed this paper tries to design an increasing block tariffs system with the consideration of residential income and electricity consumption the result indicates that the increasing block tariffs system with four tier structure is more reasonable for china although the increasing block tariffs will result in the increase of electricity price it is still acceptable and affordable the increasing block tariffs will greatly improve the equity and efficiency and promote the electricity saving and emissions reduction moreover the power companies will increase tariffs revenue which would use to the transmission networks investment in poor area in order to the offset the limitations of the increasing block tariffs the government should adopt some complementary measures

evaluating the influence of increasing block tariffs in residential gas sector using agent based computational economics abstract designing a desirable increasing block tariff for the residential gas retail market has been a challenging task for regulated utilities especially in china to deal with such problems in this paper we establish an agent based computational economics system to provide a formal evaluation of the direct and indirect influences of several issued increasing block tariffs in the residential gas market moreover a comprehensive demand response behaviour model has been improved in term of price elasticity while still coping with income levels and complex social environment we also compute and compare the outcomes of several increasing block tariffs with the initial flat tariff by running the system on a test case using real world data from a middle scale gas retail market in wuhan the results indicate that there is an appropriate increasing block gas tariff scheme that has greater ability to improve social equity while still ensuring operator revenue and promoting gas conservation in order to offset the limitations of the proposed increasing block tariffs the regulator should adopt some complementary measures such as applying appropriate policies targeting the intended consumers and allowing large families to obtain extra allowance of volume

deterioration of the terms of trade and capital accumulation a reexamination of the laursen metzler effect abstract this paper analyzes the effect of both a permanent and a temporary deterioration in the terms of trade on a small open economy the model based on intertemporal optimization emphasizes the labor leisure choice and the role of capital accumulation the transitional dynamics is shown to depend upon the long run response of the capital stock to the terms of trade shock this consists of a negative substitution effect together with a positive income effect whether or not the laursen metzler effect holds depends upon whether the income effect dominates the substitution effect

the harberger laursen metzler effect under capital market imperfections abstract this paper re examines the effects of a permanent terms of trade change on a dynamic small open economy facing an imperfect world capital market as studied in obstfeld 1982 aggregate spending and the terms of trade is there a laursen metzler effect quarterly journal of economics 97 251 270 which assumes that the economy faces a downward sloping bond curve the novelty of the present paper is that a saddle path stable steady state comes into existence under the assumption that households subjective discount rate is a decreasing function of instantaneous utility the harberger laursen metzler hlm effect is shown to hold unambiguously i e an unanticipated permanent terms of trade deterioration leads to an increase in aggregate expenditure and a current account deficit this result is in stark contrast to those obtained in obstfeld 1982 aggregate spending and the terms of trade is there a laursen metzler effect quarterly journal of economics 97 251 270 and many other studies in the literature

evaluating the performance of alternative municipal water tariff designs quantifying the tradeoffs between equity economic efficiency and cost recovery the design of municipal water tariffs requires balancing multiple criteria such as financial self sufficiency for the service provider equity among customers and economic efficiency for society a modeling framework is developed for analyzing how alternative municipal water tariff designs affect these three criteria it is then applied to a hypothetical community in which a municipal water utility provides metered piped water and wastewater services to 5 000 households we analyze how the shift from a uniform volumetric tariff to different increasing block tariff ibt designs affects households water use and water bills and how these changes in turn affect measures of equity and economic efficiency for two different financial self sufficiency targets we calculate how changes in assumptions about 1 the correlation between household income and water use and 2 households response to average or marginal prices affect the tariffs performance in terms of these three criteria the results show that ibts perform poorly in terms of targeting subsidies to low income households regardless of the magnitude of financial subsidies that a utility receives from high level government when cost recovery is low the distribution of subsidies under ibts is even worse if the correlation between water use and household income is high ibts introduce price distortions that induce economic efficiency losses but we show that these welfare losses are relatively small especially when households respond to average prices

the capital inflows problem revisited a stylized model of southern cone disinflation in the late 1970s countries in latin america s southern cone initiated attempts to lower domestic inflation rates through the progressive reduction of a preannounced rate of exchange rate devaluation the stabilization programs gave rise to massive capital inflows real exchange rate appreciation and current account deficits this paper develops a stylized intertemporal framework in which the effects of a credible preannounced disinflation scheme can be studied it is shown that even when agents have perfect foresight and markets clear continuously the capital inflows phenomenon and the associated real appreciation may result while unanticipated permanent inflation changes are neutral in the paper anticipated inflation is neutral only in exceptional circumstances a preannounced disinflation operates by altering the path of an expenditure based real domestic interest rate that depends on expected changes in the prices of liquidity services and nontradable consumption goods

accounting for forward rates in markets for foreign currency absteract forward and spot exchange rates between major currencies imply large standard deviations of both predictable returns from currency speculation and of the equilibrium price measure the intertemporal marginal rate of substitution representative agent theory with time additive preferences cannot account for either of these properties we show that the theory does considerably better along these dimensions when the representative agent s preferences exhibit habit persistence but that the theory fails to reproduce some of the other properties of the data in particular the strong autocorrelation of forward premiums since the advent of flexible exchange rates in the early 1970s a large body of statistical work has established that forward rates for major currencies are not optimal predictors of future spot rates relevant evidence is reported in studies by baillie lippens and mcmahon 1983 bekaert 1991 bilson 1981 boothe and longworth 1984 cumby 1988 cumby and obstfeld 1984 fama 1984 gregory and mccurdy 1984 hansen and hodrick 1983 hodrick and srivastava 1984 and korajczyk and viallet 1990 a more complete list of references is provided by hodrick 1987 these papers indicate that returns from speculation in forward and spot currency markets are predictable and that the predictable components vary considerably over time a number of alternative explanations have been offered for the predictable variation in foreign currency market excess returns kaminsky 1988 korajczyk 1985 and krasker 1980 suggest that infrequent extreme events may make returns appear predictable in small samples the so called peso problem lewis 1989 argues that rational learning following infrequent changes in the process governing equilibrium prices can explain part of the ex post predictability of currency returns froot and frankel 1989 and froot and thaler 1990 examine the hypothesis that market forecasts of future spot

evidence on the purchasing power parity in a panel of cities evidence is provided on the ppp hypothesis using a sample of 50 spanish cities for a long time period through the application of panel data unit root tests although results suggest non rejection of the ppp short run deviations as measured by half lives indicate that real factors might be causing a slow rate of convergence to a common price index even in highly integrated economies

dynamics of the trade balance and the terms of trade the j curve the authors provide a theoretical interpretation of two features of international data the countercyclical movements in net exports and the tendency for the trade balance to be negatively correlated with current and future movements in terms of trade but positively correlated with past movements they document the same properties in a two country stochastic growth model in which trade fluctuations reflect in large part the dynamics of capital formation the authors find that their general equilibrium perspective is essential the relation between the trade balance and the terms of trade depends critically on the source of fluctuations copyright 1994 by american economic association

current account dynamics in a finite horizon model abstract this paper examines the response of the current account in a small open economy to a permanent change in the price of imported intermediate goods to do so it extends blanchard s 1985 open economy model to incorporate the capital stock with adjustment costs a la hayashi 1982 a price increase in imported intermediate goods can be viewed as a combination of transfer payments abroad and capital taxation the former effect leads to a current account deficit and the latter leads to a current account surplus the overall effect depends on the relative magnitude of these effects

time specific disturbances in a panel data stationarity test in this article we investigate the performance of a panel data stationarity test when cross sectional correlation is modelled by a time specific factor size distortions that occur especially when the number of cross sections is small are documented to eliminate these distortions a new set of critical values is supplied when investigating the rejection frequency under the alternative hypothesis it is found that the panel data stationarity test that uses the supplied critical values maintain good power characteristics even when only a subset of the cross sectional units have a unit root

privatization and renationalization what went wrong in bolivia s water sector summary this paper investigates the impact of water service privatization in bolivia it compares the performance of cities in which the service was privatized la paz and el alto with a city in which it is managed as a cooperative santa cruz de la sierra and one where the service is publicly provided cochabamba we find that access to water by low income consumers increased under private provision however the concessionaire failed to meet the targets stipulated in the contract the tariff increases required for full cost recovery eventually led to public outrage that forced the government to renationalize the company

tiered gasoline pricing a personal carbon trading perspective abstract this paper proffers a tiered gasoline pricing method from a personal carbon trading perspective an optimization model of personal carbon trading is proposed and then an equilibrium carbon price is derived according to the market clearing condition based on the derived equilibrium carbon price this paper proposes a calculation method of tiered gasoline pricing then sensitivity analyses and consumers surplus analyses are conducted it can be shown that a rise in gasoline price or a more generous allowance allocation would incur a decrease in the equilibrium carbon price making the first tiered price higher but the second tiered price lower it is further verified that the proposed tiered pricing method is progressive because it would relieve the pressure of the low income groups who consume less gasoline while imposing a greater burden on the high income groups who consume more gasoline based on these results implications limitations and suggestions for future studies are provided

possible adverse effects of increasing block water tariffs in developing countries ture in which a commodity is priced at a low initial rate up to a specified volume of use block then at a higher or several increasingly higher rates for additional blocks used the ordinary household municipal water bill in developing countries is often calculated on some sort of ibt structure and donor organizations and consultants continue to recommend this practice for town and city water systems the majority of world bank sponsored water tariff studies conducted since 1970 for example have recommended the use of increasing block water tariffs there are two commonly accepted justifications for using ibts the first based on a rationale of equity is that ibts should assist low income households and ensure an equitable allocation of the costs of water production and distribution the argument in this case is that low income households use less water than high income households because they have fewer water using appliances and are less likely to have large lawns and gardens an ibt results in higher marginal prices to the customer and thus higher average prices for higher income households the price of water in the initial block may be set very low usually at a subsidized rate to ensure that the poor are not discouraged from using the amount of water considered essential for human needs typically estimated at 25 50 liters per capita per day the price of water in the initial block is thus sometimes termed the lifeline rate the second justification for ibt structures is that the higher prices charged beyond the initial block discourage extravagant water use and promote water conservation both these justifications for ibts assume that each household has

habit persistence and the harberger laursen metzler effect in an infinite horizon model abstract the habit persistence model of ryder and heal is used to examine the harberger laursen metzler h l m effect our results are in contrast to the general view in the literature that the stability requirements preclude the h l m effect in an infinite horizon model we show that if the marginal utility of real consumption is strongly increasing in the habitual standard of living then the h l m effect holds and a terms of trade deterioration reduces savings however if the marginal utility of real consumption is not sufficiently strongly increasing or is decreasing in the habitual standard then the h l m effect is overturned

panel stationarity tests for purchasing power parity with cross sectional dependence we investigate the purchasing power parity ppp hypothesis for a group of 17 countries using a new panel based test of stationarity that allows for arbitrary cross sectional dependence we treat the short run time series dynamics nonparametrically and thus avoid the need to fit separate and potentially misspecified models for the individual series the statistic is simple to compute and uses standard normal critical values even in the presence of a wide range of different deterministic components we also evaluate the behavior of the test using a factor model to approximate cross sectional dependence and find that it generally improves finite sample performance taken together these features provide a widely applicable solution to the problem of testing for stationarity versus unit roots in macro panel data the test finds significant evidence against the ppp null hypothesis being true even when allowance is made for structural breaks

the value of free water analyzing south africa s free basic water policy this paper analyzes south africa s free basic water policy under which households receive a free water allowance equal to the world health organization s recommended minimum of 6 kiloliters per month i structurally estimate residential water demand evaluate the welfare eects of free water and provide optimal price schedules derived from a social planner s problem i use a unique dataset of monthly metered billing data for 60 000 households for 2002 2008 from a particularly disadvantaged suburb of pretoria the dataset contains rich price variation across 18 dierent nonlinear tarischedules and includes a policy experiment which removed the free allowance i nd that without government subsidy the mean monthly consumption would decrease from 12 6 to 5 6 kiloliters which is below the clean water consumption recommended by the who however it is possible to reallocate the current subsidy to form an optimal tari without a free allowance which would increase welfare while leaving the water provider s revenue unchanged this optimal tariwould also reduce the number of households consuming below the who recommended level

debt and distortionary taxation in a simple perfect foresight model abstract we examine the real effects of a temporary substitution of debt for distortionary income taxation we find that such a policy may reduce consumption increase investment and reduce interest rates these results arise even though we examine the same model used by barro where temporary substitution of debt for lump sum taxes was shown to have no real effects we show that these anti keynesian effects on consumption are as significant as various pro keynesian effects such as finite lives hence the impact of debt is an empirical issue and ricardian neutrality appears to be a reasonable benchmark

openness and the politics of potable water improving access to potable water has become an increasingly urgent concern for developing nations in the current era of globalization according to standard wisdom if developing countries undertake certain domestic reforms such as investing in infrastructure and engineering then safe and clean drinking water will improve this analysis uncovers however that in addition to such domestic efforts one of the greatest factors affecting water uncertainty is in fact internationally induced trade surprisingly both scholars and practitioners have neglected the potential impacts of expanding trade on access to potable water this analysis is the first large n cross national study of water that focuses on the interplay of trade and politics both international and domestic as the primary driving forces behind improvements in or constraints to water access the author hypothesizes that growing export pressures are constraining drinkable water in poor countries but a particular domestic condition can mit

the welfare cost of factor taxation in a perfect foresight model this paper examines the marginal efficiency cost of various factor taxes in a dynamic general equilibrium model the au thor solves for the excess burden of anticipated and unanticipated t emporary and permanent tax policies using a range of estimates for taste and technology parameters he finds excess burdens larger than those indicated by previous studies that use static models these exc ess burdens are sensitive to parameter values and timing however th e rankings of alternative tax policies turn out to be insensitive to structural parameter values copyright 1987 by university of chicago press

durability in consumption and the dynamics of the current account abstract in a model with durable goods and ricardian production technology an increase in government expenditure increases the steady state level of employment and reduces consumption the country runs a current account surplus the two factor model with costly investment akin to turnovsky and sen oxford econom pap 43 1991 1 confirms all the basic results of the simple model except for the current account balance the increase in capital has a negative effect whereas a decrease in the stock of consumer durables has a positive effect on the purchase of foreign bonds thus creating an ambiguous effect on the current account balance moreover the current account will likely exhibit non monotonic adjustment

stabilization with exchange rate management stabilization programs in open economies typically consist of two stages in the first stage the rate of currency devaluation is reduced but the fiscal adjustment does not eliminate the fiscal deficit that causes growth of debt and loss of reserves making a future policy change necessary only later at a second stage is this followed by either an abandonment of exchange rate management or by a sufficiently large cut in the fiscal deficit we study how different second stage policy changes affect economic dynamics during the first stage these changes include tax increases budget cuts on traded and nontraded goods and increases in the growth rate of money

terms of trade factor intensities and the current account in a life cycle model this paper examines the effects of terms of trade changes on the external adjustment of a small open economy where each consumer has a life cycle saving function the supply side of the economy is given by the standard two sector model with two primary factors labour and capital it is shown that when both commodities are produced a terms of trade deterioration leads to a current account deficit surplus if the export import sector is more labour intensive

convergence of interest rates around the pacific rim this article applies the panel data unit root tests provided by im pesaran and shin discussion paper 1997 to examine the interest rate convergence of small open asian countries with major financial centres with monthly data from 1988 1 to 1997 6 it was found that the nominal interest rates of these countries converge to the us rates rather than to japan s this finding is consistent with the view that the monetary authorities of non japan asian economies pegged their exchange rates overwhelmingly to the dollar rather than the yen before the financial crisis of 1997

consumer durables permanent terms of trade shocks and the recent us trade deficits abstract this paper employs an open economy real business cycle model to suggest that part of the 1980s us trade deficits may have been driven by permanent declines in consumer durable import prices we also show that most of the resulting decline in the trade balance is due to wealth effects not substitution effects

the overvaluation of purchasing power parity abstract recent panel studies of purchasing power parity have reported strong evidence of mean reversion in real exchange rates however these studies fail to control for cross sectional dependence in the data this failure has dramatic consequences raising the significance level of tests with a nominal size of 5 percent to as much as 50 percent it is shown in this paper that controlling for cross sectional dependence no evidence against the random walk null can be found in panels of up to 64 real exchange rates this finding cannot be attributed to low power as there is ample power in panels of this size to reject the unit root null