Cointegration Tests of the Profit-maximising Equilibrium in Greek Manufacturing: 1958–91

This paper applies the recently developed cointegration techniques to test for a long-run equilibrium among real wages and the average productivity of labour as implied by profit maximisation in the Greek manufacturing sector. We find evidence for a profit-maximising equilibrium and for adjustment towards this long-run equilibrium through nominal wages and labour productivity. We have also provided an estimate of the elasticity of substitution of 0.23 which is consistent with that of other studies using alternative approaches.     

The Balassa-Samuelson Model: A General-Equilibrium Appraisal*

We derive two key propositions of the Balassa-Samuelson model as long-run balanced growth implications of a neoclassical general equilibrium model. the propositions are that productivity differentials determine international differences in nontradable relative prices and deviations from PPP reflect differences in nontradable prices. Closed-form solutions are obtained and tested using panel methods applied to long-run components of OECD sectoral data computed using the Hodrick-Prescott filter. the results indicate that labor productivity differentials help explain international low-frequency differences in relative prices. However, predicted nontradable relative prices are less successful in explaining long-run deviations from PPP. Unless very sophisticated indeed, PPP is a misleadingly pretentious doctrine, promising us what is rare in economics, detailed numerical predictions. (Paul A. Samuelson, 1964, p. 153)     

Aggregate price responses to wage and productivity changes: Evidence from the U.S.

This papei examines the dynamic responses of prices to wage and productivity changes and distinguishes between short-run and long-run effects. The long-run solution of the dynamic specification is consistent with the hypothesis of markup pricing over unit labour costs. The restrictions implied by this long-run behaviour are not rejected.by U.S. data. In addition, the evidence supports the view that the short-run wage effects are significantly stronger than productivity effects.     

An error correction model of induced innovation in UK agriculture

Cointegration techniques are applied to a model of induced innovation based on the two-stage Constant Elasticity of Substitution (CES) production function. This approach results in direct tests of the inducement hypothesis, which are applied to agricultural data for the United Kingdom from 1953 to 2000. The time series properties of the variables are checked, cointegration is established and an Error Correction Model (ECM) constructed, which attempts to separate factor substitution from technological change. Finally, the ECM formulation is subjected to causality tests, which show that the factor price ratio for chemicals and land is Granger-prior to the factor-saving bias of technological change. However, long-run relative prices are not causally prior to the machinery/labour ratio. This results from perturbations in the user cost of machinery, caused by oil price shocks. Thus, the Induced Innovation Hypothesis (IIH) may explain long-run transformations like the mechanical and fertilizer revolutions that dominated the twentieth century, but not reflect short-run price volatility.     

FUEL TAXES AND COINTEGRATION OF ENERGY PRICES

Creating a successful energy tax policy requires understanding the markets that the energy policy targets. This paper analyzes coal, natural gas, and oil markets to determine the extent to which these fuel prices move together. Results indicate that a stable long-run relationship between coal and oil prices existed until 1974 and that this relationship changed after 1974. The long-run relationship between coal, natural gas, and oil prices implies that a single fuel tax in these markets would not be effective as a single tax policy. Similarly, an equal percentage tax on these energy sources, which does not change relative prices initially, would not keep relative prices unchanged in the long run. Energy policy must take account of the long-run relationship between different energy prices. Otherwise, the long-run results of energy policy could be quite different than intended .     

More Evidence in Favor of the Balassa–Samuelson Hypothesis

This study provides additional evidence of a significant long-run relationship between the relative price of nontradables and real output, consistent with the productivity-bias hypothesis of Balassa and Samuelson. The results, however, also indicate that additional permanent supply shocks, specifically real oil prices, need to be considered. In every case, relative prices are significantly affected by permanent innovations in real output and real oil prices. The general lack of evidence of cointegration, however, points to the possibility that additional long-run determinants of relative prices have been omitted.     

An approach to the wage level determination for a developing economy

The purpose of this paper is to investigate the factors determining wage and salary rates in Greek manufacturing. The model used originates from a derived demand for, and a supply of, labour. The wage equation is a theoretical long-run relationship. Because in the short-run disequilibria occur we develop an adjustment process whereby wage-rates in the short-run adjust to the long-run factors. The statistical estimates reveal that in this determination employment can be used as a proxy of product demand. This is due to the fact that in developing economies the increasing size of the product market determines employment. It is shown, moreover, that the use of productivity for the formulation of an incomes policy entails large wage-rates differentials, but due to the existence of a wage transfer mechanism wage-rates and salary-rates move upwards in unison.     

Values, prices of production and market prices: some more evidence from the Greek economy

This paper extends the empirical investigation of the relationbetween labour values and different price forms in the caseof the Greek economy. Subjecting the labour theory of valueto empirical tests with data from various countries helps inthe derivation of general conclusions regarding its empiricalvalidity and practical usefulness. Our results on the closenessof values and prices as measured by their absolute deviationand correlation, the shape of the wage–profit curves,the predictive power of labour values over market prices comparedwith other ‘value bases’, and the comparison offundamental Marxian categories when estimated in value and priceterms provide further support for the empirical strength ofthe labour theory of value.     

Comparing the employment-output elasticities of migrants and nationals: the case of the Gulf Cooperation Council

Many countries have large or increasing migrant populations. We estimate the elasticity of private-sector employment to nonoil GDP for nationals and migrants using a Seemingly Unrelated Error Correction (SUREC) model. We use data from the Gulf Cooperation Council (GCC) countries, which have a particularly large share of foreign workers. Our results indicate that the employment response is statistically significantly lower for nationals, who have an estimated short-run elasticity of only 0.15 and a long-run response of 0.7, than for migrants, where the short- and long-run elasticities are 0.35 and almost unity. Lower elasticities could signal higher labour market adjustment costs. In the context of low oil prices, forecasts imply a significant jobs shortfall for nationals in the coming years.     

Internal Relative Price Stationarity in Long-Run Purchasing Power Parity

This study demonstrates that the joint relationship among domestic traded-goods prices, dometic nontraded-goods prices, foreign traded-goods prices, and foreign nontraded-goods prices is important to understanding rejections or confirmations of long-run PPP. This joint relationship is defined as the "cross-country internal relative price structure." For nine of the ten pairs of countries studied, the cross-country internal relative price structure is found to be stationary; thus, factors other than the influence of nontraded-goods prices must be responsible for the rejections of long-run PPP.     

Macroeconomic effects of structural reforms and fiscal consolidations: Trade-offs and complementarities

This paper studies the impact of product and labour market structural reforms and the effects of their joint implementation with alternative debt consolidation strategies. The set-up is a dynamic general equilibrium model calibrated for the Greek economy. The results show that structural reforms produce important long-run GDP gains that materialize earlier, the faster the reforms are implemented. When implemented jointly with fiscal consolidations, structural reforms may amplify the short-run costs of fiscal tightening. The GDP dynamics depend on the fiscal instrument used for public debt consolidation. In the long run, however, there are complementarity gains irrespective of the fiscal instrument used.     

An empirical examination of long-run purchasing power parity using cointegration techniques

This paper presents an empirical analysis of long-run purchasing power parity (PPP) for five major exchange rates using recently developed econometric techniques on the cointegration of economic time series. Our empirical results are extremely unfavourable to the PPP hypothesis as a long-run equilibrium condition, even with an allowance made for measurement error and/or tranportation costs. In particular, we are unable to reject the hypothesis of non-cointegration of the exchange rate and relative prices for any of the countries concerned. Far from finding a stable, long-run proportionality between exchange rates and relative prices, our results therefore suggest that they tend to drift apart without bound.     

A DYNAMIC MODEL OF TOURISM, EMPLOYMENT AND WELFARE: THE CASE OF HONG KONG

Abstract.  The present paper uses a dynamic open-economy model with wage indexation to examine the impact of tourism on employment and welfare. Both short-run and long-run situations are analysed. It is well known that tourism converts non-traded goods into tradable goods. An increase in the demand for a non-traded good raises its relative price, which results in an expansion of the non-traded sector at the expense of the traded goods sector. This output shift raises labour employment in the short run. However, in the long run, the higher relative price leads to higher wages, resulting in a negative impact on labour employment. If the output effect is dominant, the expansion in tourism raises employment and welfare. However, under realistic conditions tourism may lower both labour employment and welfare due to rising costs. These results are demonstrated by simulating a dynamic model for the case of Hong Kong.     

Tax reforms under market distortions in product and labour markets

Using a two-agent model comprised of capitalists and workers, this paper examines the importance of imperfect competition in product and labour markets in determining the welfare effects of tax reform. The reform considered consists of eliminating the capital tax alongside a concurrent rise in the labour tax. In contrast to the perfectly competitive model, models with product or labour market failures each result in welfare losses for the workers in the long-run. In a realistic calibration to the UK economy, combining these imperfections implies that this tax reform will be Pareto improving in the long-run. However, these welfare gains over longer time horizons come at the cost of short-run losses, which, consistent with previous research, result in welfare losses for workers post-reform.     

石油与黄金产业价格联动关系研究

2002-2006年石油与黄金产业价格变动之间的关系可以用格兰杰因果关系进行检验,并根据格兰杰表示定理建立石油与黄金价格联动之间的误差修正模型来考察二者之间的长期关系和动态关系.本文认为石油价格和黄金价格上涨之间是单向的,从石油价格上涨到黄金价格上涨的因果关系,而且这种关系是长期稳定的,并没有随时间而发生结构性变化.     

Long-run homogeneity of labour demand. Panel evidence from OECD countries

This study makes an attempt to examine the long-run relationship between the key labour market parameters of employment, aggregate output, real product wages and labour-augmenting technical progress for a sample of 21?OECD countries covering the period from 1970 to 2000. A new panel error correction technique is applied, which allows one to constrain the long-run coefficients to be identical across the countries while letting the short-run coefficients which govern the dynamics and the error variances differ freely, respectively. Thus, this estimation approach assumes that institutional and cultural differences, albeit causing short-term deviations of labour demand behaviour across countries, leave the long-run structure of the labour markets unaffected. That is to say, the long-run equilibrium relationship between the key labour market variables is taken to be similar across the OECD economies. The empirical analysis shows that the long-run relationship between the key labour market parameters is equal across the OECD countries. However, adjustment speed of actual employment to the equilibrium is much higher in countries with flexible labour markets, such as the USA and UK, than in countries with rigid labour markets, such as Germany and Austria.     

Explaining House Prices in Australia: 1970–2003*

This paper aims to explain changes in real house prices in Australia from 1970 to 2003. We develop and estimate a long-run equilibrium model that shows the real long-run economic determinants of house prices and a short-run asymmetric error correction model to represent house price changes in the short run. We find that, in the long run, real house prices are determined significantly and positively by real disposable income and the consumer price index. They are also determined significantly and negatively by the unemployment rate, real mortgage rates, equity prices and the housing stock. Employing our short-run asymmetric error correction model, we find that there are significant lags in adjustment to equilibrium. When real house prices are rising at more than 2 per cent per annum, the housing market adjusts to equilibrium in approximately four quarters. When real house prices are static or falling, the adjustment process takes six quarters.     

Business cycles and economic crisis in Greece (1960–2011): A long run equilibrium analysis in the Eurozone

Empirical studies find that fluctuations in output and other macroeconomic aggregates are positively related across countries. Economic theory focuses on two main explanations: common shocks and common transmission mechanisms. In this paper, we conduct an empirical analysis of the international influences, specifically from the U.S. and E.U. on the Greek business-cycle. First, we provide an in-depth analysis of the Greek economy, summarizing crucial aspects and trends by means of relevant econometric techniques such as business cycles extraction and periodization based on filtering, spectral analysis and causality tests. Next, we assess the long-run equilibriums of the Greek economy with the rest of the E.U. countries and the U.S. economy by means of a Vector Error Correction model. Our results imply a significant shift in the long-run equilibriums of the Greek economy towards increasing convergence rates with the U.S. economy after the implementation of the common monetary policy and increasing convergence rates towards the peripheral countries of the E.M.U. Also, the Greek GDP fluctuations are found to be caused, to a certain extent, by the EMU and US fluctuations, implying a transmission mechanism of business cycles from the EMU and the US to the Greek economy.     

Are crude oil spot and futures prices cointegrated? Not always!

In previous studies, the cointegration relationships between crude oil spot and futures prices are confirmed based on Johansen (1988) test and vector error correction model (VECM). These conventional methods assume that the process of long-run equilibrium adjustment is linear. This paper revisits this topic employing nonlinear threshold VECM to take into account the nonlinear dynamics of equilibrium adjustment. Our results show that crude oil spot and futures prices are cointegrated only when the price differentials are larger than the threshold value. Moreover, we use a multi-frequency analysis based on low-pass filtering with different cut-off frequencies. The main findings indicate that the relationships between spot and futures prices are different between in the short-term and in the long-term. In the short-term, futures price plays the major role in the formation of long-run equilibrium (error correction mechanism). In the long-term, both spot and futures prices contribute to the dynamics of long-run equilibrium.     

An experimental analysis of the effects of automated mitigation procedures on investment and prices in wholesale electricity markets

In this paper we report the findings of an economic experiment that examines the effects of an automated mitigation procedure (AMP) on prices and capacity investment choices of suppliers in a wholesale electricity market. Specifically, we examine the effects of different market power incentives on markets with and without an AMP. While we find that the AMP does not affect overall investment in capacity, the most significant determinant of long-run prices is investment in new capacity. The AMP also does not reduce long-run prices relative to markets without an AMP. Furthermore, our participants successfully manipulated the AMP’s trigger price. The data and a sample copy of the instructions are available upon request. This article reflects the opinions of the authors and does not necessarily reflect the position of the Federal Energy Regulatory Commission or any individual Commissioner.