Energy demand in the transportation sector of Mexico

This paper report results of an analysis of the demand for energy in the Mexican transport sectors, focusing on the railroad, air transport and motor vehicle modes. The approach is an econometric one with emphasis placed on the structure for each mode. For two of the modes a two-stage approach is employed where in the first stage demands for services from the particular mode are modeled, and in the second stage demand is treated as a derived demand from these transport services. For the motor vehicle mode, gasoline demand is considered as the product of gasoline consumption per vehicle times the total number of vehicles, and then these components are related to economic and structural variables. Diesel demand of motor vehicles is modeled in a more reduced from approach. The principal finding is that changes in income play a more important role in affecting energy demand than do changes in energy prices, especially in the railroad and air transport sectors. For the gasoline and diesel fuel demand in the monitor vehicle sector, however, price is of substantial importance.     

A characterization of piecemeal second best policy

This paper derives conditions under which prices may be set proportional to marginal cost in some sectors of the economy when fixed distortions exists in other sectors. Two simple neoclassical economies are considered - one with fixed producer prices and one with variable producer prices. In the former case, nacessary and sufficient conditions are derived for piecemeal policy in terms of properties of derivatives of the demand functions. These conditions are then interpreted in terms of separability properties of utility functions where we find that only weak separability is required. In the latter case, sufficient conditions are derived which involved both demand and supply derivatives. These are also interpreted in terms of separability properties of utility and production functions. The analysis differs from previous ones in that we use a dual formulation of the problem and obtain conditions in terms of demand and supply derivatives which are observable, and we explicitly take into consideration the budgetary constraint of the government. Because of the latter, the factor of proportionality in applying piecemeal policy is not necessarily unity. So, in general, complete laissez faire is not optimal.     

Inflation in open economies: Supply-determined versus demand-determined models

This paper provides a formal presentation of an increasingly popular pure cost-push model of the international spread of inflation. The model, which is based on the division of the economy into competitive (tradeable) and sheltered (non-tradeable) sectors, has been developed in the Scandinavian countries. The paper then tests the predictive performance of the model against two simple demand-pull explanations and finds that the Scandinavian model is a relatively poor predictor. Next, the implications of the Scandinavian model for price and income elasticities of demand on the two sectors are derived, and in the last section these are used to reinterpret the model as part of a structure including both supply and demand sides.     

A sensitivity analysis in a nonlinear Leontief model

Conclusion We have shown that in a nonlinear Leontief model where non-decreasing returns are allowed for, if some elements of the final demand vector are increased, then each activity level (i. e., gross output) goes up or remain unchanged and the maximum rate of increase in activity levels must be realized among those sectors for which the final demand is raised. It is also shown that this maximum rate of increase in activity levels is not greater than the maximum rate of increase in the final demands.It should be noted that we do not require the indecomposability ofA (x). WhenA (x) is indecomposable, the final demand vector can be allowed to be non-zero nonnegative, and we can derive a set of propositions similar to those presented in this article.     

Market concentration, macroeconomic uncertainty and monetary policy

This paper studies the effect of market structure and macroeconomic uncertainty on the transmission of monetary policy. We motivate our analysis with a simple model which predicts that: (1) investment and production in more concentrated sectors are more affected by demand shocks and (2) high uncertainty makes investment and production more sensitive to demand shocks. The empirical analysis estimates the effect of monetary shocks on sectoral output for different sectors in the US using a structural vector autoregressive (VAR) approach. The results are generally consistent with the theoretical predictions.     

The ECB's New Multi-Country Model for the euro area: NMCM — Simulated with rational expectations

The model presented here is an estimated medium-scale New Multi-Country Model (NMCM) which covers the five largest euro area countries and is used for forecasting and scenario analysis at the European Central Bank. The model has a tight theoretical structure which allows for non-unitary elasticity of substitution, non-constant augmenting technical progress and heterogeneous sectors with differentiated price and income elasticities of demand across sectors. Furthermore, it has the explicit inclusion of expectations on the basis of three optimising private sector decision making units: i.e. firms, trade unions and households, where output is in the short run demand-determined and monopolistically competing firms set prices and factor demands. Labour is indivisible and monopoly-unions set wages and households make consumption/saving decisions.We assume that agents optimise under limited information where each agent knows only the parameters related to his/her optimisation problem. Therefore we estimate with GMM, which implicitly assumes limited information boundedly rational expectations. In this paper we provide some simulation results under the assumption of model-consistent rational expectations, we show that there is some heterogeneity across countries and that the reactions of the economies to shocks depend strongly on whether the shocks are pre-announced, announced and credible or unannounced and uncredible.     

Technological Progress and Sectoral Shares

This paper studies the effect of differences in the rate of technological progress between sectors on their relative sizes. There are two sectors: a stagnant sector, where productivity does not change over time, and a progressive sector, where costs decrease over time. We consider a conjectural variation approach which encompasses perfect competition, oligopoly and monopoly. The evolution of the relative shares of the stagnant and progressive sectors over time depends on the type of competition, cost levels and the price elasticity of demand. The relationship with the cost disease literature is discussed.     

An input-output approach to the estimation of employment requirements in Europe

This study reports the results of an attempt to analyse the employment requirements per one million dollars of final demand on the basis of an input-output model, in which the standard technology matrix is partitioned into domestic and import input coefficient matrices for twelve European countries. International comparisons of employment requirements indicate that the labour productivity is higher for high income countries while employment requirements per one million dollars of final demand is less closely associated with the size of the country. Our results demonstrate that the total employment requirements estimated on the basis of the total input coefficients matrix or the domestic coefficients matrix retain the same ordinal ranking of the sectors. For developing countries, where the data are not available for domestic and import coefficients matrix separately, the methodology of estimating employment requirements (per unit of final demand) through total coefficients matrix may be adopted since our experience indicates that ranking of the sectors in terms of labour productivity is not altered between two approaches for twelve European countries.     

External income shocks and Turkish exports: A sectoral analysis

This study assesses how the growth rates of Turkish trading partners affected Turkish exports in various sectors for the period 1996:01 to 2009:12. To determine this, we modeled the destination countries and the export demand for each sector separately. Each model is estimated as a system of equations, where each equation represents a country using a seemingly unrelated regression method. The empirical evidence suggests that Motor Vehicles, Basic Metals, and Radio–Television are the sectors with the highest income elasticities for most of the analyzed countries, whereas the Food Products and Beverages sector has the lowest income elasticity. We also performed simulations for the effect of a 1% increase in the growth rate of each country on Turkish exports.     

Taxes on capital in a specific factor model with international capital mobility

The efficiency and distributional effects of sundry capital taxes are analyzed in a simple two-sector specific factor model where capital is mobile both between the two sectors and between the home country and the rest of the world. Two cases are discussed: the small country case where factor and commodity prices are parametric; and the large country case. The optimal tax on capital export is illustrated when commodity prices are parametric. A simple approach to the case when both factor and commodity prices are variable is demonstrated.     

Valuing water for Chinese industries: a marginal productivity analysis

A marginal productivity approach is developed for valuing industrial use of water and applied using data from Chinese industrial firms, where water, as well as capital, labour and raw materials, are treated as inputs to a production function. Models on price elasticity of water demand associated with the marginal productivity approach are also developed and estimated for different Chinese industrial sectors.     

Modelling demand and supply influences on utilization: A flow demand model to predict hospital utilization at the small area level

This study outlines a model to predict hospital utilization at the small area level within a National Health Service (NHS) institutional context. The proposed approach departs from alternative analyses based on utilization flows of hospital care between a local population and a hospital. A flow demand model is outlined that relates flow demand to utilization flows; models the interaction between hospital supply and utilization of alternative hospitals; captures the process of demand for hospital care, with special attention given to the role of other health care sectors, to the organizational and institutional context of the hospital system and to geographic variations. The flow approach partly overcomes the problem of dealing with simultaneity of determination between supply and demand. A two-part econometric model suitable to estimate the flow demand model for prediction purposes is tested and applied to the Portuguese health care system. The results show the model to be robust and to provide key information for defining future hospital policies at the central level.     

Has M2 demand in the USA become unstable? evidence from an error-correction model

The purpose of this paper is to estimate an appropriate broad-money demand function for the United States and to examine its stability after 1987, when the Federal Reserve System began using M2 as a policy guide. Special attention is paid to the model specification, its dynamic structure, and to its cointegration properties. The results from various dynamic error-correction models suggest that: (i) the money demand relationship is stable; (ii) most previously estimated models have undoubtedly misspecified the interest rate variable; (iii) interest-rate variability is another important determinant of real money demand; and (iv) in contrast of previous studies, the long-run scale variable is real GDP, whereas real consumer spending is the short-run scale variable. The sample period examined is 1953:1 to 1991:4.     

Cointegration,error correction and the demand for money in Cyprus

This paper applies the recently developed technique of cointegration to estimate the demand for broad money in the case of Cyprus. Cyprus is an example of a country which does not have a sophisticated financial sector and which faced a severe political shock at a certain point in her history. The hypothesis of instability in the demand for money function cannot be rejected if the effects of this shock are not taken into account. In particular, it is argued that there was a once and for all increase in the income elasticity of this function at the time of the shcock. When this shift is accounted for by the introduction of an appropriate variable in the cointegrating regression the hypothesis of instability in the demand for money is rejected. Two dynamic error correction models are then specified with income and consumption as the scale variables respectively. Non-nested tests are carried out which reveal that consumers' expenditure is a more appropriate scale variable than GDP.     

MONTHLY GDP FORECASTING USING BRIDGE MODELS: APPLICATION FOR THE FRENCH ECONOMY

This paper presents a model to predict French gross domestic product (GDP) quarterly growth rate. The model is designed to be used on a monthly basis by integrating monthly economic information through bridge models, for both supply and demand sides, allowing thus economic interpretations. For each GDP component, bridge equations are specified by using a general‐to‐specific approach implemented in an automated way by Hoover and Perez and improved by Krolzig and Hendry. This approach allows to select explanatory variables among a large data set of hard and soft data. A rolling forecast study is carried out to assess the forecasting performance in the prediction of aggregated GDP, by taking publication lags into account in order to run pseudo real‐time forecasts. It turns out that the model outperforms benchmark models. The results show that changing the set of equations over the quarter is superior to keeping the same equations over time. In addition, GDP growth seems to be more precisely predicted from a supply‐side approach rather than a demand‐side approach.     

On Estimating the Size of the Shadow Economy

As long as it is employed cautiously enough, the model approach is a useful tool to estimate simultaneously the size and the development of the shadow economy in several countries. However, a second method is necessary to calibrate the model. The currency demand approach can lead to highly implausible results; the size of the shadow economy might be largely overestimated. An alternative is the survey method. For real tests of whether a variable has an impact, procedures are necessary that do not use the same variables as those used to construct the indicator. Thus, to make progress in analysing the shadow economy, the model approach has a role to play, but it has to be complemented by other methods employing different data. The currency demand approach cannot be used as long as it employs the same variables for its constructions.     

Problems measuring the underground economy in transition1

An easy and popular method for measuring the size of the underground economy is to use macro data such as money demand or electricity demand to infer what the legitimate economy needs, and then to attribute the remaining consumption to the underground economy. Such inferences rely on the stability of parameters of the money demand and electricity demand equations, or at very least on knowledge of how these parameters are changing. We argue that the pace of change of these parameters is too variable in transition economies for the above methods of estimating the size of the underground economy to be applicable. We make our point by using Czech Republic and other transition country data from the financial and electricity sectors.     

An input-output approach to forecasting gross domestic output and employment intensities by sectors

The purpose of this paper is to integrate two commonly known input-output models of Leontief and Stone for employment analysis. Although assumptions of Leontief model are somewhat different from Stone's model, the empirical analysis can be conducted ignoring the difference between competitive and noncompetitive imports in the initial stage. The Leontief model is used to make predictions of gross domestic output on the basis of predicted imports and final demand by sectors. The predicted output is used to derive employment by sectors for a target year and this in turn is used in Stone's input-output framework for the analysis of total labour intensity by sectors. The approach on the estimates of labour intensity by sectors is illustrated using Japan's input-output data.