THE MONEY DEMAND FUNCTION FOR THE EURO AREA: SOME EMPIRICAL EVIDENCE

This paper sets out to re‐examine the money demand function for the euro area. Traditional specifications often yield unsatisfactory results: instability of short and long‐term coefficients; relatively large differences between estimated and actual value of variables; and significant changes in the number of long‐term relationships, etc. Using a standard Vector Error Correction Model, we find that the usual specification is indeed unstable. However, introducing a European equity price gives rise to a more stable system. Furthermore, recursive estimates confirm the relative stability of long‐term coefficients. Estimates of the real money gap, based on the money demand equation including equity prices, point to moderate, albeit persistent, excess liquidity in the euro area in recent years. The real money gap contains information about future inflation but this content may have diminished since 2001.     

From colonization to national territories in continental West Africa: the historical geography of a transport infrastructure network

This paper argues that in order to study the geohistory of a transport infrastructure network it is necessary to identify the link between networks and territorial scales during a given period. It focuses on the creation of road and rail networks in French West Africa during the colonial period and in the land-locked States during the national period, which involves post-independence development policies. The network is perceived in this paper as the manifestation of the political will to facilitate traffic within a delimited space. Within the colonial and then the national periods roads and railways were thus constructed as part of a process that can be interpreted as the outcome of a compromise between a territorial project and the capacity to implement it. This geohistorical study thus allows us to identify, with reference to the link between borders and networks, the successive geographical linkages (railway and port combinations with their subsequent branches, national roads, economic roads, external connections) which have been applied in the delimited spaces in question. This exercise has concentrated particularly on continental West Africa.     

Pressurised partnership: a case of perishable compromise in contested terrain

This paper analyses the life cycle of a partnership agreement in the context of managerially driven changes to work organisation at an aluminium manufacturing plant (Aluminium) located in South Wales, UK. The paper highlights the contingent, context‐specific nature of workplace partnerships and their limited influence and vulnerability to the operation of the market.     

The VAT-Evading Firm and VAT Evasion: An Empirical Analysis

It has been claimed that an increase in the ratio of VAT reclaimed to VAT paid is an indicator of increasing non-compliance. By examining this ratio, this paper evaluates the potential for VAT non-compliance in the Restaurant and Take-out, Clothing and Footwear, Furniture and Floor-coverings, and Hairdressing markets. Estimates of aggregate expenditure are used to estimate potential gross VAT payments. These are compared with actual gross payments as an indicator of the extent of non-compliance.     

SOCIALLY IMPROVING TAX REFORMS*

This article proposes graphical methods to determine whether commodity tax changes are “socially improving,” in the sense of improving social welfare or decreasing poverty for large classes of social welfare and poverty indices. It also shows how estimators of critical poverty lines and economic efficiency ratios can be used to characterize socially improving tax reforms. The methodology is illustrated using Mexican data.     

Financial firm bankruptcy and systemic risk

Financial firm distress often leads to regulatory intervention, such as “too big to fail” (TBTF) policies. Two oft-cited channels to justify TBTF are domino effects (counterparty risk) and the effects of fire sales. We analyze the policy responses for avoiding systemic risk while considering the role of these two factors. Prior bankruptcies suggest that cascades caused by counterparty risk do not occur, as firms diversify their exposures. Instead, crises tend to be symptomatic of common factors in financial firms’ portfolios, which lead to widespread instances of declining asset values and which are often misinterpreted as resulting from fire sales.     

Sectoral systems of environmental innovation: An application to the French automotive industry

This article seeks to show how a sectoral system approach may contribute to the analysis of the determinants of environmental innovations. By using Malerba's [F. Malerba: Sectoral systems of innovation and production, Res. Policy Vol. 102, 845-859, (2002)] concept of sectoral system of innovation and production, we develop a sectoral framework based on three building blocks: technological regimes, demand conditions and environmental and innovation policy. Within this framework, the sectoral patterns of environmental innovation result from the interplay between these three blocks. The conceptual framework is applied to the case of the French automotive industry, with a specific focus on the development of low emission vehicles. The analysis shows how technological regime and demand conditions lead to technological inertia, and so to a strong persistence of the dominant design. Finally, environmental and innovative policy are considered in an integrated way, so that we can study how they influence technological regime and demand conditions, and in the meantime how they are conditioned by these two blocks.     

Interest rate rules and global determinacy: An alternative to the Taylor principle

A well‐known determinacy condition on interest rate rules is the “Taylor principle,” which states that nominal interest rates should respond more than 100 percent to inflation. Unfortunately, notably because interest rates must be positive, the Taylor principle cannot be satisfied for all interest rates, and as a consequence global determinacy may not prevail even though there exists a locally determinate equilibrium. We propose here a simple alternative to the Taylor principle, which takes the form of a new condition on interest rate rules that ensures global determinacy. An important feature of the policy package is that it does not rely at all on any of the fiscal policies associated with the “fiscal theory of the price level,” which has so far been the main alternative for determinacy.