WORLDOUTLOOK

German monetary unification is expected to result in a major expansion in autonomous demand from East Germany. In economic terms this is equivalent to a fiscal shock to West Germany broadly similar to that experienced in the US in the early years of Mr. Reagan's Presidency. Led by the Bundes bank, the monetary authorities' response is again likely to be a tightening of policy, leading to several years of high real interest rates. Overall, the combined monetary-fiscal shock should strengthen growth with only moderate increases in inflation. Germany is expected to grow very rapidly in the -per cent range for several years, with only a slight upturn in inflation. Japan, after a pause over the next year, should be able to return to its under lying growth path fairly quickly. However the US situation is more precarious. FUN adjustment from the previous Reagan shock has not yet taken place, leaving the US vulnerably dependent on increasingly scarce imported capital. In the absence of a significant *peace dividend: the result is the necessity of continued tight policy and sluggish growth in the American economy. US growth stays around 2 per cent, but this allows a substantial reduction in the current account deficit.     

The Right Road to Monetary Union

How should European monetary coordination develop? John Chown and Geoffrey Wood argue that the European central banks should be forced to compete in providing the best monetary services.     

IS THE WORLD SHORT OF SAVINGS?

The opening up of Eastern Europe may give rise to a surge in investment as the former socialist economies move to a market-based system. The scope for modernization of the region in terms of its industrial, environmental and social capital raises the question of how the increase in demand can be accommodated. Since the Ergonomic shock of the early 1980s, most of the world's net saving has been provided by Japan and West Germany in the form of huge current account surpluses. If GMU now implies a significant drop in German savings, does this mean, as the OECD has recently suggested that there is a risk that world savings will be inadequate?     

Integrating decomposition approaches for the analysis of temporal changes in economic structure: an application to Chicago's economy from 1980 to 2000

This paper presents an attempt to integrate two flow decomposition methods to analyse temporal changes in a region's economic structure. The two methods of structural analysis are push–pull decomposition analysis and structural Q-analysis. Push–pull analysis presents a quasi-optimization decomposition of a set of matrices with actual intersectoral economic flows into a weighted set of matrices, while structural Q-analysis provides a form in which the structure of these decomposed flows can be considered. The paper provides an expository application to Chicago's economic structure over the period of 1980 to 2000, to reveal a complementary perspective of hollowing-out the production process in the Chicago economy that was identified in previous studies.     

An Application of an Integrated Transport Network– Multiregional CGE Model: a Framework for the Economic Analysis of Highway Projects

This paper develops a framework for the economic analysis of highway projects that is then used to estimate the dynamic economic effects of a highway project on the economic growth and the regional disparity in Korea. The framework is composed of a transport model and a multiregional Computable General Equilibrium (CGE) model. The transport model measures a change in interregional shortest distances and the accessibility due to the highway project. The CGE model estimates the spatial economic effects of the project on GDP, the price, exports, and the regional distribution of wages and population. The simulation allows policy makers to determine which highway development deserves the priority for investment, based on consideration of economic growth and regional economic equity in the long run. The simulation found that all the highway projects have positive effects on GDP and export growth as well as regional equity in terms of wage and population.     

Investment sequencing in the brick industry: an application of grounded theory

Since the work of George Richardson on the problem of investmentcoordination, the literature has focused on explaining equilibriumin investment games and neglected the problem of how investmentsare coordinated. This paper reports the findings of a case studyof the brick industry which used grounded theory techniquesto develop a new analysis of investment coordination. Our mainfindings indicate that, despite the high cost of excess capacityand the very clear signalling of investment intentions, brickfirms are reluctant to stand back and delay their own investmentswhen a rival firm is expanding. The fact that for the most partexcess investment is avoided is explained by reference to firms'heterogeneity and constraints to investment.     

Conditional Dependence in Precious Metal Prices

This study investigates the time-series properties of gold and silver spot prices. Both precious metal price series are found to exhibit time dependence and pronounced generalized autoregressive conditional heteroscedastic (GARCH) effects. Splitting the data into similar economic subperiods provides superior explanation of these effects because of the observed long-run nonconstancy of the unconditional variance. Further, the power exponential distribution, as opposed to the Student-t, is found to portray accurately the thick-tailed conditional variance that remains after the GARCH effects are removed. These findings imply that constant variance pricing models are inappropriate for securities that are based on precious metal prices.     

Real Estate Brokers, Nonprice Competition and the Housing Market

Given a fixed commission rate and easy entry, economic profits must be competed away on some nonprice margin in the real estate brokerage market. This paper focuses on nonprice competition in the level or quality of services offered buyers and sellers in the market, examining the equilibrium adjustment process, comparative static predictions and efficiency implications. In contrast with earlier studies focusing on wasteful advertising, this paper demonstrates that higher commission rates can either increase or decrease deadweight loss, depending upon how broker services affect buyer and seller transaction costs.