Declining Distance Effects in International Trade: Some Country‐Level Evidence

Technical progress can be expected to reduce transport costs over time, yet most studies of bilateral trade based on the gravity model find distance effects to be increasing rather than decreasing. We investigate countries' openness to international trade (the ratio of exports plus imports to GDP). We find that trade decreases with geographical remoteness, land area and lack of access to the sea, all of which are likely to be correlated with transport costs. In contrast to the results obtained with log‐linear models of bilateral trade, distance effects (remoteness and land area) have declined over time. Trade decreases with population density and increases with improvements in the terms of trade, investment and a more liberal trade policy.     

MONEY DEMAND STABILITY AND INFLATION PREDICTION IN THE FOUR LARGEST EMU COUNTRIES

In this paper, we analyze the money demand functions of the four largest EMU countries and of the four-country (EMU-4) aggregate. We identify reasonable and stable money demand relationships for Germany, France and Spain as well as the EMU-4 aggregate. For the case of Italy, results are less clear. From the estimated money demand functions, we derive both EMU-4 and country-specific measures of money overhang. We find that the EMU-4 overhang measure strongly correlates with the country-specific measures, particularly since the start of EMU, and is useful to predict country-specific inflation. However, it generally does not encompass country-specific money overhang measures as predictors of inflation. Hence, aggregate money overhang is an important, but by far not an exhaustive, indicator for the disaggregate level.     

Price expectations of sheep and goats by producers and intermediaries in Quetta market,Pakistan

Analysis of producers' and intermediaries' livestock price expectations was used to describe the market in Quetta, the largest livestock market in the highlands of Balochistan Province, Pakistan, and to identify factors that determine price expectations of small ruminants. A total of 4800 expected prices for sheep and goats were collected from producers and market intermediaries at monthly intervals between January 1991 and December 1992. In addition to the expected price of the animal, liveweight, species, sex, breed, body condition (fatness), calendar day and month were recorded, and whether data were collected on a meat or meatless day. Monthly rainfall data were also collected. Models of goat and sheep price expectations were built to compare the similarity of the behaviour of producers and intermediaries. Results indicated that producers and intermediaries expected high prices from November to January and during religious holidays. They expected premiums and discounts related to animals' attributes. Liveweight and seasonality had the strongest effect on prices. Rainfall in the current and previous month was positively related to seller's expected prices suggesting that livestock are retained to take advantage of favourable grazing conditions. The models of price expectations showed that producers adjusted expected goat prices (P ≤ 0.10) for seasonality, liveweight, body condition, age, sex and breed, while they adjusted sheep prices for seasonality and liveweight only. High pay-offs could be expected if extension efforts focused on factors that determine sheep meat quality; however, the retail ceiling price of meat and the lack of grading are a disincentive to work in this direction. Seasonality of supply and demand is important in determining prices and this study provides baseline information for market scheduling; however, scheduling of sales of transhumant pastoralists may be difficult to achieve. Further investigation is justified to understand the gap in marketing knowledge between producers who sell in the villages and those who sell in Quetta.