Quality-corrected price indices: the case of the Dutch new passenger car market, 1990–1999

Market dynamics and technological developments constitute a major challenge to the proper measurement of the price evolution of durable goods. In this study, hedonic methods are used to estimate quality-corrected price indices of new passenger cars in the Netherlands, 1990–1999. Use is made of a huge set of price, quantity and quality information about 11,000 car models, obtained from different sources. During the observation period the nominal price level of all available car models increased about 20% on average, while the shares of car models with airbags, tinted glass and power steering increased from almost nothing to about 90%. Matched model price indices and the official CPI for new passenger cars, which partially account for quality-adjustments, estimate the price increase to be equal to 10.6–14.2% respectively 11.2% for the 1990–1999 period. By contrast, the hedonic Fisher-like price indices based on the preferred annually estimated brand-weighted semi-log hedonic model, lead to price changes varying from +?2.3% to ??3.4% (depending on the choice of weight variable, and the use of fixed or varying reference periods in the index construction) and thereby fall 8.9 to 14.6 percentage points below the official figures, over the period 1990–1999. The pooled adjacent-years model holds an intermediate position with a predicted quality-corrected price decrease of 1.8% over the observation period, which is 13.0 points below the CPI.     

Does clean air matter in developing countries' megacities? A hedonic price analysis of the Jakarta housing market, Indonesia

Despite numerous hedonic studies on the value of clean air in developed countries, the lack of similar studies in less developed countries has raised the question as to whether clean air also matters in developing countries' megacities. As an attempt to fill this gap, we apply a hedonic property value analysis, the method commonly used to infer the value of clean air in developed countries, using the combination of data on housing rental prices and their characteristics from the Indonesian Family Life Survey, and data of the ambient level of six different pollutants in Jakarta, Indonesia. The result indicates that, in the cases of lead, total hydro carbon (THC), and SO₂, air pollutants have a negative association with property value; i.e., housing rental price. The relationship is at 5% level of significance for lead and 10% level for THC and SO₂. This paper estimates that per family value of clean air in Jakarta ranges from US$28 to US$85 per μg/m³.     

An empirical analysis of constitutional review voting in the polish constitutional tribunal, 2003–2014

Different theories have been developed, mainly in the context of the United States, to explain judicial decision-making. In this respect, there is an important ongoing debate over whether judges are guided by the law or by personal ideology. The analysis of the decision-making in the Polish Constitutional Tribunal seems to support the existence of some party alignment. It is to say that judicial behavior is influenced by the ideology, either because judges’ preferences coincide with the interests of a specific party or because the judges are incentivized to show their loyalty to a party. Party alignment exists but subject to institutional influences. These results are in line with previous findings for other constitutional courts in Europe.     

Time varying price discovery of the New Third Board market in China: does the market-making system help?

This paper examines whether the market-making system helps to improve the price discovery ability of New Third Board (NTB) market in China. We first estimate the time-varying coefficients error correction models, then apply common factor weight method to quantify the time-varying price discovery contributions, and finally explore the impacts of trading volume and volatility to price discovery contributions. Empirical results show that both markets have time-varying characteristic in terms of the magnitudes and directions of the equilibrium price adjustment due to error correction term. The Shanghai Composite Index, SZSE Component Index, and SME Index are found to lead in price discovery, while NTB exhibits the leadership on the GEM Index. Volume and volatility have significant influence on the price discovery contribution. The NTB contribution is positively related to its own trading activity, negatively related to the trading activity of Shanghai and Shenzhen stock markets, while negatively correlated with the volatility of both markets. In comparison, trading activity of SZSE Component Index and volatility of GEM Index have the greatest negative impacts on the contribution of NTB market. As an important part of China’s multi-level capital market, the pricing mechanism of the NTB market needs further to be improved.     

The time structure of production in the US, 2002–2009

The US time structure of production during the 2002 through 2009 business cycle is characterized empirically using industry-level input-output data. An industry’s total industry output requirement (TIOR) is proposed as a metric for “roundaboutness”. I find that the time structure of production lengthened following the Federal Reserve’s 2002 expansionary deviation from the Taylor rule and then contracted during the Great Recession. Value added growth in the most-roundabout of US industries accelerated relative to that of the least-roundabout industries. Heading into the Great Recession, value-added growth in the most-roundabout industries contracted early and turned negative in 2007 while value-added growth in the least-roundabout industries remained positive until 2009. The stylized facts of the time structure of production are consistent with Austrian Business Cycle Theory.     

An Empirical Investigation of the Ratchet Effect in the OECD, 1985–2009

This paper employs a reduced form structuralist model of inflation in the OECD over the period 1985–2009 to find out whether domestic prices respond symmetrically to rising and falling import prices. We find that the response is asymmetrical: domestic prices rise when import prices rise but they do not fall when import prices fall. Our finding thus confirms the presence of a ratchet effect in the sample countries during the sample period, and implies that factors – such as exchange rate fluctuations and movements in tariff rates – that influence import prices tend to be inflationary.     

The linkages,persistence, asymmetry in the volatility,the price discovery and efficiency,and the effect of the US subprime mortgage financial crisis on the spot and the futures market’s returns: the case of India

This article examines the effects of persistence, asymmetry and the US subprime mortgage crisis on the volatility of the returns and also the price discovery, efficiency and the linkages and causality between the spot and futures volatility by using various classes of the ARCH and GARCH models, and through the Granger’s causality. We have used two indices: one for spot and the other for futures, for the daily data from 12 June 2000 to 30 September 2013 from Nifty stock indices. We have then tested for ARCH effects, and subsequently employed various models of the ARCH and GARCH conditional volatility. The GARCH(1,1) model is found to be significant, and it implies that the returns are not autocorrelated and have ‘short memory’. It supports the hypothesis of the efficiency of the markets. The negative ‘news’ has more significant effect on volatility, corroborating the ‘leverage impact’ in finance on market volatility. We have also tested the volatility spillover effects. The two methods we employed support the spillover effects and the causality is bidirectional. We also have used the dummy variable for the US subprime mortgage financial crisis and found that they are statistically significant. Indian stock market is thus integrated to the world stock markets.     

A quantitative explanation of the low productivity in South–Eastern European economies: the role of misallocations

It is well known that southeast Europe is the least developed area in Europe. Using a methodology based on the idea of heterogeneous firms, this paper studies the degree to which firm heterogeneity and resource misallocation can explain the lower TFP in southeast Europe. The results show a significant degree of heterogeneity and resource misallocation, although the results are sensitive to the calibration used. There is evidence that firm-level productivity depends on firm size, while taxation negatively influences it. There is also some evidence that foreign-owned firms are more competitive, as are exporting firms. Results are generally robust across the various specifications used, but less so relative to the measure of productivity used. Additional evidence suggests that infrastructure-related obstacles as well as institutional instability drive the output distortion, while no factor is underlined as a significant driver of capital distortions, suggesting the need for better data sources for the latter.     

Regime switching and the (in)stability of the price–rent relationship: evidence from the US

Present value models of house prices assert that in the absence of self-fulfilling bubbles, a house price is equal to the present discount value of all future rents, which implies a linear relationship between house price and rent, and hence a stable price-to-rent ratio. Using a Markov switching error correction model, we re-examine this relationship in the US housing market and find two distinctive regimes: one with a long-run relation between house price and rent predicted by the present value models and the other in which the relation is nonlinear. Furthermore, we find evidence that deviations of house prices from the present value models’ predictions are caused by the overreaction of house prices to movements in rents rather than speculative bubbles attributable to extraneous factors.     

Alcohol consumption in the UK, 1955–85: a system-wide analysis

As a consequence of economic reforms in China, firms have ben affected by three essential changes. First, instead of surrendering all profits to the Government, firms now pay tax on their profits according to a contract between them and the Government and retain the balance as their own controllable surplus. Second, the central economic plan determines only part of firms' production. After fulfilling the command plan, firms are allowed to adjust their production scale by the availability of inputs and the profitability of production. Third, most consumer and investment goods have two prices, a plan price and a market price. As most of the plan prices are always lower than the market prices, the latter play a basic role in determining firms' profits. After a decade of economic reforms, the important question is: can Chinese state enterprises perform like market entities? The analysis shows that Chinese firms in transition domimic the production behaviour of market-based, efficiency-oriented firms.     

The changing state–market condominium in East Asia: rethinking the political underpinnings of development

This article addresses the effects of inequality on the globalisation process. It is argued that the recent financial and economic crisis is a manifestation of a tendency of the aggregate demand to fall relatively to aggregate supply, generated by an asymmetric income distribution, which in turn both increases, and is reinforced by, the mobility of goods, capital and labour, in a process of cumulative causation. This process has not become manifest earlier due to counteracting tendencies generated by the financial system, that were disrupted during the crisis. It is also argued that mainstream economics does not have the adequate framework for explaining the crisis, and actually contributed to the crisis through its theories and policies. Hence an alternative economic framework is suggested for addressing the crisis, drawing upon the contributions of several heterodox economic traditions, especially post-Keynesianism.     

The opening of the North–South divide: Cumulative causation,household income disparity and the regional bonus in Taiwan 1976–2005

During the last decades regional income divergence seems to have reappeared in both developed and developing countries. In Taiwan – a renowned case of growth with equity – regional per capita income was converging until the early 1990s after which it began to diverge. With the help of modeled annual household survey data from 1976 to 2005 we indicate the magnitude of a regional bonus and discuss reasons behind the re-opening of the North–South income divide in Taiwan. Our analysis suggests that this process is a consequence of cumulative causation connected to the advent of the rise of ICT industry in conjunction with changes in Taiwan's political economy which provided relatively more advantageous economic opportunities for the industrial structure of the leading region.     

The behaviour of the US consumer price index 1913–2003: a study of seasonality in the monthly US CPI

This article analyses the seasonality in the monthly consumer price index (CPI) over the period January 1913 to December 2003. We examine three types of month effects: if the mean of monthly CPI changes of the entire data set, and of a given month were significantly different from zero; if the mean of monthly CPI changes of a given month was different from the mean of the other months; and if the variance of the monthly CPI changes for a given month was different from the variance of the other months. The mean of monthly CPI changes for the entire data set (0.27%) was found to be significantly greater than zero. The means of monthly changes show a downward trend from September to December. When the data are sliced into three sub-periods, we find an increasing trend in the means and medians of monthly changes but a decreasing trend in the SDs of the monthly changes. The mean of monthly CPI changes during the republican presidencies (0.15%) was significantly lower than during the democratic presidencies (0.38%).     

Dynamics of the growth–inequality nexus in China: roles of surplus labor,openness, education,and technical change in province-panel analysis†

The paper examines the complex interrelationship between economic growth and the urban–rural income inequality in China by estimating a simultaneous equation system. This study uses a panel data-set that covers 29 provinces from 1988 to 2007, and compares the earlier period with the later period. It finds a robust and positive impact of the rural surplus labor on urban–rural inequality, which is consistent with Lewis’ dual economy theory. Economic growth is found to aggravate the urban–rural inequality in the earlier period, but there is no hard evidence in the later period. This implies that China has not yet, or at least by 2007, entered the second stage of the Kuznets curve. We also find no robust evidence on the impact of the inequality on growth in either period, but find robust evidence on the impact of both foreign direct investment and exports on the increasing inequality during the earlier period, whereas no significant impact in the later period is found. Finally, the spread of education reduced the inequality in the earlier period, but no such impact is robust in the later period.     

Empirical investigation of the agriculture–malnutrition nexus in Africa: Spatial clustering and spillover effects

Many studies have been conducted to examine the direct effect of agriculture on the prevalence of malnutrition; however, there is little solid evidence on spatial spillover effects and much less on the heterogeneous effects stemming from spatial differences in nutritional conditions. We make up this gap by using a dynamic spatial Durbin model to characterize the impact of agricultural productivity on malnutrition in Africa. Our results show that countries in Eastern Africa are more likely to suffer from severe malnutrition than other regions. We find evidence for convergence in agricultural productivity across countries with moderate and high prevalence of malnutrition as disparities in their agricultural productivity narrow down over the sample period. It appears that the negative effect of agriculture on malnutrition is more evident in countries where the prevalence of malnutrition is lower. This implies that agricultural development does not play a substantial role in reducing malnutrition in the worst affected areas. We also report that poor agricultural development can deteriorate the nutritional status among neighboring countries in the short term, consistent with the spatial-locking effect of agriculture.     

Empirical issues in the computation of Stone–Lewbel price indexes in censored micro-level demand systems

In this article, we propose an empirical method for the computation of the Stone–Lewbel (SL) price index for product aggregates, when censored samples with zero expenditures are available from household budget surveys. The proposed technique is based on a regression imputation method that takes into account the price dynamics, therefore, allowing to disentangle the role of demographics from the role of prices in computing the SL index. Our simulations seem to indicate that our method is a valuable alternative.     

Domestic prices of importable goods in Chile and the law of one price 1975–1982

This paper tries to explain observed deviations from the law of one price in Chile during the 1975–1982 period. In order to do this, we develop a microeconomic model where typical final goods are non-tradeable, and are produced by combining tradeable (importable) goods and commercial (or intermediation) services. The empirical results reported later in the paper tend to support our model and are consistent with the hypothesis that an important proportion of variations in retail and wholesale prices of selected imported goods is explained by changes in the cost of domestic distribution. A very important implication of our findings is that it would not make sense to invoke disaggregated perfect commodity arbitrage to support the assumption of purchasing power parity at the macro level.