Steady growth,policy shocks,and speed of adjustment under embodiment and putty-clay

This inquiry addresses the question of adjustment speed by appealing to a model founded on embodied technical progress and putty-clay capital. It postulates a CES production structure along with static wage-expectations and derives the steady-growth solution. It also derives comparative dynamic properties involving the economic life of capital. Discussion then turns to policy shocks, which disrupt the steady state through separate changes in the rates of saving, progress, and population expansion. Simulations track the responses to those perturbations, disclosing the relationships of adjustment speed to the elasticity of substitution, embodiment rate, capital weight, and changed saving coefficient.     

Intertemporal substitution and the liquidity effect in a sticky price model

The liquidity effect, defined as a decrease in nominal interest rates in response to a monetary expansion, is a major stylized fact of the business cycle. This paper first confirms that, with separable preferences, a low degree of intertemporal substitution in consumption is a necessary condition for the existence of the liquidity effect. In contrast to this result, in a model with non-separable preferences and capital accumulation it takes an implausibly high elasticity of intertemporal substitution to produce a liquidity effect. The robustness of these results to alternative degrees of nominal rigidities, capital adjustment costs and stochastic monetary processes is also analysed. We conclude that price stickiness, by itself, does not guarantee the existence of a liquidity effect.     

Elasticities of substitution and export demands in a world trade model

Alternative complete models of world trade, based on the trade shares matrix approach, are specified and estimated for twenty-seven countries and regions. This model attempts to explain the composition of imports on the bases of relative prices and time trend, given the total quantity of imports of each country. Elasticities of substitution amongst imports of different countries of origin in each import market are obtained and used in the derivation of aggregate export demand functions for the individual countries. There is also a comparison of the predictive performance of the alternative models.     

The normal distribution as a model of technological substitution

A model for forecasting technological substitution, based on the use of the normal distribution, is presented. Both mathematical and graphical techniques are discussed. Examples from the literature are used to illustrate the model.     

Expectations, Drift, and Volatility in Evolutionary Games

This paper proposes an evolutionary model of learning in simple coordination games where expectations are the driving force of the process. As time proceeds, agents adjust their expectations through some (possibly different) updating rules, whose only requirement is that of consistency with long stationary evidence. Sporadically, expectations are also subject to arbitrary perturbation. The main point of the paper is that, due to the possibility of random drift on expectations, the evolutionary process will be subject to high volatility across equilibria. Specifically, every Nash equilibrium (even if risk- or payoff-dominated) will have significant positive weight in the long-run invariant distribution. Journal of Economic Literature Classification Numbers: C73. D83. D84.     

Technological substitution forecasting with a model based on biological analogy

Although many models of technological substitution processes exist, only a few deal with multilevel technological substitution and still fewer may be easily applied to forecasting of real multilevel substitution processes. We propose a stochastic model of multilevel technological substitution and a forecasting method based on this model. In the author's opinion, the developed algorithm may be easily applied to forecasting various technological substitution processes. An example of the application of this algorithm to forecasting of world energy consumption is presented. The algorithm makes possible an investigation of the impact of future innovation on the system's behavior.     

Planning capital-labor substitution and intertemporal equilibrium with a non-linear multi-sector growth model

A non-linear multi-sector model, postulating sectoral production functions and price-responsive demand functions linked around an input-output matrix in a general equilibrium framework, is used to simulate capital-labor substitution on a growth path characterized by intertemporal equilibrium. It demonstrates how the ‘temporary equilibrium’ or ‘sequential temporary equilibrium’ form of models that allow substitution can be extended into an intertemporally indecomposable equilibrium model without abandoning interaction between prices and quantities in the determination of technology and demand. The model is applied to the analysis of the impact of changes in real-wage growth on the characteristics of the equilibrium growth path of the Turkish economy with special attention given to the employment problem.     

Industrialization and Expectations in a Small Open Economy

The degree of industrialization in a country can be measured by the diversity of intermediate goods produced in the country. I construct a small-country model in which this diversity is determined endogenously in the process of industrialization. My model shows that the character istics of equilibria depend on the substitutability among intermediate goods; particularly when the substitutability is large, there may be multiple equilibria. When such equilibria exist, optimistic expectations lead to a high degree of industrialization but pessimistic expectations yield a low degree of industrialization.
JEL Classification Numbers: O14, F43, F12     

Exchange Rates,Expectations, and Monetary Policy: a NOEM Perspective*

We use a dynamic general‐equilibrium optimizing two‐country model to analyze how the formation of exchange rate expectations shapes the effects of a monetary policy shock in an open economy. We also provide empirical evidence on how traders in foreign exchange markets form exchange rate expectations. Our model implies that the short‐run output effect of a permanent monetary policy shock diminishes if “technical traders” form the type of regressive exchange rate expectations we find in our empirical analysis. If the influence of technical traders is strong enough, a permanent expansionary monetary policy shock can result in a temporary decline of the output in the country in which it takes place. The output effect of a temporary monetary policy shock is magnified when technical traders form regressive exchange rate expectations.     

Accounting for technical substitution in the input-output model

Input-output analysis is a general equilibrium economic model that is being applied with increasing frequency to situations in which the input patterns of various economic activities are bound to change. Applications of the model in this context unduly strain the model's customary assumption of fixed coefficients, an assumption which precludes the substitution of inputs in production processes. The focus here is on the development of a general procedure for incorporating input substitution under various sets of conditions into the input-output model.     

Analysis of the Lotka-Volterra competition equations as a technological substitution model

This paper provides insight into the dynamics of the Lotka-Volterra competition (LVC) equations, a much used competition model, and compares the dynamics of LVC competitive substitution to that of several well-known substitution models. The behavior of the LVC equations is analyzed for the special case of a dominant competitor at equilibrium being replaced after the introduction of a small population of an invading competitor with a competitive advantage. Expressions are derived that describe the growth of the invading competitor and that growth is shown to be of four classes: left asymmetric, logistic, right asymmetric with 1−ε₂ asymptote and right asymmetric with γ asymptote. It is shown that the LVC model reverts to logistic substitution in a market of fixed size, a result with important implications. The LVC equations are fitted to the Gompertz, Bass, Non-Symmetrical Responding Logistic (NSRL) and Sharif-Kabir substitution models and compared using a novel graphical technique. The LVC equations can reasonably mimic the full range of curve shapes exhibited by each of these models.     

Monetary Policy,Expectations and Commitment*

Commitment in monetary policy leads to equilibria that are superior to those from optimal discretionary policies. A number of interest‐rate reaction functions and instrument rules have been proposed to implement or approximate commitment policy. We assess these rules in terms of whether they lead to a rational expectations equilibrium that is both locally determinate and stable under adaptive learning by private agents. A reaction function that appropriately depends explicitly on private sector expectations performs particularly well on both counts.     

Experience Goods, Expectations and Pricing*

This paper studies a peculiar problem involved in the pricing of an 'experience good' whose value is not known to consumers until it is actually consumed It shows that the producer faces an expectational problem that does not arise in the framework of a 'search good'. Noticing a link between markets in earlier and later periods due to the expectational problem, the present paper analyzes equilibrium price patterns when a producer can precommit to a certain future price path and when he cannot It also discusses social welfare implications.     

服务业顾客要求、顾客期望与顾客满意

本文对顾客要求、顾客期望和顾客满意的概念进行了阐述,并在此基础上提出了顾客要求、顾客期望和顾客满意在三个不同层次上相应的内容。最后,结合服务业给出了组织运作管理的启示。     

Expectations,capital formation,sales and capacity utilization

A model is developed and tested to relate capital formation, sales and capacity utilization in manufacturing to expected inflation and expected interest rates through anticipated real wealth effects. Expected future inflation causes purchases of storeable manufactured goods in advance and accumulations of physical capital. The former increases capacity utilization, while the latter decreases it. Expected increases in interest rates have an impact on sales and capital formation opposite to that of expected increases in prices. Finally, if expected inflation is accompanied by a propertionate increase in expected interest rates, sales decline more than capital formation, and hence capacity utilization contracts.     

Expectations and intertemporal separability in an empirical model of consumption and investment under uncertainty

An intertemporal model of consumption and investment under uncertainty is formulated, and compared with the existing literature; it is argued that an assumption of myopia is necessary for its empirical applicability. It is estimated by maximum likelihood with quarterly British data. A specification search for a satisfactory form of expectations is made, and the estimated model is compared with a static demand system. Strong intertemporal separability is formulated as a nested hypothesis, and strongly rejected by a likelihood ratio test.     

Inflationary Expectations, Variable Output, and Exchange-Rate Dynamics

This paper develops a model of exchange-rate dynamics characterized by inflationary expectations held with perfect foresight, sticky wages, and sluggish output adjustment. In this framework monetary expansion initially lowers interest rates because of sluggish output and price adjustment but quite surprisingly produces exchange-rate overshooting or undershooting. Moreover, after its initial depreciation in the overshooting case, the domestic currency temporarily appreciates beyond its new long-run equilibrium level. In the undershooting case, the home currency temporarily appreciates away from its new long-run equilibrium level. Finally, the dynamic real exchange rate-real interest rate relationship at times becomes inverse.     

Fiscal Policy,Expectations, and Exchange-Rate Dynamics*

This paper uses the sticky-price monetary model to analyze the effects of fiscal policy on the exchange rate under alternative assumptions about exchange-rate expectations. the use of different expectations mechanisms-specifically the perfect-foresight model and the popular models tested by Frankel and Froot: regressive, adaptive, and distributed-lag-is based on recent empirical evidence suggesting that exchange-rate expectations may not be rational. the most surprising finding in the paper is that with adaptive and distributed-lag expectations, fiscal expansion has no initial impact on the exchange rate, and the same may be true for regressive expectations.