A DISEQUILIBRIUM ECONOMETRIC MODEL OF THE AUSTRALIAN RAW WOOL MARKET*

This paper develops a quarterly disequilibrium model of the Australian wool market. It is postulated that because of inherent market imperfections the market does not clear. The model consists of demand and supply equations for both private and government traders, a minimum condition to determine quantity transacted and a price adjustment equation based on excess demand/supply. Effective demand/supply concepts which recognise the expectation of rationing are employed to model private demand/supply. Supplier price expectations explicitly account for the lower bound imposed by the minimum reserve price scheme (RPS). The estimates suggest that the disequilibrium hypothesis cannot be rejected, as a consequence measures of market imbalance are provided. The model is also used to simulate the effects of the removal of the RPS.     

The Dynamics of Inflation and Employment in the Full-Employment Zone: A Theoretical Analysis*

The paper is concerned with an economy in which some sectors reach full employment before others as demand expands. The position of short-run equilibrium of employment and excess demand is determined by the intersection of the aggregate demand schedule and the short-run output function, which shows the level of output induced by different levels of aggregate demand. The dynamics of the short-run equilibrium position are explored. It is shown that equilibrating forces due to relative price changes must predominate over disequilibrating forces due to the redistribution of income, in the absence of exogenous shocks and induced cost inflation. The latter is shown to be subject to a multiplier effect. The paper ends by drawing the policy implications of the analysis. It refutes the acceleration thesis by showing that the level of the real wage does not tend to change under excess demand and argues that if the economy is taken into the full employment zone forces will be set to work which tend to remove the bottlenecks.     

资产价格、通胀率与我国流动性过剩规模

现有衡量流动性过剩规模的方法存在许多不足。通过借鉴水力学理论可以推导出中国货币需求函数,以此估算我国的流动性过剩规模。在此基础上,通过Granger检验,发现流动性过剩规模与股价、房价和通胀率的走势较吻合。因此,我们可以利用流动性过剩的机会深化金融市场的改革与创新;引导流动性流向金融市场,避免房地产市场的资产价格泡沫;将货币政策与产业政策紧密配合;选择适当的货币政策工具调控流动性。     

Does money have a role in the inflation process? Evidence from Australia

Inflation, defined as a sustained increase in the price level, is considered a monetary phenomenon, as it can be explained within the framework of money‐demand and money‐supply relationships. In the extant literature, money growth is shown to remain causally related to inflation across countries and over time, irrespective of the exchange rate regime and stability of the money‐demand function. Nevertheless, emerging literature suggests a diminishing role of money in the conduct of monetary policy for price stability, especially under inflation targeting. Monetary policy in Australia under inflation targeting since 1993 is an example of policy that denies a relationship between money growth and inflation. The proposition that money does not matter insofar as inflation is concerned seems odd in both theory and the best‐practice monetary policy for price stability. This paper uses annual data for the period 1970–2017 and quarterly data for the period 1970Q1–2015Q1. It deploys both the Johansen cointegration approach and the autoregressive distributed lag (ARDL) cointegration approach to investigate for Australia whether money, real output, prices and the exchange rate (non‐stationary variables) maintain the long‐run price‐level relationship that the classical monetary theory suggests in the presence of such stationary variables as the domestic and foreign interest rates. As expected, the empirical findings for Australia are consistent with the classical long‐run price‐level relationship between money, real output, prices and the exchange rate. The error‐correction model of inflation confirms the presence of a cointegral relationship among these variables; it also provides strong evidence of a short‐run causal relationship between money supply growth and inflation. On the basis of a priori theoretical predictions and empirical findings, the paper draws the conclusion that the monetary aggregate and its growth rate matter insofar as inflation is concerned, irrespective of the strategy of monetary policy for price stability.     

The effects of indexation of wage contracts on macro-economic stability

The paper develops a simple analytical framework in which the shortrun affects of wage indexation on the dynamic stability of inflation can be analyzed. It consists of a unlonized labor market faced by a competitive demand. Without indexation, the wage contract is based upon the union's prediction of the price level during the period of the contract. With indexation, the same objective is achieved by contracting only once at some initial period, subject to the stipulation that the nominal wage is linked to the price level. The main result is that when the demand for money is sensitive to changes in the expected rate of inflation, nominal variables like prices and wages are more likely to yield an unstable dynamic response with wage indexation, thus endangering the monetary system.     

The economics of hyperstagflation: Stabilization policy in post 1973 Chile

This paper examines the stabilization policy of post 1973 Chile and attempts to explain the coexistence for four years of rates of inflation averaging well over 200 percent/year with a demand deficient depression comparable in its severity to the Depression of the '30s. The analysis is conducted in the framework of ‘disequilibrium’ models. It concludes that the origins, severity and duration of such ‘hyperstagflation’ lie in the stabilization policy's neglect of inflationary expectations, especially in the product market, thus forcing the labor market to absorb the brunt of a disequilibrium whose origins lay in the product market.     

Aggregate demand, conflict and capacity in the inflationary process

This paper focuses on an alternative perspective on inflationto that of the non-accelerating inflation rate of unemployment(NAIRU). It indicates that there are no automatic forces leadingto a level of aggregate demand consistent with constant inflation.Inflationary pressures arise from conflict over income shares,and from cost elements, with the price of raw materials, especiallyoil, being the most important. There are supply-side factorsimpinging on the inflationary process, which arise from thelevel of productive capacity (relative to aggregate demand).The supply-side constraints are viewed as arising from capacityconstraints, rather than from the operation of the labour market.     

Long-run estimates of money demand: new evidence from East Asian countries and the presence of structural breaks

Conventionally, the money demand function is estimated using a linear regression of the logarithm of money demand on a number of variables. In this article, we aim to estimate the long-run properties of money demand specification for a number of East Asian economies and within a panel framework with the presence of structural breaks. Various country-specific coefficients are allowed to capture inter-country heterogeneities. Consistent with theoretical postulates, it is found that (a) the demand for money in the long-run positively responds to real income and inversely to the interest rate spread, inflation, the real effective exchange rate and the US real interest rate; (b) the long-run income elasticity is greater than unity; and (c) both the currency substitution and capital mobility hypotheses hold. The empirical findings in this article can provide useful policy guidelines to the East Asian countries’ central banks in their quest for price stability. If one of the primary objectives of these countries is to minimize price instability, they should avoid creating unnecessary disequilibrium in the money market, while the employment of cointegration with the presence of structural breaks clearly recommends to central banks to use the supply of money to attain price and macroeconomic stability.     

人民币升值与CPI上涨

伴随着人民币的升值,我国的通货膨胀率也大幅上扬,出现了不同于经济学经典理论的特征,主要原因是美元贬值、国际大宗商品价格上涨、我国外贸依存度逐年增高、对国际市场依赖性加深以及近年来我国快速增长的需求拉动了相关产品的国际市场价格。央行当前货币政策将把控制物价上涨、抑制通货膨胀放在更加突出的位置。在目前的环境之下,我国应采取人民币加速升值的策略。     

食品与非食品价格的长期均衡关系与短期非线性调整——基于两区制门槛协整模型的实证研究

食品通胀率与非食品通胀率之间的测量缺口近期持续扩大,引起了市场广泛关注。文章根据1994年1月至2010年8月的食品价格与非食品价格数据,运用两区制门槛误差修正模型研究两者的长期均衡关系和短期价格调整以及传导机制中的非线性特征。结果发现,食品通胀率与非食品通胀率存在门槛协整关系,而且估计缺口稳定,这表明测量缺口夸大了两者的真实偏离。文章还发现了食品价格传导的新信息内涵,即食品价格对非食品价格具有非线性的价格传导性:短期内偏离主要是食品价格上升造成,尤其是在高通货膨胀区制,偏离速度有加快趋势。两区制的Granger因果关系检验发现,在极端区制,食品价格通胀与非食品价格通胀具有双向的短期Granger原因,即两者相互领先;而在正常区制,食品价格通胀与非食品价格通胀具有双向的长期Granger原因。     

中国药品价格和数量指数及偏倚的实证分析

本文利用我国三个城市样本医院的招标采购数据,测算了2002～2005年抗生素类和循环系统药品价格和数量水平的变化趋势,并检验了Gerschenkron效应.结果显示,我国城市间的医疗模式具有较大差异,北京市使用品种比较集中,佛山市比较分散;抗生素类药品价格下降,循环系统类药品价格上升;4年间药品数量上升了许多倍.尤其是...     

Anatomy of canadian inflation: An analysis with CANDIDE model 2.0

The objective of this paper is to analyze the causes of inflation projected for Canada through out the 1980s, using CANDIDE Model 2.0 as reported in the 18th Annual Review base case. Our analysis suggests that, in the medium-run inflation is not only a monetary phenomenon but also caused by a host of other factors: external inflation, foreign interest rates, low productivity growth, labour market tightness, domestic energy pricing and indexation of wages to CPI, a measure of inflation that reflects both domestic and foreign price pressures. Our results indicate that the restrictive aggregate damand policies alone will not make a significant dent in inflation without incurring substantial loss in output and employment. Our analysis suggests that we might better fight inflation using a balanced mix of aggregate demand and supply management policies and incentive based income policies.     

Korean inflation during the US military administration of 1945-1948: a further analysis

This paper investigates the dynamic process of Korean inflation under the US military administration using a structural vector autoregression (SVAR) incorporating cointegration relations among the variables. The results show that government expenditure shocks are primarily responsible for price movements together with money demand shocks having noticeable short-run impacts. The study also shows that government expenditure shocks are the most important source of fluctuations in each of the other variables investigated. The paper concludes that a reform of fiscal and monetary system is necessary to stop the sustaining process of inflation as well as fluctuations in other macro-variables.     

Time and place where gold acts as an inflation hedge: An application of long-run and short-run threshold model

This study examines the short-run and long-run inflation hedging effectiveness of gold in the United States and Japan during the period of January 1971 to January 2010. Previous research has shown in the long-run that inflation tends to appropriately increase the price of gold in the U.S., leading to gold's popularity as an asset in portfolios to reduce the risk against sudden inflation. However, gold is only partially effective in hedging against inflation in Japan. This research found that the rigidity between the price of gold and the consumer price index affects the inflation hedging ability of gold in the long-run. The gold price is characterized by market disequilibrium induced by the price rigidity, causing the price of gold to be unable to response to changes in the CPI. To explore the inflation hedging ability of gold in the short-run, this study further examines the price rigidity in low and high momentum regime. It is found during the low momentum regimes that, gold return is unable to hedge against inflation in either the U.S. or Japan. However, during high momentum regimes, gold return is able to hedge against inflation in the U.S., while the price rigidity in Japan causes the price of gold to not fully hedge against inflation in the short-run.     

Price controls in an open economy

Wage and price controls have been increasingly called for as Western economies have experienced periods of stagflation. Part of their attractiveness has been due to the belief that they are an appropriate instrument to deal with a country's unsatisfactory balance-of-payments position. This paper evaluates the appropriateness of an incomes policy in an open economy. An optimally structured incomes policy, derived for a simple inflation model, is examined under alternative exchange rate regimes. The model, in the tradition of models by Gordon, Hicks, and Okun, is characterized by two output markets-one a flexible price market and one characterized by markup pricing-and by a single labor (input) market. This model is then used as the constraint set in a dynamic optimization problem. Both analytical and simulation results are presented. The results suggest that a direct price control program is not appropriate in an open economy.     

MODELLING DEMAND FOR BROAD MONEY IN AUSTRALIA*

The existence of a valid long‐run money demand function is still important for the conduct of monetary policy. It is argued that previous work on the demand for money in Australia has not been very satisfactory in a number of ways. This paper examines the long‐ and short‐run determinants of the demand for broad money employing the Johansen cointegration technique. Using quarterly data for the period 1976:3–2002:2, this paper finds, inter alia, that the demand for broad money is cointegrated with real income, the rate of return on 10‐year Treasury bonds, the cash rate and inflation. It appears that a disequilibrium in the demand for money can affect the efficacy of interest rate policy in the long run via its impact on future output growth and output gap.     

On persistent disequilibrium

Consider a standard model of a Walrasian economy where the time derivative of price change is a sign preserving function of excess demand. The only steady states of such a system are the Walrasian equilibria. For if the system is not at a Walrasian equilibrium then there must be excess demands or supplies in some market and thus those prices must be changing. Walras' law implies that all prices cannot change in the same direction, and thus relative prices must change.However, it seems that in real world economies there have been states of persistent disequilibrium. How can this be? How can there be stationary states of an economy that are not Walrasian equilibria?The answer presented in this paper goes something like this: the demands actually presented to the market, i.e., the demands that affect price movements, are not the Walrasian demands. Rather, these demands, the effective demands, are a function of both price and quantity signals. There is no reason why there cannot be equilibria of the effective demand system that are not equilibria of the Walrasian demand system.In this paper, I present a simple abstract model of effective demand systems and given a condition for this system to have non-Walrasian equilibria. I also present a simple example of this phenomena. Finally I discuss the real world implications of this model. Related concepts of effective demand are discussed in [A1H], [2], [3], [L5], and [L6].     

当前中国通货膨胀压力成因与治理——外汇储备和产能角度下的分析

由于治理全球金融危机的扩张性政策刺激,中国的宏观经济形势自2009年11月开始由通货紧缩向通货膨胀转变。原材料价格、农产品价格、股价、房价急速上扬,这些使人明显地感受到前段时间的经济衰退正在演变成资产经济泡沫和通货膨胀。在这种背景下,本文回顾中国经济理论界对通货膨胀的研究,探讨当前外汇储备过高和产能严重过剩形成通货膨胀压力的机制。最后,就如何缓解当前的通货膨胀压力提出了初步建议。     

Inflation and the Exchange Rate: The Role of Aggregate Demand Elasticity

This paper examines the effect of aggregate demand elasticity on the exchange rate when inflation occurs. We discover that both the source of the inflation, whether demand-pull or cost-push, and the elasticity of aggregate demand with respect to the price level, are of consequence for the exchange rate. We obtain two primary conclusions. First, the effect on the exchange rate of cost push inflation is ambiguous and is partially determined by the price level elasticity of aggregate demand. In particular, and assuming that the two examined countries have equivalent aggregate supply elasticities, we conclude that the nation with the less elastic aggregate demand function will see its currency appreciate relative to the other. Second, demand-pull inflation results in an unambiguous increase in the exchange rate but the size of that increase is partially a function of aggregate demand elasticity. Assuming again that two countries have equivalent aggregate supply elasticities, that country with the more elastic aggregate demand will experience currency appreciation.     

THE AD-AS MODEL AND ITS SOLUTIONS: SOME NEW RESULTS IN A DISEQUILIBRIUM PERSPECTIVE*

This paper discusses the logical foundation and the solutions of a microfounded aggregate demand … aggregate supply model under the disequilibrium hypothesis. We first show that a) the latter hypothesis is the only one ensuring model consistent expectations and that b) price predetermination, more than price flexibility, should be embodied in an AD-AS framework. Then we develop a full AD-AS scheme, both under excess supply and excess demand for labour. We prove that in the latter case no well defined equilibrium exists. Finally, we discuss stability and perform some comparative statics exercises.