Integrating graphing assignments into a money and banking course using FRED

Over the course of one semester, six empirical assignments that utilize FRED are used to introduce students of money and banking courses to the economic analysis required for the conduct of monetary policy. The first five assignments cover the following topics: inflation, bonds and stocks, monetary aggregates, the Taylor rule, and employment. Students learn to gather and analyze data using the concepts and theories covered during lectures. The sixth homework is a short paper in which students synthesize the data from the previous assignments to make a policy recommendation for the upcoming Federal Open Market Committee meeting. The overarching purpose of this exercise is to prepare students for the College Fed Challenge, and, more generally, to introduce them to economic data and policy analysis.     

Estimation of the effects of price on apartment water demand using cointegration and error correction techniques

Water price is a key instrument in regulating water demand in the residential sector. Many empirical studies have assessed the effects of price through quantifying the price elasticity of water demand. However, most of these studies have mainly focused on the single-family housing rather the multifamily housing. An in-depth understanding of the price elasticity of multifamily housing water demand is paramount for water planners in order to properly manage water use in the fast growing intensive housing developments in urban areas. This study investigates both the long-term and short-term price elasticities of water demand in the residential apartments in Auckland central city. Using 6 years of monthly time series data, the price elasticities were estimated through cointegration and error correction methods. The results showed that the price elasticities of water demand were ?0.14 and ?0.12 in the short term and the long term, respectively. The price is inelastic yet negative and statistically significant, thus it can play a role in demand management.     

The elasticity of demand for wagering in an unregulated market

The literature estimating the take-out rate (price) elasticity of horse race wagering has consistently found values far above one. The persistence of these apparently inefficiently high prices can be attributed to institutional factors of the US market where federal taxes are imposed on the total amount wagered, and not on the bookmakers’ revenue. By investigating all horse races in New Zealand from August 1993 to April 2009, our article is the first one to consider price setting for wagering in an unregulated market where taxes for a monopolistic betting agency are based on revenues. In such a setting, one would expect elasticities close to one, but in all econometric specifications, we find values well below one. We identify two reasons why higher prices could nevertheless reduce profits: cross price elasticities are negative and, due to the specific features of parimutuel betting, international competitors may only be attracted when take-out rates are above a critical threshold.     

Elasticity of demand,price and time: lessons from South Africa's plastic-bag levy

Policy makers in many countries have perceived plastic-bag litter as a problem, and have used a variety of regulatory tools to address it. South Africa's current legislation on plastic-bags came into effect on 7 May 2003. It increased the thickness of the plastic used, charged a small levy and required that bags be sold rather than distributed gratis. These regulations sharply reduced consumption of plastic bags in the short term, but unlike the Irish and Danish levies have failed to curb their use meaningfully in the long run. It is suggested that the initial sharp fall in use of bags was a result of loss aversion rooted in an endowment effect (the bags having long been a free good). Once consumers became accustomed to paying for bags, demand slowly rose to its historic levels.     

Lottery pricing and price elasticity dispersion in the UK and Canada

We estimate effective price elasticities for different quantiles of the demand distribution of the UK National Lottery and the Canadian Lotto 649. We show that price elasticities vary significantly from draw to draw and have a tendency to increase with lottery participation and jackpot size. Our findings indicate that setting lottery rules on the basis of mean effective price elasticities should be faced with caution because expected profits are negatively related to the evident variation of elasticities among lottery draws. We also simulate alternative active rollover distributions and show that limiting the rollover accumulation by withholding portions and ploughing them back in future nonrollover draws is potentially profitable.     

Estimating the elasticities of gasoline demand: an instrumental variable approach

This article uses a new identification strategy to estimate the demand for gasoline. I show that the monthly gasoline price is endogenous to gasoline demand at the state level, and that gasoline tax and domestic oil first purchasing price together are strong and valid instruments to correct for the endogeneity bias. In addition to estimating the price elasticity, this article also provides an estimate of the income elasticity. These updated estimates are critical factors in evaluating the environmental effect of gasoline tax and forecasting gasoline consumption.     

Income and price elasticities of electricity demand in Australia: Evidence of state‐specific heterogeneity

This paper estimates country‐wide and state‐level income and price elasticities of electricity demand in Australia for the period 1999Q1–2013Q2 using the National Electricity Market data and the autoregressive‐distributed lag model. The results suggest that the long‐run income and price elasticities are inelastic and are statistically significant with theoretically consistent signs. The country‐wide income and price elasticities are estimated to be 0.41 and ?0.38, respectively. It is also found that there exists state‐specific heterogeneity in both speed and magnitude of the electricity consumption adjustment in response to changes in income and electricity price. These results have important policy implications, including the need to use state‐specific elasticities in the scenario analysis of the energy pricing policy.     

Estimates of price elasticity of demand for urban freeway use with high-frequency control variables: the case of Santiago,Chile

Estimates are presented of toll and fuel price elasticities of demand for urban freeway use in Santiago, Chile. High-frequency toll and vehicle data were collected from four urban freeways for different route segments and times of day. Estimation was performed using log-linear regression models whose explanatory variables were tolls, fuel prices, city traffic levels and sets of dichotomous variables to control for daily, weekly and monthly seasonality. City traffic is a high frequency control of the activity level of the city. The elasticities to changes in tolls and fuel were all low in absolute value. The toll elasticities were below 0.05 for two freeways and 0.16 for the third, while for the fourth, which had more alternative routes, it was 0.47. The fuel price elasticities were also heterogeneous, with values of approximately 0.45 for two freeways and 0.21 for the third whereas for the fourth, which had the fewest alternatives, it was 0.07.     

Money demand income elasticity in advanced and developing countries: new evidence from meta-analysis

This article extends the meta-analysis presented in Knell and Stix (2005, 2006) to investigate the possible sources of variations in empirical findings about the income elasticity of money demand in advanced and developing countries. In the case of advanced countries, we find that the income elasticities of money demand are significantly higher if broader definitions of the monetary aggregates are used. In addition, financial reforms and wealth seem to have significantly reduced the estimates of the income elasticity. However, we achieved quite different findings for the developing countries. It appears that the broader definitions of monetary aggregates seem to produce income elasticity estimates that are only marginally higher than the narrower aggregates. While the wealth (financial reform) impacts on income elasticity are statistically insignificant (weakly significant), both seems to have reduced the income elasticity estimates only marginally. Moreover, some contrasting results between advanced and developing countries are also attained with respect to the proxies of cost of holding money.     

Understanding the role of economic transition in enlarging energy price elasticity

Evidence of energy price elasticity would allow for a better understanding of economic, distributional and environmental consequences of varying energy prices. We document the previously unnoticed causal relationship between energy price elasticity and economic transition by modelling energy price elasticity as endogenous to the economic system. The central message is that economic transition promotes incentives and flexibility of micro‐units to sufficiently use price signals. Three potential mechanisms are proposed and tested for economic transition affecting the energy price elasticity. The findings provide implications for energy price policies because it reveals how energy consumers respond to energy price changes alongside economic transition.     

The income elasticity of household energy demand: a quantile regression analysis

This article examines variation in the income elasticity of household energy demand across the energy expenditure distribution using expenditure data from the five most recent Household Budget Surveys (HBSs) in Ireland: the 1987, 1994/1995, 1999/2000, 2004/2005 and 2009/2010 HBS. The analysis uses a two-stage instrumental variable quantile regression approach and is based on each HBS cross section, as well as the overall pooled observations. The estimated elasticities are compared across low- and high-energy-consumption scenarios and to a benchmark elasticity estimated using two-stage least squares. The results provide evidence that there is significant variation in the income elasticities across the energy expenditure distribution and that care must be taken when using the constant mean elasticity for policy purposes. More specifically, any examination of the future impact of a change in income support policy measures on energy consumption should recognize the substantial context-dependent variation in the income elasticity.     

Is lottery demand elasticity a reliable marketing tool? Evidence from a game innovation in greece

Demand for lotteries and especially lotto has been extensively studied in an international context, an important question being whether lottery providers correctly price their product. In Greece a lotto game has been offered since 1990 whereas a new version was introduced seven years later with a clearly more skewed payoff. The objective of this paper is to analyze whether demand estimates from the original game help explain the subsequent innovation and to assess, in that sense, the reliability of demand estimates as a marketing tool. (JEL: D12, L83)     

Pooling surveys in the estimation of income and price elasticities: An application to Tunisian households

This paper presents a methodological extension of Deaton's (1990) model for estimating price elasticities, by pooling Tunisian data from several surveys to improve the inter-cluster variability of unit values which is one of the key elements used in the derivation of these elasticities. Since the surveys cover a relatively long period, possible structural changes in consumption behaviour occurring over time are accounted for by postulating that certain response coefficients of the basic model vary from one survey to the other. The own price and cross price elasticities calculated using appropriate estimates of the extended model are satisfactory both from the economic point of view of their sign and the statistical point of view of their significance and superior to those obtained using a single survey. First version received: April 2000/Final version received: June 2001 RID="*" ID="*"  The authors would like to thank Angus Deaton and anonymous referees for useful comments and suggestions.     

Residential water demand responds asymmetrically to rising and falling prices

This paper econometrically estimates residential water consumption in Germany between 2007 and 2013 based on a panel of almost 3000 supply areas. In particular, the analysis distinguishes periods of rising and falling water and sewage water prices. The short-run (long-run) price elasticity is estimated at around 4.2% (13%), but water demand appears to respond asymmetrically to rising and falling prices. When prices are rising, the short-run (long-run) price elasticity is around 6.5% (17%). When prices are falling, the short-run price elasticity is not statistically different from zero, and the long-run price elasticity is estimated at around 12%. Additional results illustrate that employing average prices instead of marginal prices results in substantially overestimating the price elasticity. These findings are particularly relevant for utilities and regulators planning to alter the tariff structure towards a higher fixed fee and a lower volumetric fee.     

弹性概念的延伸——质量弹性

质量弹性表示在一定时期内一种商品的质量成本变动一定比例所引起的该商品的需求量的变动比例。质量弹性的实质是质量变动对需求量的影响程度。影响质量弹性的因素主要有消费者的收入水平、产品价格在消费者收入中所占比例、商品对消费者的重要程度、市场竞争程度。质量弹性可以分为富有弹性、单位弹性和缺乏弹性三大类。企业提高产品质量的原则是：只要利润增量大于成本增量,企业就应该不断提高质量,直到利润增量等于成本增量。企业应该分析不同时期各个市场的质量弹性,决定相应时期、相应市场的商品质量定位,在更好地满足消费者需求的同时,获得更大的收益。     

货币需求弹性、有效货币供给与货币市场非均衡模型——解析"中国之谜"与长期流动性过剩

Chinese excessive liquidity problems are more serious than other main countries. The upgrading industrial structure and the increasing opening degree lead to the excessive money demand and higher money demand elasticity. Bad credits weaken money supply effectiveness and lead to illusive increasing money. We set up the money market disequilibrium model under the condition of the excessive liquidity. The imbalance between money demand and money supply is the key of Chinese excessive liquidity problems. __________ Translated from Jingji lilun yu jingji guanli 经济理论与经济管理(Economic Theory and Business Management), 2007, (11): 38–44     

Productivity versus elasticity: a normalized constant elasticity of substitution production function applied to historical Soviet data

This study tests the extensive growth hypothesis, which would attribute the Soviet economic slowdown to low elasticity of substitution and over-investment rather than deteriorating productivity growth. To circumvent the low availability of data, widely applicable new methods for estimating productivity and elasticity of substitution were developed based on the normalized constant elasticity of substitution (CES) production function. One is an extended version of the Solow residual calculation, and the other is a direct estimation of the time-varying parameter normalized CES production function. The application of the methods to the Soviet data showed a decreasing trend in productivity growth and a low elasticity of substitution of approximately 0.25. The results neither reject nor support the extensive growth hypothesis because of uncertainty in the interpretation of the low elasticity of substitution. The results suggest that it is reasonable to assert that both deteriorating productivity growth and low elasticity of substitution caused the Soviet economic slowdown. Further empirical studies on productivity and elasticity of substitution in the Soviet and other economies are necessary to fully understand relations between productivity growth, elasticity of substitution and economic development.     

Determinants of residential water demand in Germany

We econometrically analyze the impact of several economic, environmental and social determinants for the per capita demand for water in about 600 water supply areas in Germany. Besides prices, income and household size, we consider the effects of population age, the share of wells, housing patterns, precipitation and temperature. We also explore why current per capita residential water consumption in the new federal states is about 30% lower than in the old federal states. Since average cost pricing may cause an endogeneity problem, we apply instrumental-variable procedures in addition to single equation ordinary least squares, but find no evidence that prices are endogenous. Our estimation results suggest that the price elasticity of water demand in Germany is around − 0.24. The income elasticity is positive, decreases with higher income levels and is at least three times higher in the new federal states than in the old federal states. Current differences in prices and income levels explain about one third of the gap in residential water use between the two regions. Household size and the share of wells have a negative impact on per capita water demand, and water use increases with age. Finally, the findings provide some evidence that rainfall patterns rather than total rainfall affect water consumption, while temperature appears to have no impact at all. All outcomes are robust to a log-log and two types of semi-log specifications for the water demand function.     

中国"超额货币"成因的进一步检验

中国的超额货币一直是理论界颇有争议的话题,因而关于超额货币成因的理论假说有很多种。基于对以往的理论假说进行总结与质疑的基础上,利用货币需求的收入弹性与价格弹性对交易方程式进行调整,并利用中国1991-2003年的数据对调整后的模型进行检验,结果发现:货币需求的收入弹性与价格弹性的变化是导致中国超额货币存在的主要原因。