Nonlinearities and the Business Cycle in Spanish Imports: A Smooth Transition Regression Approach

Traditional specifications about imports have their foundations on the symmetry of the cycle. However, the wide debate about the asymmetric character of the cycle has aroused much interest in nonlinear dynamics due to the cyclical state of the economy. Economic theory maintains a linear long-run relationship linking imports, GDP and relative prices. This paper analyzes whether short-run deviations from this equilibrium display any kind of nonlinear behavior related to the state of the cycle. Nonlinearities will be captured by an error correction smooth transition regression (STR). Empirical evidence, focused on Spanish imports of goods, supports that short-run deviations of this variable from its linear equilibrium state display a nonlinear behavior. As it is demonstrated, this evolution is caused by the cyclical state of the economy. A previous version of this article has been presented at the 65th International Atlantic Economic Conference (Warsaw, Poland, April 9–12, 2008). The authors would like to thank the conference participants and an anonymous referee for their comments.     

The UK demand for steel

The paper suggests a short-run model of the demand for steel that may be used for forecasting future trends. The paper commences with consideration of a long-run model which is estimated using cointegration analysis. An error correction model is then developed to depict the short-run movements to equilibrium. This can be used for the purpose of ex-post forecasting.     

On the effectiveness of monetary and fiscal policies in a Keynesian model

One of the central problems in macroeconomics is the comparison of the effectiveness of various monetary and fiscal policy measures for regulating output and employment. Opinions on this issue are quite varied. This paper analyses this controversy in the framework of a non-Walrasian model with price rigidities. It studies a monetary economy where money is the sole medium of exchange in the model ‘money buys goods and goods buy money; but goods do not buy goods’. The works of Benassy, Dreze, Malinvaud and Younes are utilised for constructing a model of Keynesian unemployment equilibrium.     

Capital movements, growth, and balance of payments

This paper develops a stylized model to examine how the adjustments of balance-of-payments accounts along with the growth path depend on capital mobility, investment behavior, saving behavior, and the magnitude of stock variables. The dynamic investment theory developed by Uzawa and the dynamic portfolio behavior model developed by Metzler are the two building blocks of our model. A two-panel diagram is developed to illustrate the flow and stock aspects of short-run equilibrium. To analyze the pattern of economic growth, we employ dynamic phase diagrams.     

A learning-based model of repeated games with incomplete information

This paper tests a learning-based model of strategic teaching in repeated games with incomplete information. The repeated game has a long-run player whose type is unknown to a group of short-run players. The proposed model assumes a fraction of ‘short-run’ players follow a one-parameter learning model (self-tuning EWA). In addition, some ‘long-run’ players are myopic while others are sophisticated and rationally anticipate how short-run players adjust their actions over time and “teach” the short-run players to maximize their long-run payoffs. All players optimize noisily. The proposed model nests an agent-based quantal-response equilibrium (AQRE) and the standard equilibrium models as special cases. Using data from 28 experimental sessions of trust and entry repeated games, including 8 previously unpublished sessions, the model fits substantially better than chance and much better than standard equilibrium models. Estimates show that most of the long-run players are sophisticated, and short-run players become more sophisticated with experience.     

A Bayesian evaluation of an efficiency-wage model with indeterminacy

ABSTRACT

This paper provides a quantitative assessment of a general equilibrium economy with non-Walrasian labour markets. Indeterminacy in the economy does not require production externalities or increasing returns but it rests on replacing the labour supply curve by a no-shirking condition on the efficiency-wage labour markets. The model is estimated on U.S. data via full information Bayesian methods. The shirking model is capable of matching several stylized facts of the aggregate economy and the labour market. Data favour a version of the artificial economy that is characterized by determinacy.     

Back to Basics: Remittances in the Keynesian Macroeconomic Framework

This paper examines a remittance multiplier based on the short-run Keynesian equilibrium approach and shows how income may be affected by remittance inflows. We explore this through the equilibrium in the goods and money markets, where remittances can affect both consumption and the demand for real money balances. We present this simple theoretical model utilizing a standard Keynesian framework. The short-run Keynesian equilibrium approach provides insight into how remittances affect output and income, and its potential multiplier effects. The model used is indicative of a positive relationship between the marginal propensity to consume out of remittances and the multiplier. The framework also shows that remittances will have a greater impact if its marginal propensity to consume is greater than that for standard disposable income.     

A geometric approach to disequilibrium exchange rate fluctuations: The case of Switzerland

This article deals with the effects of exchange rate fluctuations in non-Walrasian macromodels. A demand driven model (‘Keynesian Unemployment’) and a supply driven model (‘Classical Unemployment’), both estimated on Swiss data, are alternatively considered. In each case an exchange rate modification and possible accompanying policy measures are considered. The feasible consequences on employment and the balance of trade are investigated by means of a geometric comparative static technique. For each type of fix-price equilibrium, the favourable conditions for a devaluation and a revaluation are thus emphasised.     

Explaining House Prices in Australia: 1970–2003*

This paper aims to explain changes in real house prices in Australia from 1970 to 2003. We develop and estimate a long-run equilibrium model that shows the real long-run economic determinants of house prices and a short-run asymmetric error correction model to represent house price changes in the short run. We find that, in the long run, real house prices are determined significantly and positively by real disposable income and the consumer price index. They are also determined significantly and negatively by the unemployment rate, real mortgage rates, equity prices and the housing stock. Employing our short-run asymmetric error correction model, we find that there are significant lags in adjustment to equilibrium. When real house prices are rising at more than 2 per cent per annum, the housing market adjusts to equilibrium in approximately four quarters. When real house prices are static or falling, the adjustment process takes six quarters.     

Devaluation,Capital Mobility,and Long-Run Equilibrium*

The paper considers a small, fully employed economy with non-tradeables, securities, and money. The paper first analyzes the effects of devaluation and financial controls in the short-run equilibrium on the trade balance, the capital account, and the overall balance of payments. Disequilibria in the capital account and the overall balance of payments cause changes in the stock of securities and money, shifting the short-run equilibrium. The paper investigates the condition for the- uniqueness and stability of the long-run equilibrium under this adjustment process (‘specie flow mechanism’). Finally, the long-run equilibrium effects of devaluation and monetary policies are examined.     

我国CPI与PPI非线性调整的实证解释

本文基于两区制门槛误差修正模型对我国CPI与PPI倒挂现象进行实证解释.研究结论表明,CPI与PPI之间存在非线性协整关系,只有当偏离达到一定程度时,系统才会开始向长期均衡状态调整.在调整过程中,CPI与PPI对误差修正的调整速度并不相同,PPI的调整速度要高于CPI的调整速度,而且调整主要是通过倒挂期PPI的变化来完成.两个区制的差别还反映在Granger因果关系上;在区制一时仅存在从CPI到PPI的单向Granger因果关系;而在区制二时存在CPI和PPI的双向Granger因果关系.     

Walras' Law and Keynesian Macroeconomics

This paper examines the claim that Keynesian models violate Walras' law. Walras' law is founded in the logic of exchange. Standard statements misrepresent it, as it pertains to a monetary economy. Keynesian models are consistent with Walras' law once this misrepresentation is corrected. The law holds for both notional and effective demands. It also holds in unconstrained Walrasian equilibria, constrained Walrasian equilibria, and constrained non-Walrasian equilibria. The latter corresponds to a Keynesian conception of equilibrium: markets need not clear, but agents expectations must be fulfilled.     

Business cycle, unemployment benefits and productivity shocks

The dimension of aggregate fluctuations is quite different between the European and US economies. Such a result fully justifies attention to non-Walrasian features for improving the empirical performance of the RBC model. In this paper, we introduce two features, present in European economies, into the standard general setting of the infinite-horizon stochastic growth paradigm: trade union behavior and unemployment benefits. We show that this non-Walrasian economy (i) improves the ability to account for the stylized facts, (ii) displays realistic features in explaining the employment and productivity puzzles, (iii) may account for contractions.     

A long-run,short-run,and politico-economic analysis of the welfare costs of inflation

The long-run, short-run, and politico-economic welfare implications of inflation are assessed in a Bewley model of money demand. All agents produce and consume every period, and hold money to self-insure against idiosyncratic risk. The model is calibrated so the equilibrium monetary distribution shares features with US data. The long-run welfare costs of inflation are shown to be large because inflation reduces the ability of money to mitigate risk. However, the beneficial redistributive effect of inflation is magnified along the short-run transition and reduces the overall costs. These short-run benefits result in a majority-rule inflation rate above the Friedman Rule.     

THE INFLATION AND SUPPLY SIDE CONSEQUENCES OF DEMAND SIDE SHOCKS*

This paper outlines a small general equilibrium model derived under the assumptions of imperfect competition and non-constant returns to scale Cobb-Douglas technology. The model is used to simulate the short-run supply side effects of a demand shock. The simulation results reveal that demand shocks lower prices and result in positive supply side effects, which in turn strengthen the positive demand side effects on unemployment.     

Preliminary results from a five-sector flow of funds model of the United Kingdom, 1972–77

This paper provides a preliminary report on a five sector twelve asset flow of funds model estimated on monthly data for the period 1972–77. The model follows the general equilibrium approach in including a complete set of asset demands and supplies. It distinguishes between long-run and short-run demands and in some cases between short-run national and effective demands. It allows for variable adjustment speeds and, apart from the five forcing variables which are the sector's net surpluses, it does not contain any shift variables to serve as proxies for private or public behaviour. This report outlines the structure of the model and summarizes the initial parameter estimates. Some simulations are reported for comparison with related models.     

MULTIVARIATE COINTEGRATION APPROACH TO THE DETERMINATION OF RESERVES AND BANK CREDIT: A CASE STUDY OF TURKEY*

The paper estimates both long-run reserves and long-run money demand equations using the multivariate cointegration approach. An economic model is constructed, based on the monetary approach to balance of payments in which the monetary authorities can control money supply through changes in bank credit. The vector auto-regressive methodology is used to derive latent equilibrium relationships, and the short-run error correction equations are estimated for both nominal money stock and reserves. A response function for the short-run changes in bank credit is developed. Given the institutional system and slow adjustments, a response function of changes in bank credit to lagged changes in reserves performs well for the period 1960–88.     

On the dominance of the Keynesian regime in disequilibrium growth theory: A note

This note shows that non-Walrasian disequilibrium models of monetary growth (which are rare) can be considerably simplified in their dynamics if appropriate flexibilities of market economies are taken into account that help to avoid certain types of rationing of economic agents as they are typical for the non-Walrasian modeling of macrodynamics. We consider and modify accordingly an established example of this type of model building and show that propositions on stability and the loss of stability of the then remaining Keynesian regime are much easier to derive and also much more transparent than in their original non-Walrasian setup with its regime switches right at the steady state of the economy.     

Evidence on nonlinear error correction in money demand: the case of Taiwan

This paper proposes a nonlinear error-correction model based upon smooth transition regression methodology. The model is specified such that the short-run adjustment toward long-run equilibrium is nonlinear and that the error correction is a smooth function of long-run deviation. Empirical results obtained from estimating M2 money demand in Taiwan support the hypothesis of a nonlinear error-correction process and provide better interpretation of change in the demand for money.     

中国经济增长与碳排放之间的长期均衡关系及其短期非线性调整

运用Hansen和Seo的两区制阈值协整理论,研究了1953—2010年中国经济增长与碳排放之间的关系及其关系的短期非线性调整。结果表明:经济增长与碳排放之间存在非线性协整关系;当两者的长期均衡关系出现短期偏离时,在正常区制中,主要依靠碳排放的调整使两者间关系恢复到长期均衡状态,在极端区制中,碳排放和经济增长都会向均衡状态做出调整,且碳排放的调整速度更快。