Social Preferences and Price Cap Regulation

This paper analyzes the allocative properties of price cap regulation under very general hypotheses on the nature of society's preferences. We propose a generalized price cap that ensures the convergence to optimal (second best) prices in the long-run equilibrium for virtually any form of the welfare function. Hence, the result of the convergence to Ramsey prices of Laspeyres-type price cap regulation is a particular instance of our more general result. We also provide an explicit and relatively easy to calculate and implement generalized price cap formula for distributionally weighted utilitarian welfare functions, as suggested by Feldstein (1972a).     

SPECIFYING AND TESTING OUTPUT AND PRICING STRUCTURES OF ALTERNATIVE MACROECONOMIC MODELS

ABSTRACT This paper puts forward a framework for choosing between alternative macroeconomic models. It is shown that a three-sector model with importables, exportables and non-traded goods can be specified so as to encompass both the Keynesian one-sector imperfect substitutes model and the two-sector dependent economy model with traded and non-traded goods as special cases. A two-stage test procedure is suggested in order to let the data determine which of these alternative models is the most appropriate. The use of this procedure is illustrated for the case of Argentina, Brazil and Mexico.     

Exchange rates and prices in Europe

Zusammenfassung Wechselkurse und Preise in Europa. — Dieser Aufsatz behandelt die Implikationen von Asymmetrien in der übertragung von Preisst?rungen bei zentralisierter Wechselkurspolitik in einem System gesteuerter Kurse wie dem Europ?ischen W?hrungssystem. Es wird gezeigt, da\ bei derartigen Asymmetrien unwiderruflich feste Wechselkurse suboptimal sind, selbst dann, wenn die politischen Ziele der L?nder identisch und die Wechselkurs- und Geldpolitiken zentralisiert sind. Im empirischen Teil werden die asymmetrischen übertragungen von Preisst?rungen aufgezeigt, indem Input-Output-Matrizen für vier europ?ische L?nder simuliert werden. Dabei ergibt sich, da\ diese Asymmetrien in der Tat betr?chtlich sind und da\ sie bei einer optimalen Festsetzung der Wechselkurse ausdrücklich in Rechnung gestellt werden sollten.

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Résumé Taux de change et prix en Europe. —- Dans cet article les auteurs discutent les implications des asymétries en transmission des perturbances de prix pour une politique de taux de change centralisée dans un système de taux dirigés comme le Système Monétaire Européen. Ils démontrent que, sous des asymétries, les taux de change fixés irrévocablement sont sous-optimum, même si les buts politiques des pays sont identiques et si les politiques de taux de change et monétaires sont centralisées. Puis les auteurs donnent de l’évidence empirique pour des asymétries en transmission des perturbances de prix en simulant des matrices input-output pour quatre pays Européens. Le résultat est que ces asymétries sont vraiment considérable; par conséquent, un cadre optimum de taux de change devrait tenir compte d’elles.

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Resumen Tipos de cambio y precios en Europa. — En este trabajo se discuten las consecuencias que tienen asimetrías en la transmisión de perturbaciones de los precios para políticas de cambio centralizadas dentro de un sistema de tipos de cambio manejados como el Sistema Monetario Europeo. Se demuestra porqué en presencia de estas asimetrías tipos de cambio fijos e irrevocables son suboptimales, incluso cuando los objetivos de política son idénticos en todos los países y las politicas de cambios y monetarias son centralizadas. A continuación se présenta evidencia empfrica de asimetrías en la transmisión de perturbaciones de los precios simulando matrices insumo producto de cuatro países europeos. Los resultados indican que estas asimetrias son importantes y que a raíz de ello un régimen de cambio óptimo debiera tomarlas en cuenta explícitamente.

     

The Behavior of Nontradable-Goods Prices In Europe: Evidence and Interpretation*

This paper examines the evolution of the relative price between tradable and nontradable goods in a group of European countries. A model of an open economy is used to analyze different factors that can account for an increase in the relative price of nontradable goods. These factors are (a) faster technological progress in the tradable goods sector, (b) demand shifts toward nontradable goods, and (c) real wage pressures. the relevance of these factors is analyzed empirically for France, Germany, Italy, Spain, and the United Kingdom.     

Poverty alleviation in Mozambique: a multi-market analysis of the role of food aid

The use of food aid in poverty alleviation programs has been hampered by two problems: the inability to target to households in need, and the disincentive effects on agriculture. In this paper, we present econometric estimates of in Almost Ideal Demand System (AIDS) for households in Maputo, Mozambique, and develop a multi-market model to show that in Maputo, imported yellow maize is not only self-targeting, but that owing to a combination of the low cross-price elasticity with locally produced staples (particularly, white maize) and cross-border trade in food products, the disincentive effects on domestic agriculture have been negligible.     

Income policies, inflation and relative pay :

This paper discusses proposals for tabular standards in the late nineteenth and early twentieth centuries. In particular, we focus on Keynes’ proposal for an international tabular standard (ITS) as the gold standard unravelled in the 1930s. The paper explains the origins of Keynes’ ITS proposal which pegged the value of an international reserve to a broad index of primary commodities, weighted in terms of their value in world production. We argue that the ITS should be viewed as an important and enduring component of Keynes’ ideal long-run vision for anchoring the international monetary system, even post-Bretton Woods.     

Keynes and the international monetary system: Time for a tabular standard?

This paper discusses proposals for tabular standards in the late nineteenth and early twentieth centuries. In particular, we focus on Keynes’ proposal for an international tabular standard (ITS) as the gold standard unravelled in the 1930s. The paper explains the origins of Keynes’ ITS proposal which pegged the value of an international reserve to a broad index of primary commodities, weighted in terms of their value in world production. We argue that the ITS should be viewed as an important and enduring component of Keynes’ ideal long-run vision for anchoring the international monetary system, even post-Bretton Woods.