How integrated are world beef markets? The case of Australian and U.S. beef markets

The objective of the paper is to examine market integration between Australian and U.S. beef prices at the farmgate level. If these two prices are found to be integrated then it can be alleged that Australian beef prices can be used as a world price in empirical analyses and/or as a ‘reference price’ to measure the level of support accorded the U.S. beef sector. Co-integration analysis and a time-varying parameter estimation procedure based on the Kalman filter model are applied. The paper distinguishes between steer and cow beef segments and it uses monthly data over the 1972:1 to 1993:2 period. The results indicate that Australian and U.S. beef prices are co-integrated, albeit not fully and that the degree of convergence between the various price pairs has not substantially increased over time. The results also suggest that Australian prices can not unequivocally be adopted as a world price in empirical analyses.     

Efficiency and productivity growth in the banking industry of Central and Eastern Europe

We employ the directional technology distance function and provide estimates of bank efficiency and productivity change across Central and Eastern European (CEE) countries and across banks with different ownership status for the period 1998–2003. Our results demonstrate the strong links of competition and concentration with bank efficiency. They also show that productivity for the whole region initially declined but has improved more recently with further progress on institutional and structural reforms. Input-biased technical change has been consistently positive throughout the entire period suggesting that the reforms have induced favorable changes in relative input prices and input mix. However we find evidence of diverging trends in productivity growth patterns across banking industries and that foreign banks outperform domestic private and state-owned banks both in terms of efficiency and productivity gains. Overall, we find that productivity change in CEE is driven by technological change rather than efficiency change.     

Net foreign assets,productivity and real exchange rates in constrained economies

Empirical evidence suggests that real exchange rates (RER) behave differently in developed and developing countries. We develop an overlapping generations two-sector exogenous growth model in which RER determination may depend on the country's capacity to borrow from international capital markets. The country faces a constraint on capital inflows. With high domestic savings, the RER only depends on the productivity spread between sectors (Balassa–Samuelson effect). If the constraint is too tight and/or domestic savings too low, the RER depends on both net foreign assets (transfer effect) and productivity. We then analyze the empirical implications of the model and find that, in accordance with the theory, the RER is mainly driven by productivity and net foreign assets in constrained countries and by productivity in unconstrained countries.     

Inflation, Shadow Prices and the EMU: Evidence From Greece

The paper examines whether inflation systematically distorts the informational content of price signals. A shadow cost function is specified, and the deviation of shadow from actual prices is modeled as a function of the level of economy‐wide inflation, as well as other conditioning variables like budget deficits and changes in inflation rate. It is found that inflation is associated with significant allocative costs in most Greek manufacturing sectors. Measures of cost gains resulting from Greece's convergence towards the EMU are provided and the policy implications are explored.     

Large time-varying parameter VARs

In this paper, we develop methods for estimation and forecasting in large time-varying parameter vector autoregressive models (TVP-VARs). To overcome computational constraints, we draw on ideas from the dynamic model averaging literature which achieve reductions in the computational burden through the use forgetting factors. We then extend the TVP-VAR so that its dimension can change over time. For instance, we can have a large TVP-VAR as the forecasting model at some points in time, but a smaller TVP-VAR at others. A final extension lies in the development of a new method for estimating, in a time-varying manner, the parameter(s) of the shrinkage priors commonly-used with large VARs. These extensions are operationalized through the use of forgetting factor methods and are, thus, computationally simple. An empirical application involving forecasting inflation, real output and interest rates demonstrates the feasibility and usefulness of our approach.