Non-separability and sectoral comovement in a sticky price model

This paper resolves the sectoral comovement problem between nondurable and durable outputs that arises in response to a monetary shock in a two-sector sticky price model with flexibly priced durable goods. We analytically demonstrate that the non-separability between aggregate consumption and labor can generate the comovement between nondurable and durable outputs in response to a monetary policy shock. We then estimate the degree of non-separability, together with other parameters, using a Bayesian approach. We find that the non-separable preferences are supported by the data and our estimated model generates the sectoral comovement in response to a monetary shock.     

A quantile-based test of protection for sale model

This paper proposes a new test of the Protection for Sale (PFS) model by Grossman and Helpman (1994). Unlike existing methods in the literature, our approach does not require any data on political organization. We use quantile and IV quantile regressions in our tests, using the data from Gawande and Bandyopadhyay (2000). Surprisingly, the results do not provide any evidence favoring the PFS model. We also explain why previous work may have found support for it.     

Optimal investment policy of the regulated firm

The main purpose of this paper is to investigate the optimal investment behaviour of a regulated firm and to show that the Averch-Johnson effect of overcapitalization does not necessarily occur in a dynamic model under the assumption of concave revenue function. There may be three cases of undercapitalization, overcapitalization, and neutralization. As the result, whether the Averch-Johnson effect appears or not is crucially dependent on the regulated rate of return and the firm's planning horizon.     

Does the version of the Penn World Tables matter? An analysis of the relationship between growth and volatility

Abstract .  The Penn World Tables (PWT) are an important data source for cross-country comparisons in economics. The PWT have undergone several revisions over time. This paper documents how countries' output growth rates change across four publicly available versions of the PWT. We show that for some countries the magnitude of the differences is significant and/or the sign of the growth rates changes across versions. Using as an example Ramey and Ramey (1995) , who found growth volatility has a significant negative effect on growth, we demonstrate that conclusions based on one version of the PWT may not hold under another version.