Components of effective devaluation and the domestic rate of inflation: The case of Israel

Developing countries have frequently resorted to effective devaluation by changing either their formal rate of exchange, or by using non-formal components, such as taxes and subsidies. The ensuing increase in the domestic price of imports has inflationary effects. This paper analyses the Israeli experience to investigate the inflationary effects of increases in import prices and alternative methods of devaluation. It is found that formal and non-formal devaluation appear to have the same long-run effects on the price level, but are not the same in timing: A formal devaluation leads more quickly to increases in domestic prices.     

A model of market-making with imperfect information

Although the prevention of false markets is one of the major concerns of stock market authorities in the UK and elsewhere, until recently, the theoretical literature on the workings of markets with imperfect information has been sparse. This paper analyses the problem of providing liquidity to investors when price-sensitive information is unequally distributed. Specifically we shall model the activities of a market-maker when certain traders have price-sensitive information unavailable to other market participants. Our model will show how the bid-asked spread would be determined in such a market. It is useful in explaining certain tactics employed by stock market traders and in suggesting alternative ways of evaluating market efficiency. The theory is developed in three sections: (1) the determination of the bid-asked spread for a single, isolated transaction; (2) the determination of the bid-asked spread in a continuous market; (3) the relationship between the spread and the size of transaction.     

PROJECTING CANADIAN DAIRY FARM STRUCTURE USING MARKOV PROCESSES

This paper reports on an application of the Markov chain process to an analysis of the size structure of the primary Canadian dairy industry. On the basis of observed changes in the size distribution of "census" farms with milk cows from 1961 to 1966, projections were made of the numbers of these farms by herd size for the years 1971 and 1981. It is projected that by the year 1981 there will be 109,200 farms with milk cows in Canada, a 51 per cent decline from the numbers in 1966. All of the decrease will occur in the smaller size herds of less than 33 cows. Farms with herd sizes larger than this are expected to increase in numbers. Projections were made separately for Ontario and Quebec.