A Hausman test with trending data

A simple Hausman test for errors in variables is investigated when there is a trend in the data. It is shown that both the asymptotic null distribution and the consistency of the test remain intact in this non-standard situation.     

What can regulators regulate? The case of electric utility rates of return

The efficacy of electric utility regulation has not been finally determined. This study assesses the impact of commission regulation on the level of earnings realized by electric power utility firms. Time series data for the individual electric firms operating in Florida, Iowa and Mississippi were used in this analysis. These are the only three states regulated since World War II and it was possible to compare profit rates for the individual firms before and after commission regulation was instituted. The results show that regulation has lowered profits in some cases. However, there appears to be significant randomness in the process.     

A positive model of tax structure

The model of tax structure developed in this paper is one in which the composition of revenues and the structure of specific taxes arise ‘naturally’ as the result of self-interested political behavior. It is assumed that political agents choose tax structure so as to minimize the political costs (or expected net loss in votes) associated with raising a budget of given size. Several hypotheses concerning the nature of political cost functions are developed and applied to an explanation of the differences among U.S. states in their reliance on income taxation. The empirical application emphasizes differences in political constraints across jurisdictions in the belief that much can be learned about the choice of policy instruments by studying structural adjustments in response to varying constraints. The paper discusses how the proposed approach differs from or is consistent with that adopted by other authors, and how the estimating equation relates to other empirical research in the literature.     

Robust estimation of ARIMA models

The paper discusses methods of estimating univariate ARIMA models with outliers. The approach calls for a state vector representation of a time-series model, on which we can then operate on using the Kalman filter. One of the additional advantages of Kalman filter operating on the state vector representation is that the method and code could easily be adapted to be applicable to the ARIMA model with missing observations. The paper investigates ways to calculate robust initial estimation of the parameters of the ARIMA model. The method proposed is based on the results obtained by R.D. Martin (1980).     

Did fictitious profits contribute to the decline in the rate of profit?

Zusammenfassung Ein auf Anschaffungskosten basierendes Steuersystem führt in Zeiten steigender Inflationsraten zu Scheingewinnen und somit einer Erhöhung der realen Steuerbelastung. Als Folge wird ein Absinken des Ertrags pro eingesetzter Kapitaleinheit angeführt. Der folgende Aufsatz zeigt jedoch, daß diesem negative Effekt die Abzugsfähigkeit der Nominalzinsen und die in Österreich betriebene Zinspolitik als neutralisierende Einflüsse gegenüberstehen. Solange die Inflationsrate unter 10% bleibt und eine autonome Zinspolitik betrieben werden kann, bleibt die reale Ertragskraft des Eigenkapitals erhalten.     

Theory and Tests of Generalized Purchasing-Power Parity: Common Trends and Real Exchange Rates In the Pacific Rim

The paper develops the theory of generalized purchasing-power parity (G-PPP) to explain the “stylized facts” of real exchange-rate behavior. the fundamental economic variables determining real exchange rates are nonstationary; thus, real rates are nonstationary. If the fundamentals are sufficiently integrated, as in a currency area, the real rates will share common trends. the theory is tested using the Pacific Rim nations. It is shown that G-PPP holds between each of the Pacific Rim nations and the large industrialized countries. There is only mild evidence that G-PPP holds among the Pacific Rim nations as a group.