Are there nonlinearities in short‐term interest rates?

The present paper investigates the characteristics of short‐term interest rates in several countries. We examine the importance of nonlinearities in the mean reversion and volatility of short‐term interest rates. We examine various models that allow the conditional mean (drift) and conditional variance (diffusion) to be functions of the current short rate. We find that different markets require different models. In particular, we find evidence of nonlinear mean reversion in some of the countries that we examine, linear mean reversion in others and no mean reversion in some countries. For all countries we examine, there is strong evidence of the need for the volatility of interest rate changes to be highly sensitive to the level of the short‐term interest rate. Out‐of‐sample forecasting performance of one‐factor short rate models is poor, stemming from the inability of the models to accommodate jumps and discontinuities in the time series data.     

The behaviour of a dual economy under different ‘closing rules’

A subsistence sector which produces output without reproducible capital and is also the only source of labour in the economy opens up the possibility that profit maximisation does not rule everywhere. If, in this context, there is one good and savings determine investment, then equilibrium is unique whether the labour market works classically or neoclassically. If, however, investment determines savings in neo-Keynesian fashion, equilibrium may no longer be unique. These results suggest that the importance of different behavioral specifications cannot be determined independently of how markets get cleared.     

REFORMING PROPERTY RIGHTS IN LAND AND TENANCY

This article examines the nature and distribution of propertyrights in land and how they are changing under economic anddemographic pressures. It also analyzes the practical chancesof success of several alternative forms of policy interventionto redistribute property rights and regulate tenancy. This analysisbegins with the political economy of land reform in the twentiethcentury. It draws a distinction between reforms precipitatedby social upheaval (defeat in war, social revolution, or nationalliberation) and those that occur in "normal" times, when thesocial and political order is more secure. It is argued thatthe former have been much more important and, drawing on examples,that the latter face formidable obstacles. In this connection,it is proposed that a tax reform which does away with the highlyselective subsidies and exemptions that benefit the rich andinflate the price of land should be undertaken first. Then,when land prices have fallen, compulsory purchase of land forredistribution, at close to fair market value to ensure itspolitical acceptability, would not entail an intolerable fiscalburden. Where tenancy is concerned, it is argued that this institutionis commonly a socially useful market response, which providesopportunities for the fuller employment of family resourcesand, over the long run, for individual mobility. Thus interventionsdesigned to inhibit tenancy directly or to transfer ownership-likerights to existing tenants may result in heavy costs, especiallyfor future cohorts of would-be tenants.      

UTILITARIAN AND RIGHTS-BASED ALTERNATIVES FOR PROTECTING SITES OF SPECIAL SCIENTIFIC INTEREST

Current legislation in Great Britain has set up a class of protected land under the designation Site of Special Scientific Interest (SSSI). However, what values are to be protected, and how, are questions largely left unanswered. Areas which are designated as worthy of protection can still be threatened by gradual erosion due to rural development. The designation of a site as being of conservation value requires an agency which enforces protection from development. We highlight the conflicts which have arisen between landowners and conservationists over SSSI management and analyse the role of a conservation agency under alternative environmental philosophies. We show how the values underlying the motive for conservation will affect the environmental management process chosen. This provides contrasting views as to the future for countryside management, and focuses concern on the current trend towards the free market in which trade-offs based upon the anthropocentric usefulness of nature are fundamental.     

REGIME-SWITCHING IN AUSTRALIAN SHORT-TERM INTEREST RATES

This paper applies a generalized regime-switching (GRS) model of the short-term interest rate to Australian data. The model allows the short rate to exhibit both mean reversion and conditional heteroscedasticity and nests the popular generalized autoregressive conditional heteroscedasticity (GARCH) and regime-switching specifications. It is shown that empirical estimates of many popular interest rate models provide curious results which imply that innovations to the short rate process are extremely persistent, and that the short rate is potentially non-stationary. The source of these curious results, which are also present in US and European interest rates, is identified in the context of the GRS model, which is shown, via specification and forecasting tests, to capture the features of Australian short-term interest rate data better than existing models. The stochastic process of short-term interest rates in Australia is compared with evidence from the US and Europe, highlighting a number of important differences.     

Soviet agricultural prices,rent and land cadastrest

Progress toward decentralized agriculture in which entrepreneurial initiative of Soviet farm managers could be given fuller range is impeded by the double function of Soviet agricultural prices: as factors affecting input and output decisions and as extractors of land rent. Claims that the Soviet land cadastre inhibits the setting of uniform marginal-cost prices are here examined and found wanting. The real culprits are special interest opposition, ignorance of the potential role of prices, and inability to achieve the necessary complementary reforms, which can be traced to shortcomings in Soviet agricultural economic research and education.