Short-run Changes Research Articles

The Influence of London on Labor Markets in Southern England, 1830-1914

Historians have long acknowledged that London, because of its enormous size and rapidly growing demand for labor, acted as a powerful magnet for migrants from throughout southern England. However, while there is a large literature documenting the flow of migrants to London, there have been surprisingly few attempts to determine the consequences of this migration for southern labor markets. This article attempts to redress the imbalance in the literature by examining the influence of London on agricultural labor markets during the nineteenth century. In particular, the article examines the effect of distance from London on wage rates in southern England at various points in time, and the effect of labor market conditions in London on short-run changes in agricultural wage rates.

Dynamic adjustment in the US beef market with imports

Abstract This paper hypothesizes that while there are important qualitative differences in domestic beef and imported beef, beef and cattle imports also represent attempts by the US beef processing and wholesale sector to adjust to short-run changes in supply and demand. Dynamic production theory is applied to the problem to test for this adjustment process, and presents a production theory approach to meat trade that has previously been included in demand functions. The results of this analysis suggest that the method used provides a reasonable and appropriate representation of the import behavior of the US processing and wholesale beef sector.

Stock-Market Volatility and Real Processes in the Czech Economy

The use of speculative investment strategies, given the small number of firms traded in the Czech stock market, has led to large fluctuations that seem to have no relevance for real processes in individual firms. Also, the behavior of global stock-market indices seems to be driven more by animal spirits than by economic fundamentals. Czech economists and stock-market analysts often conclude that the developments at the Prague Stock Exchange (PSE) can hardly provide important information about real processes in firms. This is, however, only a hypothesis that needs to be tested. While the short-run changes in individual stock-market prices are hardly explained by any real-sector variable, there is some, as yet partial, evidence that the long-run average price of a firm on the stock exchange can be explained by some real factors.1 However, to date, there has been no attempt in the literature to

Natural Gas in the U.S.: How Far Can Technology Stretch the Resource Base?

We review the theoretical underpinnings of the exponential model, the amount of gas discovered per unit effort, a quantity called yield-per-effort (YPE), and estimate an econometric model that represents the historical determinants of the YPE for nonassociated gas discoveries in the lower 48 states from 1943 to 1991, the entire period for which the requisite data are available. Results indicate the YPE declines as the exponential function of cumulative drilling when short run changes in drilling effort, real gas prices, and shifts between onshore and offshore are accounted for. We explicitly test and reject the hypothesis that technological change has arrested or reversed the long run decline in YPE. We also discuss some alternative models of YPE that misrepresent the interplay of depletion and technical innovation, as well as the process of innovation itself, and the statistical and methodological shortcomings of the empirical analyses used to support several alternative models of YPE.

World Commodity Prices as a Forecasting Tool for Retail Prices: Evidence from the United Kingdom

This paper investigates, using cointegration and Granger-causality techniques, whether a stable long-run co-movement exists between world commodity prices and U.K. retail prices, and whether short-run changes in commodity prices convey information about future movements in U.K. retail prices. The results show noncointegration and no unidirectional Granger causality from commodity to retail prices. These findings suggest that little may be gained from using developments in commodity prices to forecast movements in retail prices in the inflation-targeting framework followed by the U.K. monetary authorities.

Measuring Short-Run Inflation for Central Bankers

As central bankers intensify their focus on inflation as the primary goal of monetary policy, it becomes increasingly important to have accurate and reliable measures of changes in the aggregate price level. Measuring inflation is surprisingly difficult, involving two types of problems. Commonly used indices, such as the Consumer Price Index (CPI), contain both transitory noise and bias. Noise causes short-run changes in measured inflation to inaccurately reflect movements in long-run trends, while bias leads the long-run average change in the CPI to be too high. In this paper I propose methods of reducing both the noise and the bias in the CPI. Noise reduction is achieved by average monthly inflation in measures called trimmed means' over longer horizons. Trimmed means are statistics similar to the median that are calculated by ignoring the CPI components with extreme high and low changes each month, and averaging the rest. I find that using three month averages halves the noise, while removing the highest and lowest ten percent of the cross-sectional distribution of inflation reduces the monthly variation in inflation by one-fifth.

World Commodity Prices As a Forecasting tool for Retail Prices: Evidence From the United Kingdom

This paper investigates, using cointegration and Granger-causality techniques, whether a stable long-run co-movement exists between world commodity prices and U.K. retail prices, and whether short-run changes in commodity prices convey information about future movements in U.K. retail prices. The results show noncointegration and no unidirectional Granger causality from commodity to retail prices. These findings suggest that little may be gained from using developments in commodity prices to forecast movements in retail prices in the inflation-targeting framework followed by the U.K. monetary authorities.

Posted rates and mortgage lending activity

In many metropolitan areas (MSAs) newspapers post mortgage terms for lenders in a manner designed to permit an easy comparison of discount points and note rates. Using these advertised rates for 73 lenders in three MSAs we examine 1) how applicants respond to short-run changes in relative rates, and 2) the relationship between the services provided and quality of applications received by lenders and their long-term market positions. We find that applicant flows increase when lenders lower their rates. We also find that persistent cross-lender differences in rates are associated with differences in product quality reflected in processing times, loan sales, and FHA/VA lending; and that high-risk borrowers tend to apply to lenders posting above-average rates.

Money And Interest Rates As Predictors Of Regional Economic Activity

This paper revisits the issue of monetary influences on regional economies. It explores linkages between national financial variables and economic activity in the Detroit MSA and the state of South Carolina, regions with very different industrial structures. Tests on the information-content of money and interest rates and evaluation of contributions to forecasting regional employment reveal that interest rates outperform monetary aggregates over several business cycles. Detroit is more sensitive to interest rates than South Carolina, but the latter is far from immune to changing national monetary conditions. The spread between rates on commercial paper and treasury bills outperforms monetary aggregates as a predictor of short-run changes in the regional economies. This result is in line with findings for the nation.

Estimating Intertemporal Supply Response in the Fed Beef Market

AbstractA partial adjustment model with monthly lag structures on expected output and input prices is used to estimate intertemporal supply behavior of fed beef. Previous research has provided conflicting supply elasticities. The present work reconciles the conflicts by integrating different lengths of run into cattle marketing and placement decisions. For example, the model dynamics incorporate short‐run changes in cattle asset values and long‐run adjustments in resource use. Empirical results provide no evidence of short‐run supply fixity; supply elasticities switch from negative to positive over time.

Imperfect competition as a micro foundation for keynesian macroeconomics: A graphical analysis

A simple imperfectly competitive model can provide a rigorous foundation for Keynesian macroeconomics. Further, Keynesian economics is consistent with profit maximizing behavior by firms, and flexible prices and wages. The analysis assumes that real wages are relatively insensitive to short-run changes in employment. This is easier to justify theoretically than sticky nominal wages, and is consistent with aggregate data. In an imperfectly competitive model, simple pricing rules, such as mark-up pricing, may be close to being optimal. The result is that both aggregate demand and supply disturbances have large and persistent effects on output and employment.

Habits, Addictions, and Traditions

The past casts a long shadow on the present through its influence on the formation of present preferences. The past influences present preferences through habitual, addictive, and traditional behavior, and in other ways. These have profound implications for the analysis of economic and social phenomena, including short and long run changes in the amount of smoking due to higher taxes on a pack of cigarettes, and the effects of taxes on effort and work habits in the long run. The link between the past and present choice may also explain why and how parents influence the formation of children's preferences, and the formation and support of institutions and culture. Copyright 1992 by WWZ and Helbing & Lichtenhahn Verlag AG

Physical and economic aspects of resource quality: The cost of oil supply in the lower 48 United States, 1936–1988

For the past half century, the average cost of finding new oil in the lower 48 U.S. has increased in a non-linear fashion. The average cost of producing oil decreased then increased over the same period, with costs rising since the mid-1960s. These results indicate that the cost increasing effects of resource depletion have outweighed the cost decreasing effects of technological improvements in the two primary stages of the oil supply process. Finding and production costs are also highly correlated with the rate of effort expended in each stage, and short-run changes in the rate of effort drive average costs above or below the long-run trend. Previous models which ignored the interplay between short- and long-run effects on cost produced misleading results concerning the scarcity of crude oil in the U.S. The drilling boom of the early 1980s arrested the rate of decline in new additions to reserves, but the average costs associated with those additions were the highest on record. Attempts to sustain production in the lower 48 U.S. through massive drilling programs targeting the large number of undiscovered small fields and infill drilling in existing fields are likely to drive average costs even higher.

Price and Welfare Effects of Catastrophic Forest Damage From Southern Pine Beetle Epidemics

Abstract Southern pine beetle (Dendroctonus frontalis) epidemics are periodically responsible for catastrophic levels of mortality to southern yellow pine forests. Traditional forest damage appraisal techniques developed for site specific economic analysis are theoretically weak since they do not consider aggregate impacts across ecosystems and related markets. Because the traditional model estimates losses only to producers with damaged forests, it provides misleading information from a distributional standpoint by ignoring impacts on producers with undamaged forests and timber consumers. An economic model of timber supply and demand is introduced and used to develop a new technique for estimating short-run market level impacts of catastrophic forest damages. The null hypothesis that catastrophic disruption of forest ecosystem production has no effect on timber markets is tested using intervention analysis and data on the recent Texas-Louisiana epidemic. Parameter estimates are used to compute short-run changes in economic welfare for producers on damaged forests, producers on undamaged forests, and timber consumers. Principal findings are: (1) changes in social welfare resulting from catastrophic damage to standing timber across forest ecosystems requires market-level analysis, and (2) the net change in economic welfare resulting from insect epidemics is unambiguously negative. For. Sci. 37(2):500-516.

A general equilibrium model of exchange market intervention with variable sterilization

The model presented in this paper is characterized by rational expectations, sticky prices, imperfect capital substitution, separate policy functions for domestic credit and credit and reserves, and variable sterilization. Monetary, intervention, and sterilization policies offer complex tradeoffs between internal and external objectives; sterilization dampens exchange rate and price changes due to intervention, but magnifies short-run changes due to foreign interest rate shocks; the ratio of exchange rate to price changes due to intervention rises at an increasing rate with the degree of sterilization; and changes in domestic credit induce long-run purchasingn power parity, but exogeneous changes in reserves, income, or the foreign interest rate do not.

Exchange Rates and Import Prices in the United States: A Varying-Parameter Estimation of Exchange-Rate Pass-Through

This article estimates the import-price function in the United States using a varying-parameter model. The results show that the short-run nonoil import-price changes have become relatively less responsive to exchange-rate changes than to foreign-cost changes since the generalized floating began in the early 1970s. Concomitantly, the markup has varied significantly, falling when the dollar fell and rising when it rose. Thus “pricing to market” is confirmed even for overall U.S. imports.

Factor Price Changes and Imported Intermediate Goods

The paper presents a diagrammatic analysis of the short-run and long-run effects of changes in the prices of imported intermediated goods on domestic factor prices. The analysis focuses on the role of the elasticities of substitution between imported inputs and domestic factors in determining short-run changes in wage and rental rates, and on the importance of the share of imports in the costs of production in determining the long-run changes. The Possibility that all short-run changes in factor prices could be reversed in the long run is illustrated. [410]

Customer Markets and Price Sensitivity

This paper investigates the behavior of prices in customer markets of the Phelps-Winter type under uncertainty. It is shown that the responsiveness of prices to short-run demand and cost changes depends crucially on whether the marginal customer is price risk averse or price risk loving. If he is price risk averse (loving), then the customer market price is less (more) flexible than the monopoly price. Competition makes the customer market price more rigid (flexible) if the marginal customer is price risk averse (loving). The scope of rigid customer market prices is wide if near-rational behavior of customers and the adjustment cost in the consumption process are taken into consideration. Copyright 1989 by The London School of Economics and Political Science.

Inequality in the Third World

In their recent article in Comparative Political Studies, Kohli et al. (1984) attempt to test what they term “developmental,”“statist,” and “neo-Marxist” explanations of income inequalities in the Third World. They conclude that the “statist” approach provides the best explanation of short-run changes in inequality, these being the product of the nature and policies of the state in question: “Authoritarian-exclusionary regimes tend to worsen inequalities over the short run, while more democratic states tend to stabilize them” (1984: 283). Their analysis, however, presents a caricature of the developmental and dependency approaches, uses variables that do not adequately capture their hypotheses, and rejects them for failing to cope adequately with short-run changes that the approaches would not claim to explain. Support for the “statist” explanation is found only through manipulating the data in an unacceptable manner. A reexamination of the data shows that there are no statistically significant relationships between regime type and short-term changes in income inequality for the countries included in their sample.

Variable Depreciation and Some of Its Implications

Variable Depreciation and Some of Its Implications