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Habit formation in an interdependent world economy

Ikeda, Shinsuke; Gombi, Ichiro - 2004

Economic interdependence of heterogeneous habit forming consumers is examined by using a two-country model. Due to endogenous interest rate adjustments, consumption-habit dynamics in one country are affected by the other country's habits and preferences. To characterize the interactive dynamics,...

Persistent link: https://www.econbiz.de/10010332278

Heterogeneous habits and the transfer paradox

Gombi, Ichiro; Ikeda, Shinsuke - 2001

By using a two-country model with habit-forming consumers, this paper shows that the transfer paradox can take place in the free-trade, dynamically-stable world economy. When the debtor is more habituated to consumption than the creditor, an income transfer from the creditor to the debtor raises...

Persistent link: https://www.econbiz.de/10010332351

The Demand for Currency Substitution

Seater, John J. - In: Economics: The Open-Access, Open-Assessment E-Journal 2 (2008) 2008-35, pp. 1-30

the model. Independent empirical work provides support for the theory. …

Persistent link: https://www.econbiz.de/10010298619

Global imbalances in a world of inflexible real exchange rates and capital controls

Hallett, Andrew Hughes; Martinez Oliva, Juan Carlos - 2011

This paper addresses the issue of international payments in a stock-flow framework, by capturing the interaction between the current account balance and international assets portfolios of domestic and foreign investors. It is argued that the stability of such interaction may be affected by...

Persistent link: https://www.econbiz.de/10010286193

The Nature of Equilibrium in Macroeconomics: A Critique of Equilibrium Search Theory

Aoki, Masanao; Yoshikawa, Hiroshi - 2008

The standard Walrasian equilibrium theory requires that the marginal value product of production factor such as labor … theory allegedly fills this gap by encompassing apparent disequilibrium phenomena in the neoclassical equilibrium framework …. Taking up Lucas and Prescott (1974) as a primary example, we show that the neoclassical search theory cannot explain the …

Persistent link: https://www.econbiz.de/10010298573

The behaviour of the real exchange rate: evidence from regression quantiles

Nikolaou, Kleopatra - 2006

We test for mean reversion in real exchange rates using a recently developed unit root test for non-normal processes based on quantile autoregression inference in semi-parametric and non-parametric settings. The quantile regression approach allows us to directly capture the impact of different...

Persistent link: https://www.econbiz.de/10011604713

PPP: a Disaggregated View

Fischer, Christoph - 2004

By disaggregating price indices, it becomes apparent that the real exchange rate consists of the real exchange rate for a single good and a weighted sum of relative prices between goods. When applying a battery of panel unit root tests to this sum and its components, it is found that both the...

Persistent link: https://www.econbiz.de/10010295634

Concepts to Calculate Equilibrium Exchange Rates: An Overview

MacDonald, Ronald - 2000

In this paper we present a critical overview of differnt methods of constructing an equilibrium exchange rate. The recent literature on purchasing power parity (PPP) indicates that on its own PPP is not a good vehicle for defining an equilibrium exchange rate. Rather, we argue that the latter...

Persistent link: https://www.econbiz.de/10010295691

Why not use standard panel unit root test for testing PPP

Lyhagen, Johan - 2000

In this paper we show the consequences of applying a panel unit root test when testing for a purchasing power parity relationship. The distribution of the tests investigated, including the IPS test of Im et al (1997), are influenced by a common stochastic trend which is usually not accounted...

Persistent link: https://www.econbiz.de/10010281460

A note on testing for purchasing power parity

Heinen, Florian - 2011

We examine the asymptotic behavior of unit root tests against nonlinear alternatives of the exponential smooth transition type if the data is erroneously nonlinearly transformed. We show analytically and by a Monte Carlo study that the probability of rejecting the correct null of a random walk...

Persistent link: https://www.econbiz.de/10010289013

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