1,721,047 research outputs found
Money Demand and the Welfare Cost of Inflation: Empirical Evidence From East Asian Countries
No full textThis dissertation presents empirical evidence of the long-term relationship between money (M1) and inflation from five selected East Asian countries during the period from 1977?2014. The two money demand specifications, namely, the semi-log and the log-log functional forms initiated by Cagan (1956) and Meltzer (1963), respectively, are examined using time-varying and structural break tests for stationary and cointegration before estimating cointegration equations with ordinary least squares (OLS) regression. In addition to estimating the money demand function, the welfare cost of inflation is calculated following Bailey?s (1956) consumer surplus approach. Results indicate that there is an insignificant effect of inflation in the five countries, as well as in comparison to existing studies. On the other hand, there is a distinction between the two specifications, with the log-log form often producing more consistent and reasonable results
Does Dynamic Pricing Vary According to the Business Cycle?
No full textPredicting and controlling the business cycle is considered being an end phenomenon of macroeconomic analysis and up to this point, the fundamental principles of firm pricing have been almost completely overlooked. Recent macroeconomic analysis literature in macroeconomics indicated that firms do not often track macroeconomic information such as the inflation rate and other key information and similar work has only attempted work on links between inflation and pricing. Using firm-level survey data I conduct an exploration of any links between dynamic pricing and business cycles through the usage of descriptive statistics and linear regression techniques with a comparison towards the literature. Our results show that while firms do believe that the business cycle plays an important part in decision making, there is no clear link between the two in themselves with a P-value of 0.13. We conclude that rational inattention may play a large part in why this is the case and infer that a similar approach to how inflation expectations were tracked, may uncover the degree of rational inattention towards real GDP growth, further questioning the effectiveness of monetary policy enacted by the NZ Reserve Bank
Inflation Expectations and Input Costs in the Construction Industry in New Zealand
No full textThis dissertation examines the formation of inflation expectations among households particularly the influence of input costs changes in construction in the context of New Zealand. Unlike the previous research, which focused on firms’ inflation expectation, this research investigates households’ responses to input cost fluctuations and consider how these adjustments reflect broader inflationary expectations. The findings document those changes in sector-specific costs and expectations, particularly within construction, comove and serves as forward-looking indicator of inflation. This effect is especially pronounced in times of economic shocks, supporting the theory of “rational inattention” where households selectively respond to prominent price changes and disregard minor fluctuations in stable time periods. While this research is constrained by a short-term and aggregate data which obscured long term trends and demographic variations, the high correlation in expectations and costs of input offer important implications for monetary policy. Targeted approaches in sectors which have high impact on expectations can aid in anchoring inflation expectations during the period of economic shocks/instability. These insights highlight the critical role of sector-specific costs which plays a vital role in shaping household inflation expectations, suggesting that monetary policy can benefit from a dual focus on macroeconomic conditions and sectoral dynamics
Money Demand and the Welfare Cost of Inflation: Empirical Evidence From East Asian Countries
No full textThis dissertation presents empirical evidence of the long-term relationship between money (M1) and inflation from five selected East Asian countries during the period from 1977?2014. The two money demand specifications, namely, the semi-log and the log-log functional forms initiated by Cagan (1956) and Meltzer (1963), respectively, are examined using time-varying and structural break tests for stationary and cointegration before estimating cointegration equations with ordinary least squares (OLS) regression. In addition to estimating the money demand function, the welfare cost of inflation is calculated following Bailey?s (1956) consumer surplus approach. Results indicate that there is an insignificant effect of inflation in the five countries, as well as in comparison to existing studies. On the other hand, there is a distinction between the two specifications, with the log-log form often producing more consistent and reasonable results
Does Dynamic Pricing Vary According to the Business Cycle?
No full textPredicting and controlling the business cycle is considered being an end phenomenon of macroeconomic analysis and up to this point, the fundamental principles of firm pricing have been almost completely overlooked. Recent macroeconomic analysis literature in macroeconomics indicated that firms do not often track macroeconomic information such as the inflation rate and other key information and similar work has only attempted work on links between inflation and pricing. Using firm-level survey data I conduct an exploration of any links between dynamic pricing and business cycles through the usage of descriptive statistics and linear regression techniques with a comparison towards the literature. Our results show that while firms do believe that the business cycle plays an important part in decision making, there is no clear link between the two in themselves with a P-value of 0.13. We conclude that rational inattention may play a large part in why this is the case and infer that a similar approach to how inflation expectations were tracked, may uncover the degree of rational inattention towards real GDP growth, further questioning the effectiveness of monetary policy enacted by the NZ Reserve Bank
How Can Central Banks Improve Monetary Policy Communication to Firms?
No full textThe world faced by central banks in the wake of the Global Financial Crisis has demanded new and unconventional approaches to implement monetary policy. Responding to problems like the zero-lower bound on interest rates has seen tools like forward guidance offered through central bank communication become more commonplace in many countries. The Reserve Bank of New Zealand has been an early adopter of many of these modern features of central banking, but key among them has been that they offered quantitative forward guidance since 1997—well before the crisis. Recent academic work has shown that this relatively long history of communication has not translated into informedness about monetary policy for many firms of New Zealand. This is a problem, as it is ultimately the firms who set prices and wages within the economy. By using a survey of firms from New Zealand, this thesis examines what indicates a firm is likely to have low errors in their inflation forecasting, with the goal of determining how the central bank can improve their communication to firms. Smaller firms, firms with a lower price than their competitors and firms with a low margin between sales and costs are generally more likely to have more accurate inflation forecasts. Additionally, this thesis shows that firms with at least one affiliation to an outside body, for example a trade association, are more likely to have lower error in their inflation forecast. This result provides strong potential for improving central bank communication to firms
An Exploration of Heterogeneity in the Macroeconomic Expectations of Firms
No full textFirms’ expectations on macroeconomic uncertainty are heterogeneous. However, we find that regardless, an exogenous macroeconomic news shock has a strong effect on adjusting all firms’ beliefs towards professional forecasts. This research aimed to understand how firm characteristics are associated with macroeconomic uncertainty. Initially, we find that firms in the transportation or construction industries or those who have less competitors, are less efficient, have a higher profit margin or who have less frequent discussion with their customers are associated with higher levels of macroeconomic uncertainty. These findings add to the existing literature on how expectations of firms are formed. Following this, we extend our analysis by using a RCT and examining how firms respond to an exogenous macroeconomic shock. We find that firms respond strongly to macroeconomic news, and there is limited heterogeneity in their reaction. The key exception to this is by industry groups. When interacting firm characteristics with industry groups, we find much larger degrees of heterogeneity. Our results support the Lucas Island Model hypothesis (1975), that agents form their aggregate beliefs based on environment specific information. Overall, these findings imply that central banks should consider how firm characteristics impact macroeconomic uncertainty, but nonetheless, uncertainty can be reduced universally through effective communication
Efficiency and Productivity Analysis of New Zealand District Health Boards: An Empirical Enquiry Using Bayesian Stochastic Frontier Analysis
No full textThe bulk of efficiency studies in healthcare literature that use longitudinal data assume that inefficiency is independent over time. However, if the operating environment imposes significant adjustment costs that prevent healthcare providers from operating at optimum levels, inefficiencies are likely to follow a dynamic process. This implies that inefficiencies may persist from one period to the next, thereby violating the widely held assumption of inefficiency independence. In such a dynamic decision-making environment, a healthcare provider may opt to remain partly inefficient over time and aim for a long-run level of equilibrium efficiency that corresponds to the degree of adjustment costs they face.
While the measurement of healthcare providers’ total factor productivity (TFP) and its components has gained considerable traction, existing studies exclusively assume either primal or dual specification, without any comparisons between them. The analysis of the productivity using both specifications can act as a robustness check and, most significantly, assist in highlighting the source of discrepancies in the results.
This thesis aims to address some of these gaps in healthcare literature by applying Bayesian estimation techniques on quarterly data on New Zealand District Health Boards (DHBs) for 2011-2018.
The first empirical chapter investigates the technical efficiency of New Zealand’s DHBs in providing hospital services by using a dynamic stochastic frontier specification. The empirical results identify an excessive level of persistence in technical inefficiency in the sector due to high adjustment costs. While high adjustment costs resulted in a low national long-run technical efficiency level, on average, DHBs performed close to the long-run level of technical efficiency.
The second empirical chapter also used a dynamic stochastic frontier specification to estimate cost efficiency while controlling for unobserved and observed DHB specific heterogeneity. The results show that although cost inefficiency persistence is still relatively high in the sector, DHBs that provide hospital services to rural communities tend to have a higher long-run level of cost inefficiency. The chapter also provides evidence that ignoring heterogeneity in stochastic frontier models can lead to biased estimates of model parameters and efficiency estimates.
The final empirical chapter undertakes the TFP change decomposition under both primal and dual specifications. The results from both specifications are consistent and show that the TFP decreased between 2011 and 2018, primarily due to the declining technical change component. However, the scale component remained positive throughout the study period and dampened some of the negative influences of the technical change component on the TFP. Additionally, the results indicated that in 2016, both the scale and efficiency components posted their highest positive growth in response to the introduction of a performance-based ‘elective initiative’ programme, which briefly raised the TFP in 2016
Impact of Generalised System of Preferences (GSP) by Developed Countries on Less Developed Countries: The Case of Lao PDR-EU Exports
No full textGeneralised System of Preferences (GSP) is a non-reciprocal preferential trade agreement where developed countries grant concessions or elimination of their tariffs on imports from developing and less developed countries (LDCs). The primary objective of GSP is to help increase the beneficiaries’ export revenues. Lao People’s Democratic Republic (Lao PDR) acceded as a new member of the Association of Southeast Asian Nations (ASEAN) in 1997 and became a member of the World Trade Organization (WTO) in 2013. The country is also a beneficiary of the European Union (EU)’s GSP since the 1990s and thus benefits from concessions or elimination of two-third of their tariffs on Lao PDR exports to the EU. In addition, as a LDC, Lao PDR currently enjoys duty-free, quota free market access to the EU via a special arrangement known as Everything but Arms (EBA) that the EU has offered to all LDCs since 2001. This study empirically analyses the impact of EBA on the export volumes of Lao PDR to the EU using an export demand model with quarterly time series data over the period 1996-2015. Following (Cuyvers & Soeng, 2013), the impact of EBA has been quantified taking into account changes under the EU GSP, which potentially affect the effectiveness of EBA scheme, such as the complete removal in 2009 of duties and quota on remaining agricultural products (banana, rice, and sugar) and the application of more favourable Rules of Origin (RoO) in 2011. The results of this study show that none of the mentioned changes in the scheme has affected the effectiveness of the EBA on Lao exports to the EU. Instead, it is observed that production supply constraints and declining comparative advantage of Lao PDR’s key export products to the EU are the two important factors affecting the export volumes from Lao PDR to the EU. Thus, in order to increase Lao exports to the EU, it is necessary to address these two crucial constraints in order to take advantage of the EBA GSP
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