Statistical mechanics and dynamics of solvable models with long-range interactions

The two-body potential of systems with long-range interactions decays at large distances as $V(r)\sim 1/r^\alpha$, with $\alpha\leq d$, where $d$ is the space dimension. Examples are: gravitational systems, two-dimensional hydrodynamics, two-dimensional elasticity, charged and dipolar systems. Although such systems can be made extensive, they are intrinsically non additive. Moreover, the space of accessible macroscopic thermodynamic parameters might be non convex. The violation of these two basic properties is at the origin of ensemble inequivalence, which implies that specific heat can be negative in the microcanonical ensemble and temperature jumps can appear at microcanonical first order phase transitions. The lack of convexity implies that ergodicity may be generically broken. We present here a comprehensive review of the recent advances on the statistical mechanics and out-of-equilibrium dynamics of systems with long-range interactions. The core of the review consists in the detailed presentation of the concept of ensemble inequivalence, as exemplified by the exact solution, in the microcanonical and canonical ensembles, of mean-field type models. Relaxation towards thermodynamic equilibrium can be extremely slow and quasi-stationary states may be present. The understanding of such unusual relaxation process is obtained by the introduction of an appropriate kinetic theory based on the Vlasov equation.Comment: 118 pages, review paper, added references, slight change of conten

The evolving external orientation of manufacturing: a profile of four countries

Using more than two decades of industry data, the authors profile the external orientation of manufacturing industries in the United States, Canada, the United Kingdom, and Japan. They use the term "external orientation" to describe the potential exposure of an industry's revenues and costs to world events through exports, imports, and imported inputs. For each major manufacturing industry, the authors provide histories of the share of total revenues earned in foreign markets, the role of imports in domestic consumption, and the costs of imported inputs in total production. In addition, they construct a measure of net external orientation, which is intended to capture how much an industry's use of imported inputs (a cost factor) can potentially offset exposure to the international economy through exports (a revenue factor).Manufactures ; International economic relations ; Exports ; Imports ; Production (Economic theory)

Investment, Pass-Through and Exchange Rates: A Cross-Country Comparison

Although large changes in real exchange rates have occurred during the past decades, the real implications of these movements remain an empirical question. Using detailed data from the United States, Canada, the United Kingdom, and Japan we examine the implications of exchange rates for time series of sectoral investment. Both theoretically and empirically we show that investment responsiveness to exchange rates varies over time, positively in relation to sectoral reliance on export share and negatively with respect to imported inputs into production. The quantitative importance of each of these channels of exposure is a function of a set of exchange rate pass-through and demand elasticities. There exist important differences in investment endogeneity across high and low markup sectors, with investment in low markup sectors significantly more responsive to exchange rates. Unlike pass-through elasticities, which are viewed as industry-specific, investment endogeneity to exchange rates is a country-specific phenomenon.

Distribution Margins, Imported Inputs, and the Sensitivity of the CPI to Exchange Rates

Border prices of traded goods are highly sensitive to exchange rates, but the CPI, and the retail prices of these goods, are more stable. Our paper decomposes the sources of this stability for twenty-one OECD countries, focusing on the important roles of distribution margins and imported inputs in transmitting exchange rate fluctuations into consumption prices. We provide rich cross-country and cross-industry details on distribution margins and their sensitivity to exchange rates, imported inputs used in different categories of consumption goods, and weights in consumption of nontradables, home tradables and imported goods. While distribution margins damp the sensitivity of consumption prices of tradable goods to exchange rates, they also lead to enhanced pass through when nontraded goods prices are sensitive to exchange rates. Such price sensitivity arises because imported inputs are used in production of home nontradables. Calibration exercises show that, at under 5 percent, the United States has the lowest expected CPI sensitivity to exchange rates of all countries examined. On average, calibrated exchange rate pass through into CPIs is expected to be closer to 15 percent.

Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon?

Exchange rate regime optimality, as well as monetary policy effectiveness, depends on the tightness of the link between exchange rate movements and import prices. Recent debates hinge on whether producer-currency-pricing (PCP) or local currency pricing (LCP) of imports is more prevalent, and on whether exchange rate pass-through rates are endogenous to a country's macroeconomic conditions. We provide cross-country and time series evidence on both of these issues for the imports of twenty-five OECD countries. Across the OECD and especially within manufacturing industries, there is compelling evidence of partial pass-through in the short-run- rejecting both PCP and LCP. Over the long run, PCP is more prevalent for many types of imported goods. Higher inflation and exchange rate volatility are weakly associated with higher pass-through of exchange rates into import prices. However, for OECD countries, the most important determinants of changes in pass-through over time are microeconomic and relate to the industry composition of a country's import bundle.

Employment versus Wage Adjustment and the US Dollar

Using two decades of annual data, we explore the links between real exchange rates and employment, wages and overtime activity in specific U.S. manufacturing industries. Across two-digit industry levels of aggregation, exchange rate movements do not have large effects on numbers of jobs or on hours worked. More substantial effects are picked up in industry wages, especially for industries characterized by low price-over-cost markup ratios, and in overtime wages and overtime employment. The industry-by-industry pattern of wage responsiveness is not strongly related to industry export orientation or changes in overall external orientation. Industries with low price-over-cost markups and those with a less skilled workforce exhibit relatively larger employment elasticities but lower wage elasticities.

Pass Through of Exchange Rates to Consumption Prices: What has Changed and Why?

In this paper, we use cross-county and time series evidence to argue that retail price sensitivity to exchange rates may have increased over the past decade. This finding applies to traded goods, as well as to non-traded goods. We highlight three reasons for changing pass through at the level of retail prices of goods. First, pass through may have declined at the level of import prices, but the evidence is mixed over types of goods and countries. Second, there has been a large expansion of imported input use across sectors. This means that the costs of imported goods as well as home tradable goods have heightened sensitivity to import prices and exchange rates. The final channel we consider is whether there have been changing sectoral expenditures on distribution services, with the direction of change negatively correlated with pass through into final consumption prices. We find that this channel, which has been a means of insulating consumption prices from import content and exchange rates, has not systematically changed in recent years. The balance of effects weighs in favor of increased sensitivity of consumption prices to exchange rates, even if exchange-rate pass-through into import prices has declined for some types of goods.

Distribution margins, imported inputs, and the insensitivity of the CPI to exchange rates

Border prices of traded goods are highly sensitive to exchange rates, but the CPI and the retail prices of traded goods are more stable. Our paper decomposes the sources of this stability for twenty-one OECD countries, focusing on the important roles of distribution margins and imported inputs in transmitting exchange rate fluctuations into consumption prices. We provide rich cross-country and cross-industry details on distribution margins and their sensitivity to exchange rates, imported inputs used in different categories of consumption goods, and weights in consumption of nontradables, home tradables and imported goods. While distribution margins damp the sensitivity of consumption prices of tradable goods to exchange rates, they also lead to enhanced pass-through when nontraded goods prices are sensitive to exchange rates. Such price sensitivity arises because imported inputs are used in production of home nontradables. Calibration exercises show that, at under 5%, the United States has the lowest expected CPI sensitivity to exchange rates of all countries examined. On average, calibrated exchange rate pass-through into CPIs is expected to be closer to 15%.Exchange rate; pass through; import prices; distribution margins;

Exchange-Rate Pass-Through to Import Prices in the Euro Area

This paper presents an empirical analysis of transmission rates from exchange rate movements to import prices, across countries and product categories, in the euro area over the last fifteen years. Our results show that the transmission of exchange rate changes to import prices in the short run is high, although incomplete, and that it differs across industries and countries; in the long run, exchange rate pass-through is higher and close to one. We find no strong statistical evidence that the introduction of the euro caused a structural change in this transmission. Although estimated point elasticities seem to have declined since the introduction of the euro, we find little evidence of a structural break in the transmission of exchange rate movements except in the case of some manufacturing industries. And since the euro was introduced, industries producing differentiated goods have been more likely to experience reduced rates of exchange rate pass-through to import prices. Exchange rate changes continue to lead to large changes in import prices across euro-area countries.