The behavior of real exchange rates: the case of Japan

The study examines the convergence rate of mean reversion by contrasting the estimated half-life of real exchange rate (RER). We employ an extensive monthly consumer price index (CPI)-based product price’s panel for Japan (the U.S. as the num´eraire). We find that the disaggregated RERs are persistent due to the cross-sectional dependence problems. By controlling common correlated effects, the estimated half-life for all goods may fall to as low as 2.54 years, below the consensus view of 3 to 5 years summarized by Rogoff (1996). After correcting the small-sample bias, the estimated half-life of deviations from purchasing power parity (PPP) increase by 1.03 year. Our findings also support that the half-life of mean reversion of RER is about 3.55 years for traded goods, about 0.11 year lower than non-traded goods. We also show that traded goods and non-traded goods perform distinct distributions of persistence

Estimation of a panel stochastic frontier model with unobserved common shocks

This paper develops panel stochastic frontier models with unobserved common correlated effects. The common correlated effects provide a way of modeling cross-sectional dependence and represent heterogeneous impacts on individuals resulting from unobserved common shocks. Traditional panel stochastic frontier models do not distinguish between common correlated effects and technical inefficiency. In this paper, we propose a modified maximum likelihood estimator (MLE) that does not require estimating unobserved common correlated effects. We show that the proposed method can control the common correlated effects and obtain consistent estimates of parameters and technical efficiency for the panel stochastic frontier model. Our Monte Carlo simulations show that the modified MLE has satisfactory finite sample properties under a significant degree of cross-sectional dependence for relatively small T. The proposed method is also illustrated in applications based on a cross country comparison of the efficiency of banking industries

Estimation of a Panel Stochastic Frontier Model with Unobserved Common Shocks

This paper proposes a panel stochastic frontier model with unobserved common shocks to control cross-sectional dependence among individual firms. The novel feature is that we separate technical inefficiency (decision-dependent heterogeneity) from the effects induced by individual heterogeneity (decision-independent) caused by unobserved common shocks. We propose a feasible maximum likelihood method that does not require estimating the effects of unobserved common shocks and discuss its asymptotic properties. Monte Carlo simulations show that the proposed method has satisfactory finite sample properties when cross-sectional dependence exists. Application is illustrated by comparison of the efficiency of savings and commercial banking industries in the US

The behavior of real exchange rates: the case of Japan

The study examines the convergence rate of mean reversion by contrasting the estimated half-life of real exchange rate (RER). We employ an extensive monthly consumer price index (CPI)-based product price’s panel for Japan (the U.S. as the num´eraire). We find that the disaggregated RERs are persistent due to the cross-sectional dependence problems. By controlling common correlated effects, the estimated half-life for all goods may fall to as low as 2.54 years, below the consensus view of 3 to 5 years summarized by Rogoff (1996). After correcting the small-sample bias, the estimated half-life of deviations from purchasing power parity (PPP) increase by 1.03 year. Our findings also support that the half-life of mean reversion of RER is about 3.55 years for traded goods, about 0.11 year lower than non-traded goods. We also show that traded goods and non-traded goods perform distinct distributions of persistence

Estimation of a Panel Stochastic Frontier Model with Unobserved Common Shocks

This paper proposes a panel stochastic frontier model with unobserved common shocks to control cross-sectional dependence among individual firms. The novel feature is that we separate technical inefficiency (decision-dependent heterogeneity) from the effects induced by individual heterogeneity (decision-independent) caused by unobserved common shocks. We propose a feasible maximum likelihood method that does not require estimating the effects of unobserved common shocks and discuss its asymptotic properties. Monte Carlo simulations show that the proposed method has satisfactory finite sample properties when cross-sectional dependence exists. Application is illustrated by comparison of the efficiency of savings and commercial banking industries in the US

Modeling of Human Hepatic and Gastrointestinal Ethanol Metabolism with Kinetic-Mechanism-Based Full-Rate Equations of the Component Alcohol Dehydrogenase Isozymes and Allozymes

Alcohol dehydrogenase (ADH) is the principal enzyme responsible for the metabolism of ethanol. Human ADH constitutes a complex family of isozymes and allozymes with striking variation in kinetic properties and tissue distribution. The liver and the gastrointestinal tract are the major sites for first-pass metabolism (FPM). The quantitative contributions of ADH isozymes and ethnically distinct allozymes to cellular ethanol metabolism remain poorly understood. To address this issue, kinetic mechanism and the steady-state full-rate equations for recombinant human class I ADH1A, ADH1B (including allozymes ADH1B1, ADH1B2, and ADH1B3), ADH1C (including allozymes ADH1C1 and ADH1C2), class II ADH2, and class IV ADH4 were determined by initial velocity, product inhibition, and dead-end inhibition experiments in 0.1 M sodium phosphate at pH 7.5 and 25 °C. Models of the hepatic and gastrointestinal metabolisms of ethanol were constructed by linear combination of the numerical full-rate equations of the component isozymes and allozymes in target organs. The organ simulations indicate that in homozygous <i>ADH1B*1/*1</i> livers, a representative genotype among ethnically distinct populations due to high prevalence of the allele, major contributors at 1 to 10 mM ethanol are ADH1B1 (45% to 24%) and the ADH1C allozymes (54% to 40%). The simulated activities at 1 to 50 mM ethanol for the gastrointestinal tract (total mucosae of <i>ADH1C*1/*1–ADH4</i> stomach and the <i>ADH1C*1/*1–ADH2</i> duodenum and jejunum) account for 0.68%–0.76% of that for the <i>ADH1B*1/*1–ADH1C*1/*1</i> liver, suggesting gastrointestinal tract plays a relatively minor role in the human FPM of ethanol. Based on the flow-limited sinusoidal perfusion model, the simulated hepatic <i>K</i>_m^app, <i>V</i>_max^app, and <i>C</i>_i at a 95% clearance of ethanol for <i>ADH1B*1/*1–ADH1C*1/*1</i> livers are compatible to that documented in hepatic vein catheterization and pharmacokinetic studies with humans that controlled for the genotypes. The model simulations suggest that slightly higher or similar ethanol elimination rates for <i>ADH1B*2/*2</i> and <i>ADH1B*3/*3</i> individuals compared with those for <i>ADH1B*1/*1</i> individuals may result from higher hepatocellular acetaldehyde