A multi-output analysis of the iron and steel industry

Bibliography: p.15

Optimal Tariffs in Consistent Conjectural Variations Equilibrium

This paper analyzes the determination of the optimal tariff under the assumption of Consistent Conjectural Variations (CCV). A general characterization of the CCV equilibrium is given. We show that (i) there are, in general, a multiplicity of such equilibria, and (ii) under certain restrictions, the Cournot equilibrium, which is based on the assumption of no retaliation can also be a CCV equilibrium. By contrast, free trade is never a CCV equilibrium. Finally the CCV equilibrium is solved explicitly in a simple example.

Optimal Monetary Policy and Wage Indexation Under Alternative Disturbances and Information Structures

The interdependence between the optimal degree of wage indexation and optimal monetary policy is analyzed for a small open economy under a variety of assumptions regarding: (i) relative information available to private agents and the stabilization authority; (ii) the perceived nature of the disturbances impinging on the economy. The distinctions between: (a) unanticipated and anticipated disturbances, and (b) permanent and transitory disturbances, are emphasized. The extent to which stabilization is achieved is shown to depend upon the nature of the disturbances and the available information. The policy redundancy issue is emphasized, implying that optimal rules can frequently be specified in many equivalent ways.

Exchange Market Intervention Under Alternative Forms of Exogenous Disturbances

This paper analyzes exchange market intervention in a stochastic model of a small open economy. The distinction is made between disturbances which are unanticipated and anticipated on the one hand, and those that are perceived as being transitory or permanent, on the other. The paper demonstrates how the appropriate form of exchange market intervention is sensitive to these aspects of the disturbances. Of particular interest is the case of an unanticipated permanent disturbance, when output may be stabilized perfectly about its frictionless level by the use of a very simple class of intervention rules.The optimal rules in other cases are also discussed.

Wage Indexation and Exchange Market Intervention in a Small Open Economy

The analysis of this paper stresses the interdependence between wage indexation on the one hand, and exchange market intervention on the other,as tools of'macroeconomic stabilization policy in a small open economy subject to stochastic disturbances. It is shown how the choice of eitherpolicy instrument impinges on the effectiveness of the other. In particular,if the domestic money wage is fully indexed to some weighted average of the domestic and foreign price levels, then irrespective of what that chosen weight may be, exchange market intervention is rendered totally ineffective insofar as the stabilization of the real part of the domestic economy is concerned. Likewise, if the monetary authority intervenes in the exchange market so as to exactly accommodate for nominal movements in the demand for money, thereby rendering the excess demand for money dependent only upon real variables, then any form of wage indexation is totally ineffective for the stabilization of the real part of the system. In either polar case, the respective instrument can stabilize the domestic price level. Alternative combinations of policy for the stabilization for domestic and foreign disturbances are considered.

The Gains from Fiscal Cooperation in the Two Commodity Real Trade Model

This paper analyzes the gains from fiscal cooperation within the context of the standard two commodity real trade model. It shows how the adjustment in terms of trade is the critical factor in determining the effects of moving from a noncooperative equilibrium. In general, a noncooperative equilibrium leads to an overexpansion of government expenditure on the export good and an underexpansion on the import good, relative to a cooperative equilibrium. The specific example of a logarithmic economy is also considered. The paper discusses further the welfare effects resulting from the formation of a coalition among two countries.

Monetary Growth, Inflation, and Economic Activity in a Dynamic Macro Model

This paper analyzes the effects of an increase in the monetary growth rate within a dynamic optimizing macroeconomic model. Both the short-run and long-run effects, and therefore the adjustments along the transitional path, depend critically upon the tax structure and the firm's corresponding optimal financial decisions. With all bond financing, the effects depend upon the extent to which interest payments are tax deductible for corporations. If this is sufficiently high, the effects of an increase in the monetary growth rate are generally expansionary. With low interest deductibility, or if the tax structure induces equity financing, the effects arc generally contractionary.