The Rise and Fall of India’s Relative Investment Price: A Tale of Policy Error and Reform

India’s relative price of investment rose 44 percent from 1981 to 1991 and fell 26 percent from 1991 to 2006. We build a simple DGE model, calibrated to Indian data, in order to explore the impact of capital import substitution policies and their reform post-1991 in accounting for this rise and fall. Our model delivers a 23 percent rise before reform and a 31 percent fall thereafter. GDP per effective labor was 3 percent lower in 1991 compared to 1981 due to import restrictions on capital goods. Their removal, and a 71 percentage point reduction in tariff rates, raised GDP per effective labor permanently by 20 percent. (JEL E22, E23, F13, O11, O16, O19)

Optimal Market-Integration Decisions by Policymakers: Modeling and Analysis of Agriculture Market Data

Policymakers often seek to integrate markets as a way to maximize social welfare. In this article, the authors consider the spectrum of all possible integration policies, from full isolation to complete integration, and characterize the socially optimal market integration, under general demands. They identify market conditions under which social surplus is indeed maximized at partial market integration. For the linear price-responsive demand model that is used extensively in the operations management literature, these conditions are identified as thresholds on (i) the relative size of the markets being integrated, and (ii) the relative price sensitivity of consumers in these markets. The authors then apply the model to the commercial seed market in the European Union (EU). Their analysis shows that socially optimal market integration for these countries provides a further improvement in the social surplus for the EU by 2.80%, relative to complete integration. Results show that policymakers should exercise caution in determining the extent to which markets are integrated.

Rising prices are not a long-run UK economy risk

Significance There is little risk that inflation will return to heights seen in the 1980s as the authorities have the tools to control high inflation. However, their effective deployment depends on cooperation between the BoE and Her Majesty's Treasury (HM Treasury -- the finance ministry). Impacts The long-run demographic forces that kept real interest rates low in the past will continue to keep them low in the future. Low real rates and little risk of high inflation mean nominal rates will also remain low. Moderate inflation in the range 0-5% can be expected over the next decade. A dose of moderate inflation will be useful for the UK economy as it will ease the relative price adjustments needed during the recovery.

TOURISM DEMAND IN INDONESIA: IMPLICATIONS IN A POST-PANDEMIC PERIOD

This study uses an autoregressive distributed lag (ARDL) model to investigate the role of incomes, relative price competitiveness, and substitution prices in tourism demand from Indonesia’s six largest countries of origin from 2007Q1 to 2019Q4. Income level, competitive prices, and substitution prices significantly impact the demand for tourism in Indonesia. Malaysia, Singapore, Australia, Japan, and India are income elastic, signaling that tourism is a luxury good, but China (normal good). Malaysia and China are price elastic while Japan, India, Singapore, and Australia are less affected by changes in relative prices. Substitute prices may drive tourist to other destinations if the change in prices is large.

Keberlanjutan Penerapan Teknologi Padi Sawah Ramah Lingkungan dalam Aspek Kapasitas Petani dan Sifat Inovasi di Sulawesi Tengah

Friendly environment lowland rice management is an alternative way which can be implemented by farmers for getting a balance and sustainability of environment. However, challenges often faced by environmentally friendly agriculture such as the sustainability of its application after the technological innovation was disseminated. Some factors are thought to influence the sustainability of friendly environment rice management namely capacity of farmers and the nature of technology innovation. This study aims to determine the relationship between farmer capacity and the nature of innovation on the sustainability of the application of environmentally friendly rice technology in Central Sulawesi. Data collection was carried out through a survey using a questionnaire to 174 respondents. Data were analyzed descriptively and statistically quantitatively using multinomial logit regression. The results of the analysis show that the capacity of farmers and the nature of innovation that significantly affects the sustainability of the application of environmentally friendly lowland rice technology in Central Sulawesi is the relative cost advantage, relative price advantage, complexity in application, evaluation of farming, and knowledge of environmentally friendly lowland rice management. Therefore, there is a need to increase all significant variabels and to expand the dissemination of innovations in environmentally friendly lowland rice technology.

The Equilibrium Consequences of Indexing

We develop a benchmark model to study the equilibrium consequences of indexing in a standard rational expectations setting. Individuals incur costs to participate in financial markets, and these costs are lower for individuals who restrict themselves to indexing. A decline in indexing costs directly increases the prevalence of indexing, thereby reducing the price efficiency of the index and augmenting relative price efficiency. In equilibrium, these changes in price efficiency in turn further increase indexing, and raise the welfare of uninformed traders. For well-informed traders, the share of trading gains stemming from market timing increases relative to stock selection trades.

Estimation of Indonesia Wooden Furniture Export Demand Function

The export value of Indonesia’s wooden furniture was sharply decreased by about 31.9% over the period in 2007-2018. On the other hand, global wooden furniture export was increased by 5.8% during the same period. Understanding the behavior of the demand side of Indonesia’s wooden furniture exports that is reflected by its relative price and income elasticities is needed for the policy development of Indonesia’s wooden furniture industry in the future. The objective of this study was to estimate the export demand function of Indonesia wooden furniture using a panel data regression model. Three types of panel data models, such as pooled ordinary least squares model, fixed-effects model, and random effects model, were investigated. The results showed that the export demand function of Indonesia wooden furniture could be well estimated using the fixed effects model. Relative price elasticity and income elasticity were -0.45 and 0.8, respectively. The adjusted R2 value obtained was 0.99. Keywords: export demand function, panel data regression, wooden furniture

Contributions of Productivity and Relative Price Changes to Wheat Profitability Changes in China

Using the provincial panel data of wheat from 1998 to 2018, based on the total price and quantity framework proposed by O'Donnell(2010), and using Färe-Primont productivity index, this artical decomposes the change of wheat profitability into the change of input-output relative price (TT) and the change of total factor productivity (TFP), and further decomposes the change of TFP into technological progress and efficiency change based on input orientation. The results showed that the overall profitability of wheat decreased by 24.9% compared with 1998, which was attributed to the decrease of TT by 32.6% and the increase of TFP by 11.4%. Results indicate that profitability change is mainly driven by TT change, and the impact of TT change on wheat profitability was alleviated by the compensatory change of TFP. The main driving factor of wheat TFP growth is technical progress, Compared with the growth of technical progress, the technical efficiency grows slowly.

Dynamic Spillover Effects of Investor Sentiment and Return between China and the United States

As the two largest economies in the world, the investor sentiment and stock return of China and the United States are the focus of global attention. In this paper, we study the dynamic spillover effects of investor sentiment and return between China and the United States. First, we use the relative price differences of 9 dual-listed companies in China and the United States simultaneously to verify whether investor sentiment affects stock returns. We find a significant positive correlation between the relative price difference of dual-listed companies and the difference of investor sentiment, indicating that the investor sentiment index indeed affects stock prices. Next, we construct the TVP-VAR model to study the dynamic spillover effects of investor sentiment and the return between China and the United States. Through the time-varying impulse response, we find investor sentiment has a significant dynamic impact on returns. Therefore, investment sentiment contagion and stock market linkage between China and the United States are obvious. In addition, we conduct various robust tests, and all results are consistent.