Supply Shocks (supply + shock)

Distribution by Scientific Domains


Selected Abstracts


THE ECONOMIC EFFECTS OF THE MARATHON-ASHLAND JOINT VENTURE: THE IMPORTANCE OF INDUSTRY SUPPLY SHOCKS AND VERTICAL MARKET STRUCTURE,

THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 3 2007
CHRISTOPHER T. TAYLOR
This study measures the effects of the Marathon/Ashland Petroleum (MAP) joint venture on rack and retail reformulated (RFG) gasoline prices in the four cities where both firms sold RFG before the joint venture. MAP was an early transaction in the recent era of petroleum mergers and resulted in large regional increases in concentration. While wholesale (rack) prices increased in the two cities experiencing the largest change in market structure in the year following the transaction, retail prices did not increase. Our results also highlight the importance of identifying the marginal source of supply in correctly identifying merger effects. [source]


The effects of EU shocks on the newly acceded countries

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2007
Alina Barnett
Abstract This paper analyses the response of seven of the newly acceded countries (NACs) to EU supply and monetary shocks. A typical NAC perceives an EU technology disturbance as a negative supply shock and an EU monetary expansion as a negative demand shock. When we split the seven countries into two groups, results for group 1 which includes the Czech Republic, Hungary, Poland and Slovakia suggest that an EU supply shock feeds through as a demand shock, increasing both prices and output. This suggests trade acts as a channel of EU shock propagation. Monetary disturbances explain 2% and 3% of the output fluctuation of group one and two and 10% and 42% of interest rate variations, respectively. EU shocks are identified as given by Canova and De Nicoló (2002) using sign restrictions of the cross-correlation function of the variables' responses to orthogonal disturbances. These restrictions are derived from a DSGE model. Copyright © 2007 John Wiley & Sons, Ltd. [source]


Quasi-rational and ex ante price expectations in commodity supply models: an empirical analysis of the US broiler market

JOURNAL OF APPLIED ECONOMETRICS, Issue 4 2003
Matthew T. Holt
A statistically optimal inference about agents' ex ante price expectations within the US broiler market is derived using futures prices of related commodities along with a quasi-rational forecasting regression equation. The modelling approach, which builds on a Hamilton-type framework, includes endogenous production and allows expected cash price to be decomposed into anticipated and unanticipated components. We therefore infer the relative importance of various informational sources in expectation formation. Results show that, in addition to the quasi-rational forecast, the true supply shock, future prices, and ex post commodity price forecast errors have, at times, been influential in broiler producers' price expectations. Copyright © 2003 John Wiley & Sons, Ltd. [source]


The Opportunistic Approach to Disinflation

INTERNATIONAL FINANCE, Issue 1 2002
Athanasios Orphanides
This paper explores the theoretical foundations of a new approach to monetary policy. Proponents of this approach hold that, when inflation is moderate but still above the long-run objective, the central bank should not take deliberate anti-inflation action but, rather, should wait for exogenous circumstances , such as favourable supply shocks and unforeseen recessions , to deliver the desired reduction in inflation. While waiting for such circumstances to arise, the central bank should aggressively resist incipient increases in inflation. This strategy has come to be known as ,the opportunistic approach to disinflation'. We deduce policy maker preferences that rationalize the opportunistic approach as the optimal strategy for disinflation in the context of a model that is standard in other respects. The policy maker who is endowed with these preferences tends to focus on stabilizing output when inflation is low, but on fighting inflation when inflation is high. We contrast the opportunistic approach to a more conventional strategy derived from strictly quadratic preferences. [source]


Central Bank Accountability and Transparency: Theory and Some Evidence

INTERNATIONAL FINANCE, Issue 1 2002
Sylvester C. W. Eijffinger
The first part of this paper outlines the concept of democratic accountability of central banks, and compares the legal accountability of the European Central Bank (ECB) with some other central banks (Bank of Canada, Bank of Japan, Bank of England and the Federal Reserve System). The second part presents a theory of central bank accountability. Two aspects of accountability are considered: transparency of actual monetary policy and the question of who bears final responsibility for monetary policy. The paper shows that accountability through transparency leads to a lower expected rate of inflation and less stabilization of supply shocks. Accountability through shifting final responsibility in the direction of the government leads to higher inflationary expectations and more stabilization of supply shocks. [source]


The equity premium and the business cycle: the role of demand and supply shocks

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 2 2010
Peter N. Smith
Abstract This paper explores the effects of the US business cycle on US stock market returns through an analysis of the equity risk premium. We propose a new methodology based on the SDF approach to asset pricing that allows us to uncover the different effects of aggregate demand and supply shocks. We find that negative shocks are more important that positive shocks, and that supply shocks have a much greater impact than demand shocks. Copyright © 2009 John Wiley & Sons, Ltd. [source]


The stabilization properties of fixed and floating exchange rate regimes

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 2 2004
Keith Pilbeam
Abstract This paper investigates the price and output stabilization properties of fixed and floating exchange rates using a small open economy model. The performance of the two regimes is compared in the face of money demand, aggregate demand and aggregate supply shocks. It is shown that the ranking of the two regimes is extremely sensitive to the weighting of the objective function as between price and output stability, the type of shock impinging upon the economy, the values of structural parameters of the economy and institutional features such as the degree of wage indexation within the economy. The results obtained suggest that estimates of the income elasticity of money demand, the elasticity of aggregate demand to changes in both the real exchange rate and the real interest rate, and the degree of openness of the economy are likely to be important to policymakers when making the choice of exchange rate regime. Neither regime can be said to be dominant in all circumstances. Copyright © 2004 John Wiley & Sons, Ltd. [source]


Non-stationary Hours in a DSGE Model

JOURNAL OF MONEY, CREDIT AND BANKING, Issue 6 2007
YONGSUNG CHANG
Bayesian econometrics; DSGE models; non-stationary hours The time series fit of dynamic stochastic general equilibrium (DSGE) models often suffers from restrictions on the long-run dynamics that are at odds with the data. Using Bayesian methods we estimate a stochastic growth model in which hours worked are stationary and a modified version with permanent labor supply shocks. If firms can freely adjust labor inputs, the data support the latter specification. Once we introduce frictions in terms of labor adjustment costs, the overall time series fit improves and the model specification in which labor supply shocks and hours worked are stationary is preferred. [source]


Wage Hikes as Supply and Demand Shock

METROECONOMICA, Issue 4 2003
Jürgen Jerger
ABSTRACT Wage hikes affect production costs and hence are usually analysed as supply shocks. There is a long-standing debate, however, about demand effects of wage variations. In this paper, we bring together these two arguments in a Kaldorian model with group-specific saving rates and a production technology that allows for redistribution between workers and entrepreneurs following a wage hike. We thereby pinpoint the conditions under which (a) wage variations affect aggregate demand and (b) the positive demand effects of wage hikes may even overcompensate the negative supply effects on aggregate employment (,purchasing power argument'). We conclude by noting that, whereas demand effects are very likely to occur, the conditions under which the purchasing power argument does indeed hold are very unrealistic. [source]


Leaning into the Wind: A Structural VAR Investigation of UK Monetary Policy,

OXFORD BULLETIN OF ECONOMICS & STATISTICS, Issue 5 2005
Andrew Mountford
Abstract This paper adapts Uhlig's [Journal of Monetary Economics (2005) forthcoming] sign restriction identification methodology to investigate the effects of UK monetary policy using a structural vector autoregression (VAR). It shows that shocks which can reasonably be described as monetary policy shocks have played only a small role in the total variation of UK monetary and macroeconomic variables. Most of the variation in UK monetary variables has been due to their systematic reaction to other macroeconomic shocks, namely non-monetary aggregate demand, aggregate supply, and oil price shocks. We also find, without imposing any long run identifying restrictions, that aggregate supply shocks have permanent effects on output. [source]


SOURCES OF REAL EXCHANGE RATE FLUCTUATIONS: EMPIRICAL EVIDENCE FROM NINE AFRICAN COUNTRIES

THE MANCHESTER SCHOOL, Issue 2009
A. H. AHMAD
We investigate the sources of real exchange rate fluctuations in a sample of nine African countries from 1980:01 to 2005:04, using a trivariate structural vector autoregression. The analysis is motivated by a stochastic sticky-price model from which three shocks are identified; demand, supply and monetary shocks. The results indicate that demand shocks are the predominant source of real exchange rate movements in these countries, although nominal shocks have also played a small but significant role in South Africa and Botswana, and supply shocks seem to be of some relevance for Algeria, Egypt and Tanzania. [source]


Effect of Money Supply on Real Output and Price in China

CHINA AND WORLD ECONOMY, Issue 2 2009
Chih-Hsiang Chang
F01; Q13; Q41 Abstract Over the past 30 years, China has achieved remarkable long-term economic growth. Using quarterly data, we study the effects of money supply on real output and inflation in China between 1993 and 2008. To this end, we use money supply shocks after filtering out the expected component of the money supply. Our findings provide evidence supporting the asymmetric effect of positive and negative money supply shocks on real output and inflation in China. That is, real GDP growth in China responds to negative money supply shocks but not positive money supply shocks. In addition, inflation responds to positive money supply shocks but not negative money supply shocks. We conclude that the People's Bank of China's policy of steady monetary growth appears to be appropriate. Our study offers important policy implications for China. [source]