Journal of Economic Studies

Simmons, Robert

1992 Journal of Economic Studies

doi: 10.1108/01443589210015935

Applies an errorcorrection model to demand for money in fiveAfrican economies Congo, Cte dIvoire, Mauritius, Morocco andTunisia. Attention is given to a set of opportunity cost variablesincluding expected inflation, domestic interest rate, foreign interestrate and expected exchangerate depreciation. The empirical results showthat the domestic interest rate plays a significant role in the demandfor money functions for three of the five countries and externalopportunity cost variables are significant for one of the others. Theresults show some diversity in money demand behaviour in the countriesstudied, but the error correction mechanism is always significant and infour out of five cases there is a shortrun inflation impact. Theequations are subjected to a battery of tests and found to bestatistically wellbehaved.

Reed, Geoffrey

1992 Journal of Economic Studies

doi: 10.1108/01443589210015953

As deregulation takes place in the UK, rent tribunals areconfronted with the problem of setting a market rent forpreviously controlled property. A simple partial equilibrium model of asector of the rented accommodation market is used to examine thequestion of setting a market rent in the controlledrentsubsector. It is shown that setting the controlled rent equal to therent prevailing in the uncontrolled part of the market is suboptimal,and a simple formula is suggested which will give a better estimate ofthe true free market rent.

Lawler, Philip

1992 Journal of Economic Studies

doi: 10.1108/01443589210015944

Examines the effects of a monetary expansion on certain keymacroeconomic variables, in particular the nominal exchange rate,competitiveness, and domestic output and employment, using a modifiedversion of the Dornbusch Journal of Political Economy, 1976model. Dornbuschs original analysis of the implications of stickyprices was conducted on the basis of two alternative assumptionsconcerning the supply side of the economy, a fixed fullemploymentlevel of output and in his Appendix continuous goods market clearing,maintained by instantaneous output adjustment. Neither of theseassumptions appears particularly satisfactory and the model presentedhere attempts to address the issue by assuming output to beinstantaneously fixed, but to respond gradually to excess demand orsupply in the goods market. The structure of the resulting model is suchas to imply a thirdorder dynamic adjustment process which is solvedexplicitly. Two principal conclusions follow from the analysis. First,despite the fact that the monetary expansion inevitably reduces thedomestic interest rate, nominal exchange rate overshooting need notresult. Second, the dynamics of adjustment are considerably morecomplicated than in the original Dornbusch model and may, in fact, becyclical in nature.

Milner, Chris

1992 Journal of Economic Studies

doi: 10.1108/01443589210015917

Demonstrates the implications of imperfect substitutability betweendomestic and imported final goods for the determination of secondbestnominal and effective tariffs in a general equilibrium setting. Theanalysis of secondbest interventions for given policy distortionsextends that by Ruffin and Casas on homogeneous goods to the case wherethere is product heterogeneity. The secondbest optimal effective rateof protection for given policy distortions is shown to depend upon thenature of the policy distortion and the degree of substitutabilitybetween imported and domestic varieties. Although imperfect substitutionreduces the extent to which effective protection can be determined fromthe structure of protection, it increases the extent to which secondbest tariffs can be determined in a qualitative sense at least whencompared with the traditional, perfect substitution case.

Pitelis, Christos

1992 Journal of Economic Studies

doi: 10.1108/01443589210015926

Aims to explore the possibility of developing a neoclassical theoryof institutional failure, based on transaction costs.Critically assesses the role of institutions in General Equilibriumtheory and concludes that, with the exception of the market pricemechanism, this is institutionfree. This is unsatisfactory, given theimportance of the firm and the state, in particular, which have receivedwide attention recently in the theory of transaction costs. It isclaimed that General Equilibrium theory can be given microfoundationsbased on transaction costs. This provides the possibility of aneoclassical theory of institutional failure. It also has importantimplications on the nature and scope of economic theory in general andthe plan versus markets debate in particular.