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ID: 159026

Behavior of money demand in the Chinese hyperinflation / LiuyanZhao

LiuyanZhao	Journal Article
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Summary/Abstract

In this paper I study the behavior of money demand during the episode of hyperinflation that occurred in China after World War II. I consider two popular and competing money demand specifications – the log–log and the semi-log – and show that the log–log performs better than the semi-log in its ability to track the behavior of the money demand. The choice between the two specifications is of great importance, as it implies that welfare cost estimates are very different for hyperinflation. The findings also contribute to the understanding of Cagan’s paradox and the failure of Cagan inflationary finance models. The paradox might be attributable to the popular semi-log schedule for money demand, and the log–log schedule might be an appropriate form for the analysis of hyperinflation.

Key Words

Welfare Cost ; The Chinese Hyperinflation ; Cagan’s Paradox

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ID: 111328

Europe’s climate goals and the electricity sector / Eskeland, Gunnar S; Rive, Nathan A; Mideksa, Torben K

Mideksa, Torben K	Journal Article
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2012.

Summary/Abstract

EU's objective of attaining 20% reductions in greenhouse gas emissions by 2020 is analysed with a general equilibrium model detailing electricity generation technologies and capital vintaging. Consistent with theory and other analysts we find that the nonuniform treatment of emitting sectors in EU raises abatement costs - by a factor of two to three. Under cost effective emission reductions - a more comprehensive tradable cap-electricity generation abates more than its proportional share in emissions. The European economy abates by substitution towards natural gas, by energy efficiency improvements, and by reductions in emission intensive manufactures. Applied policies such as renewable support - and responses such as carbon leakage - hold down the prices for emission and electricity, thus also holds down incentives for energy efficiency and technological change. This leads to little preparation for the future and global mitigation.

Key Words

Renewable Energy ; Climate Change Policy ; Welfare Cost

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