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Ebook Agricultural Arbitrage, Adjustment Costs, and the Intensive Margin

The United States Department of Agriculture-s Economic Research Service (ERS) reports that near2record harvests in 2008, coupled with improved farm product demand and high commodity prices, should result in increased spending on farm real estate and capital investment. Since 2000, holdings of these assets at the national level has more than doubled from $1.03 trillion to $2.16 trillion, and currently represent 92% of all farm assets. These figures indicate that farmland and capital are an important and rapidly expanding component of the agricultural economy.

Empirical evidence suggests that farmland and capital are quasi2fixed in that adjustment costs are incurred when holdings are altered. A paper by de Fontnouvelle and Lence (2002) states that transaction costs for buying/selling farmland are as high as 15% of the land price to cover brokerage fees, legal fees, appraisals, and surveys.( Research analyzing the quasi2fixity of capital is common in the agricultural production literature (e.g. Vasavada and Chambers, 1986; Oude Lansink and Stefanou, 1997; and Gardebroek and Oude Lansink, 2004), where examples of adjustment costs include lending fees, learning costs, building and environmental licensing fees, and the value of time spent preparing investments. As a fraction of investment expenditures for a sample of Dutch pig farms, Gardebroek and Oude Lansink (2004) find that adjustment costs for buildings and machinery are as high as 1.6% and 5.1%, respectively.

PDF Ebook Why Foreign Economic Assistance?

There is an interesting dichotomy in the dialogue about the use of foreign assistance in the pursuit of domestic economic and strategic interests. It is clear that self interest and security arguments have often represented little more than cynical efforts to generate support for the foreign assistance budget. There have been serious efforts to examine the theoretical foundations of the economic self-interest argument. There have also been increasingly serious attempts to evaluate the economic and social impacts of economic assistance in developing countries. In addition to a large professional literature, the U.S. Agency for International Development has conducted and published more than 100 Project Evaluations, Evaluation Special Studies, and Program Evaluation Reports. The World Bank has an Operations Evaluation Department that engages in a major program of project completion evaluation studies.

The security rationale has not, however, been subject to nearly as rigorous theoretical or empirical analysis. 1 8 The single background paper on the effectiveness of military assistance prepared for the Carlucci Commission asserted a positive linkage between U.S. security assistance expenditures and security interests while admitting that the evidence to support the assertion is "elusive."19 This is not to suggest that empirical support cannot be provided to support the political and strategic self-interest arguments. It is simply to argue that, in spite of Huntington's assertion that the results of security assistance have been at least as successful as efforts to promote economic development,20 little convincing evidence has appeared in the professional literature on development assistance.

Ebook Monetary Policy with Changing Financial and Labor-Market Fundamentals

A strong consensus has emerged, both among economists and central bankers, in favor of conducting monetary policy with a target for a short-term interest rate. The last vestiges of interest in monetary aggregates has vanished from monetary policy-making in the past decade. Today, central bankers around the world establish an interest rate target for the daily management of their portfolios, and change that target as needed to achieve the goals of policy, generally some combination of the exchange rate, the rate of inflation, and the level of economic activity.

In the United States—whose monetary policy is the focus of this paper—the international value of the dollar has a rather smaller role than does the exchange rate in other countries or in the Euro block. The most influential commentator on U.S. monetary policy, John Taylor, has proposed a policy rule that considers only inflation and aggregate activity. He describes the current policy of the Federal Reserve as placing a weight of 1.5 on recent inflation and 0.5 on the percentage departure of real GDP from potential when it sets the target for the federal funds interest rate (Taylor [1993]). Moreover, he sees this policy rule as roughly optimal.

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