Asghar Shahmoradi

FLEXIBLE FUNCTIONAL FORMS, CURVATURE CONDITIONS, AND THE DEMAND FOR ASSETS

This paper focuses on the demand for money in the United States in the context of five popular locally flexible functional forms—the generalized Leontief, the basic translog, the almost ideal demand system, the Minflex Laurent, and the normalized quadratic reciprocal indirect utility function. We pay explicit attention to the theoretical regularity conditions of positivity, monotonicity, and curvature and argue that much of the older empirical literature ignores economic regularity. We treat the curvature property as a maintained hypothesis and provide a comparison in terms of violations of the regularity conditions and in terms of output in the form of a full set of elasticities. We also provide a policy perspective, in that a strong case can be made for abandoning the simple sum approach to monetary aggregation, on the basis of the low elasticities of substitution among the components of the popular M2 aggregate of money.

Measuring and Testing Natural Gas and Electricity Markets Volatility: Evidence from Alberta's Deregulated Markets

In this paper we specify and estimate a multivariate GARCH-M model of natural gas and electricity price changes, and test for causal relationships between natural gas and electricity price changes and their volatilities, using data over the deregulated period from January 1, 1996 to November 9, 2004 from Albertas (deregulated) spot power and natural gas markets. The model allows for the possibilities of spillovers and asymmetries in the variance-covariance structure for natural gas and electricity price changes, and also for the separate examination of the effects of the volatility of anticipated and unanticipated changes in natural gas and electricity prices.

VELOCITY AND THE VARIABILITY OF MONEY GROWTH: EVIDENCE FROM A VARMA, GARCH-M MODEL

This paper uses recent advances in financial econometrics to test the Friedman hypothesis that money supply volatility Granger-causes velocity. Comparisons are made among simple-sum and Divisia velocity series at the M1 and M2 levels of monetary aggregation, using quarterly data from 1959:1 to 2004:3. The conclusion is that the Friedman hypothesis cannot be rejected if money supply volatility is modelled explicitly, using models that capture important volatility effects that previous work has ignored.

A NOTE ON IMPOSING LOCAL CURVATURE IN GENERALIZED LEONTIEF MODELS

In this paper, we build on Ryan and Wales (1998) and Moschini (1999) and impose curvature conditions locally on the generalized Leontief model, introduced by Diewert (1974). In doing so, we exploit the Hessian matrix of second order derivatives of the reciprocal indirect utility function, unlike Ryan and Wales (1998) and Moschini (1999) who exploit the Slutsky matrix.

Note On Finite Approximations Of The Asymptotically Ideal Model

This note builds on recent work by Serletis and Shahmoradi [Macroeconomic Dynamics 9 (2005), 542–559] and estimates the AIM model at different degrees of approximation, using the same optimization procedures as in Gallant and Golub [Journal of Econometrics. 26 (1984), 295–321]. We estimate the models subject to regularity and provide a comparison between the different versions. We argue that the AIM(3) model estimated subject to global curvature currently provides the best specification for research in semiparametric modeling of consumer demand systems.

Gasoline Subsidy and Consumer Surplus in the Islamic Republic of Iran

Gasoline subsidy in Islamic Republic of Iran is a controversial issue. While a group of politicians believe that its merits outweigh its costs, some economists believe that its harms exceed the benefits. A new approach is taken to study the changes in social welfare because of gasoline subsidies for the period 19872005. The findings indicate that the consumers surplus has declined over time for a representative consumer. A large population growth, inflation and non-substitutability of gasoline with other goods might have caused this phenomenon.

Oil Price Changes and Total Productivity Fluctuations in an Oil‐Exporting Country

This paper estimates a dynamic stochastic general equilibrium model to investigate how oil price changes can affect the technological fluctuations in an oil‐exporting country like Iran. Focusing on Iran as an example of a resource‐intensive emerging economy, the paper uses the Blanchard–Kahn approach and the Kalman filter method to estimate unobservable technological deviations from its steady state. The estimated model simulates the stylised facts of the comovement, standard deviation and persistence of the cyclical components of macroeconomic variables. Based on these results, there is a positive correlation between oil price changes and the estimated technological fluctuations. In addition, this positive relationship is stronger in the period of accumulated positive oil price shocks, such as during the March 2003 to April 2007 period. The results show that oil price changes can be used as an indicator to predict the technological fluctuations in this economy.