Ching-chong Lai

Commodity Price Dynamics and Anticipated Shocks

In this paper we address the robustness of overshooting hypothesis in agricultural prices. We find that agricultural prices may undershoot their long-run level if the economy experiences an anticipated monetary shock rather than an unanticipated monetary shock. We also find that agricultural prices definitely display undershooting if the price of manufactures adjusts instantaneously rather than sluggishly. Copyright 1996, Oxford University Press.

Currency devaluation in an open-shop union

Abstract This paper sets up an efficient wage–employment bargaining model embodying both styles of closed- and open-shop union in the context of an open economy. The papers main purpose is to highlight the impacts of a domestic currency devaluation on the labor market and aggregate output. It is found that the effects of currency devaluation, in general, are not unequivocal. Particularly, owing to the influence of the membership effect, its impacts are crucially related to the operation style (closed shop or open shop) of the union.

Monetary Announcement and Commodity Price Dynamics: A Portfolio Balance Model

This paper sets up a simple portfolio balance model and investigates how commodity prices will exhibit as the monetary authorities conduct a pre–announced monetary policy. It is found that agricultural prices will rise discretely on impact but may either overshoot or undershoot its long-run level at the instant of policy announcement. Our results also indicate that, during the period following the announcement but prior to the monetary expansion, rising agricultural prices are coupled with an accumulation in the stock of agricultural products. However, when monetary expansion actually takes place, two possible patterns of adjustment may happen: rising agricultural prices are matched by a decrease in the stock of agricultural products and falling agricultural prices are coupled with an accumulation in the stock of agricultural products.

Targeting Nominal Income versus Targeting Price Level: A Target Zone Perspective

Abstract Based on a simple stochastic macro model, this paper first addresses the relative stabilizing performance between targeting nominal income and targeting money supply from the viewpoint of target zones. Similar to the conclusion found in Bean [Econ. J. 93 (1983) 803.] and in West [Econ. J. 96 (1986) 1077.], upon the shock of a change in commodity production, the elasticity of aggregate demand to real money balances is the crucial factor for the desirability of targeting nominal income. Second, comparing nominal income with price target zones, we find that, with the plausible parameter values, a price target zone policy is a better strategy for price stabilization. However, a nominal income target zone policy will be the better choice for output stabilization.

Employment Policy, the Crowding‐out Effect and Imperfect Competition

This paper presents a macroeconomic model with imperfect competition in the commodity market, and uses it to address how the commodity market’s structure is related to the efficacy of government employment policies. It is found that job creation in the public sector may lead to a decrease in output and an increase in prices. In particular, these adverse side-effects will be alleviated when competition in the goods market is less perfect. We also find that public-sector job creation definitely has a positive effect on total employment, though it may crowd out private-sector employment.