David Karemera

A gravity model analysis of international migration to North America

This study examines the influence of political, economic and demographic factors on the size and composition of migration flows to North America. A modified gravity model is specified and adjusted to include immigration regulations and characteristics specific to the origin and destination countries. For empirical test of the model, the time period of study is from 1976–1986, and 70 countries are covered for a total of 1540 observations of migration flows to Canada and the USA. The results reveal that the population of origin countries and the income of destination countries are two major determinants of migration to North America. High population areas of Asia and Latin America provided a large share of the immigrants. Domestic restrictions on political and civil freedom in origin countries are found to significantly impair migration to North America.

Input and output biased technological change in US agriculture

Data Envelopment Analysis (DEA) techniques are applied to a state-level data set to measure the total factor productivity in US agriculture over 1960–1996. Total factor productivity is decomposed into input and output biased technological change, efficiency change, and scale change, under both constant return to scale (CRS) and variable return to scale (VRS). Assumption of Hick neutral technological change is discussed. Technological change is found to be the result of efficient use of inputs much more than the effects of output capability increase.

Trade and environmental damage in US agriculture

Trade liberalisation has the potential to contribute to overall improvements in environmental performance, while countries might lose a comparative advantage in trade because of stringent environmental regulations. We analyse the environmental damages in the US agriculture since 1973 using state level data and conclude that states lose a comparative advantage by stringent environmental regulations. The decomposition of trades effect into scale, technique and composition effects, and a further decomposition of the technique effect into environmental technique and environmental scale effects, show its relevance as major determinants of environmental damage. The differences in production technology and factor supplies are major factors affecting trade patterns. Finally, human risk factors suggest that freer agricultural trade is bad for the environment.

The effects of environment and technology on agricultural export

The impact of environmental policy on international trade has received a great deal of attention over the decades. Theory predicts that the relative level of a countrys environmental policy, technology, and factor endowments will jointly determine international trade and specialisation. This study develops alternative empirical models of export shares to evaluate the effects of technology and efficiency, factor endowments, prices, and environmental risk factors on the exports. The models are applied to state agricultural export data since 1973 through 1996. Our findings support the hypothesis that states lose a comparative advantage in trade by stringent environmental regulations. Output prices and technological changes are found to be major determinants of export shares.

Random walks and monetary velocity in the G-7 countries: new evidence from a multiple variance ratio test

The random walk hypothesis (RWH) of the velocity of money has often been supported for the developed economies. The literature is, however, far from unanimous. This paper employs the most recent methodological advances in testing for random walks, the multiple variance ratio test, to re-examine the behaviour of the velocity of money in the G-7 countries. Monetary velocity is computed as the ratio of nominal income to contemporaneous money stock, under alternative definitions of income and money. The empirical results from the present study do not support the RWH in most of the G-7 countries, with the US M1 and M2 velocities as exceptions. Furthermore, the results show that the RWH is sensitive to either the definitions of monetary velocity or the sample period of study.

ARFIMA Tests for Random Walks in Exchange Rates in Asian, Latin American and African-Middle Eastern Markets

This article examines fractional processes as alternatives to random walks in emerging foreign exchange rate markets. Sowells (1992) joint maximum likelihood is used to estimate the ARFIMA parameters and test for random walks. The results show that, in most cases, the emerging market exchange rates follow fractionally integrated processes. Forecasts of exchange rates based on the fractionally integrated autoregressive moving average models are compared to those from the benchmark random walk models. A Harvey, Leybourne and Newbold (1997) test of equality of forecast performance indicates that the ARFIMA forecasts are more efficient in the multi-step-ahead forecasts than the random walk model forecasts. The presence of fractional integration is seen to be associated with market inefficiency in the exchange markets examined. The evidence suggests that fractional integrated processes are viable alternatives to random walks for describing and forecasting exchange rates in the emerging markets.

Trade Creation, Trade Diversion effects of NAFTA on vegetable and fruit trade flows

The present study empirically estimates and evaluates the impact of NAFTA in the vegetable and fruit trade between the USA and Mexico. The import price elasticities suggest that imports are not sensitive to price changes. However, the income elasticities of import demand vary by commodities. As expected, the vegetables and fruits exhibit strong seasonality while the import dynamics are commodity-specific. The amount of trade expansion is estimated using import price elasticities from a dynamic import demand model for the commodities. This study demonstrates that there is trade expansion attributable to NAFA in the vegetable and fruit trade. The amount of Trade Creation (TC) is greater than the amount of Trade Diversion (TD) in most commodities examined.

The intertemporal stability of the US money demand function: new evidence from switching regressions

The demand for money remains one of the topics most extensively studied in macroeconomics. This article contributes to the debate on the money demand stability and presents further evidence of a structural shift in the US money demand function. The switching regression technique developed by Goldfeld and Quandt (1972) shows that the US money demand function displays a gradual structural break during the 1994–1995 period. The traditional Goldfeld money demand model was estimated by the nonlinear optimization methods. Consumer and corporate interest rates were included in the model specifications. In all specifications, the results show a two-regime money demand model with a significant structural shift common to the 1994–1995 period. The study period from 1966:I to 2009:IV suggests that any identified shift is the most significant break in the series. Thus, this study demonstrates that the most significant transition from the first to the second regime is gradual rather than abrupt, as suggested by the previous studies. We believe that the cause of the gradual break may be associated with the US recession in the 1992–1993 period. This finding suggests that a two-regime demand model can be used in US money demand analysis and forecasting in future.

Mexican agricultural exports: effect on trade flows and prices in the USA under NAFTA

The objectives of this study are to determine the factors that affect trade flows of selected vegetables from Mexico to the USA and to evaluate the impacts of Mexican agricultural exports on the US domestic price of these commodities. Major factors affecting trade flows of these commodities from Mexico to the USA include the exchange rate, differences in market size, domestic supply and consumption and trade liberalisation under the North American Free Trade Agreement (NAFTA) of 1994. These factors have contributed to increased Mexican exports of agricultural commodities to the USA. The increased Mexican exports have resulted in reduced US domestic prices.