We investigate how key monetary policy instruments and financial regulation affect the banking firm. We take the user-cost approach to the construction of prices for financial services and use quarterly data on the U.S. commercial banking sector, over the period from 1992 to 2016, obtained from the Federal Deposit Insurance Corporation. We use the symmetric generalized Barnett variable profit function to derive demands for and supplies of monetary and nonmonetary goods and provide evidence consistent with neoclassical microeconomic theory. We find that the compensated price elasticities of banking technology are small in magnitude. Yet a hypothetical policy experiment shows that even small changes in the holding costs of financial goods can result in significant changes in user costs and the quantities demanded and supplied.

We investigate the demand for money and the degree of substitutability among monetary assets in the United States using the generalized Leontief and the Minflex Laurent (ML) models as suggested by Serletis and Shahmoradi (2007). In doing so, we merge the demand systems literature with the recent financial econometrics literature, relaxing the homoskedasticity assumption and instead assuming that the covariance matrix of the errors of flexible demand systems is time-varying. We also pay explicit attention to theoretical regularity, treating the curvature property as a maintained hypothesis. Our findings indicate that only the curvature constrained ML model with a Baba, Engle, Kraft, and Kroner (BEKK) specification for the conditional covariance matrix is able to generate inference consistent with theoretical regularity.

This paper uses hedonic regression techniques to decompose the price of a house into land and structure components using real estate sales data for Tokyo. To get sensible results, a nonlinear regression model using data that covered multiple time periods was used. Collinearity between the amounts of land and structure in each residential property leads to inaccurate estimates for the land and structure value of a property. This collinearity problem was solved by using exogenous information on the rate of growth of construction costs in Tokyo in order to get useful constant-quality subindices for the price of land and structures separately.

In this paper, we propose a price-augmenting asymptotically ideal model (AIM) cost function to investigate the effects of public infrastructure on the performance of the U.S. manufacturing industry, using KLEMS data over the period from 1953 to 2001. In doing so, we make a distinction between the productivity effect and the production factor effect of public infrastructure. This distinction allows us to focus on the more interesting productivity effect by incorporating public infrastructure into the AIM cost function through the efficiency index. Moreover, we specify the growth rate of the efficiency index as a Box–Cox function of public infrastructure and a time trend, a proxy for other technology. The excellent flexibility of our price-augmenting AIM cost function offers many insights regarding the effects of infrastructure on the U.S. manufacturing sector.

In this paper we investigate the issue of whether a floating currency is the right exchange rate regime for Canada or whether Canada should consider a currency union with the United States. In the context of the framework recently proposed by James L. Swofford, we use a semi-nonparametric flexible functional form—the asymptotically ideal model (AIM), introduced by William A. Barnett and A. Jonas—and pay explicit attention to the theoretical regularity conditions of neoclassical microeconomic theory, following the suggestions of William A. Barnett and William A. Barnett and Meenakshi Pasupathy. Our results indicate that U.S. dollar deposits are complements to domestic (Canadian) monetary assets, suggesting that Canada should continue the current exchange rate regime, allowing the exchange rate to float freely with no intervention in the foreign exchange market by the Bank of Canada.

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.

This paper focuses on the demand for money in the United States in the context of two globally flexible functional forms—the Fourier and the asymptotically ideal model (AIM)—estimated subject to full regularity, using methods suggested over 20 years ago. We provide a comparison in terms of violations of the regularity conditions for consumer maximization and in terms of output in the form of a full set of elasticities. We also provide a policy perspective, using (for the first time) parameter estimates that are consistent with global regularity, in that a very 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.