This paper proposes a nonlinear error-correction model based upon smooth transition regression methodology. The model is speci® ed such that the short-run adjustment toward long-run equilibrium is nonlinear and that the error correction is a smooth function of long-run deviation. Empirical results obtained from estimating M2 money demand in Taiwan support the hypothesis of a nonlinear error-correction process and provide better interpretation of change in the demand for money.

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Energy efficiency has long been an important issue to the global economic and political theaters; however, searching for an effective and concise measure for efficiency remains a contentious and intriguing topic. There are two obvious flaws with the commonly used metrics in existing literature. First, there is a sense of confusion and misunderstanding between the definitions of energy efficiency and efficacy. As a result, the formulae and methods for measuring efficiency are often the subject of criticism. Second, even if the definition of efficiency is clear, the method of estimation can be quite cumbersome, making it difficult to comprehend or implement. This study attempts to address these two issues. With an OECD comparative dataset, it first presents the contradiction between efficiency and efficacy, explains the loss of effectiveness with the existing measurements, and then proposes a new and easy-to-use method for gauging energy efficiency, so that the succinctness and robustness of the measurement can be re-established. The paper serves as a guide to those who are interested in the controversial issues related to measuring energy efficiency. Both practitioners and policy makers will find an easy and reliable tool from this paper for measuring energy efficiency.

In 2007, the Clean Air Act officially included greenhouse gases, making fossil fuel power plants the first of key industries regulated by the Environmental Protection Agency. How do we measure the impact of the regulations on these power plants’ productivity? Previous studies that attempt to answer this question have provided inadequate answers because their samples cover the periods only up to 2007, and they often use greenhouse gases as the only proxy for the undesirable output. This paper collects data from 133 fossil fuel power plants in the United States and covers 2004 to 2013. These power plants are divided into Sun Belt and Frost Belt based on their geographical locations. To measure the undesirable outputs, we used both carbon dioxide and toxic emissions as the proxies. The estimation model includes the construction of a generalized common stochastic frontier (metafrontier) and a Malmquist productivity index. We used the index to measure the change in productivity for the power plants before and after the implementation of the regulation. The results indicate that, since regulation in 2007, the overall production efficiency of the power plants has declined incessantly while productivity has seen a sustained downward trend despite two surges in growth.

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