http://lists.repec.org/mailman/listinfo/nep-all All new papers 2009-06-17 Marco Novarese http://d.repec.org/n?u=RePEc:acb:camaaa:2009-02&r=all Initially, the global financial crisis caused a surge of financial inflows, raising Chinese investment but this abated in 2008, to be replaced by a slowdown in export demand. The government’s key response has been to commit to an unprecedented fiscal expansion. Two oft-ignored consequences are, first that government spending is on non-traded goods and services and so enlarges the consequent real appreciation and, second, that a more inwardlooking economy causes firms to face less elastic demand and hence to increase oligopoly rents, further enlarging the real appreciation. Both are important for China because of the contribution of its real-exchange-rate sensitive, low-margin labour-intensive export sector to total employment. An economy-wide analysis is offered, using a model that takes explicit account of oligopoly behaviour. The results suggest that a conventional fiscal expansion would further contract the Chinese economy and, moreover, that the structural changes required would be considerable and painful. On the other hand, accelerated industrial reform, emphasising the sectors that remain dominated by state-owned oligopoly firms, would reduce costs and foster further export led growth in both output and modern sector employment. Rod Tyers, Ling Huang http://d.repec.org/n?u=RePEc:acb:camaaa:2009-04&r=all Model uncertainty has the potential to change importantly how monetary policy should be conducted, making it an issue that central banks cannot ignore. In this paper, I use a standard new Keynesian business cycle model to analyze the behavior of a central bank that conducts policy with discretion while fearing that its model is misspeci?fied. My main results are as follows. First, policy performance can be improved if the discretionary central bank implements a robust policy. This important result is obtained because the central bank's desire for robustness directs it to assertively stabilize inflation, thereby mit- igating the stabilization bias associated with discretionary policymaking. In effect, a fear of model uncertainty can act similarly to a commitment mechanism. Second, exploiting the connection between robust control and uncertainty aversion, I show that the central bank's fear of model misspeci?cation leads it to forecast future outcomes under the be- lief that inflation (in particular) will be persistent and have large unconditional variance, raising the probability of extreme outcomes. Private agents, however, anticipating the policy response, make decisions under the belief that in?ation will be more closely sta- bilized, that is, more tightly distributed, than under rational expectations. Third, as a technical contribution, I show how to solve an important class of linear-quadratic robust Markov-perfect Stackelberg problems. Richard Dennis 2008-08 http://d.repec.org/n?u=RePEc:acb:camaaa:2009-03&r=all This paper considers the “real-time” forecast performance of the Federal Reserve staff, time-series models, and an estimated dynamic stochastic general equilibrium (DSGE) model – the Federal Reserve Board’s new Estimated, Dynamic, Optimization-based (Edo) model. We evaluate forecast performance using out-of-sample predictions from 1996 through 2005 – thereby examining over 70 forecasts presented to the Federal Open Market Committee (FOMC). Our analysis builds on previous real-time forecasting ex- ercises along two dimensions. First, we consider time-series models, a structural DSGE model that has been employed to answer policy questions quite different from forecast- ing, and the forecasts produced by the staff at the Federal Reserve Board. In addition, we examine forecasting performance of our DSGE model at a relatively detailed level by separately considering the forecasts for various components of consumer expenditures and private investment. The results provide significant support to the notion that richly specified DSGE models belong in the forecasting toolbox of a central bank. Rochelle M. Edge, Michael T. Kiley, Jean-Philippe Laforte 2008-12 http://d.repec.org/n?u=RePEc:acb:camaaa:2009-08&r=all Macroeconometric and fi?nancial researchers often use secondary or constructed binary random variables that differ in terms of their sta- tistical properties from the primary random variables used in micro- econometric studies. One important difference between primary and secondary binary variables is that, while the former are, in many in- stances, independently distributed (i.d.), the latter are rarely i.d. We show how popular rules for constructing the binary states interact with the stochastic processes for of the variables they are constructed from, so that the binary states need to be treated as Markov processes. Consequently, one needs to recognize this when performing analyses with the binary variables, and it is not valid to adopt a model like sta- tic Probit which fails to recognize such dependence. Moreover, these binary variables are often censored, in that they are constructed in such a way as to result in sequences of them possessing the same sign. Such censoring imposes restrictions upon the DGP of the binary states and it creates difficulties if one tries to utilize a dynamic Probit model with them. Given this we describe methods for modeling with these explicitly deals with any censoring constraints. An application is provided that investigates the relation between the business cycle and the yield spread. Don Harding, Adrian Pagan 2009-01 http://d.repec.org/n?u=RePEc:acb:camaaa:2009-11&r=all This paper argues that the theory of wage and price setting in macroeconomics should be broadened to include insights from behavioural economics, in particular prospect theory and loss aversion. The paper shows how broader microeconomic foundations can explain the main features of a realistic Phillips curve, which are the concurrence of a steep SRPC at low unemployment, a flat SRPC at high unemployment and speed-limit effects. The resulting macroeconomic model has the benefits of consistency with important properties of natural rate models, especially a crucial role for inflation expectations and, in determining the economy’s macroeconomic potential, for supply factors, plus the benefit of consistency with the standard IS/LM model. The paper also shows that the behavioural aspects of these broader microeconomic foundations were alluded to by Keynes and Robinson in 1936 when macroeconomics was created. Ian McDonald 2008-08 http://d.repec.org/n?u=RePEc:acb:camaaa:2009-01&r=all The paper examines whether central banks should be committed to achieving price stability (a low-inflation target), and how strong (explicit) their long-term monetary commitment should be. For that purpose we propose a game theoretic framework that enables us to model various degrees of commitment, as well as its endogenous deter- mination. Our main policy contribution consists in showing that the socially optimal degree of long-term monetary commitment depends on: (i) the potential short-term cost in terms of reduced stabilization flexibility, (ii) the potential benefi?t in terms of better anchored expectations, (iii) the structure of the economy, (iv) agents' expectations for- mation, and (v) the degrees of the central bank's conservatism (strictness) and ambition. The latter point implies substitutability between explicit inflation targeting and central bank goal-independence, and offers a possible explanation for the fact that countries with originally low degrees of central bank goal-independence have tended to commit more explicitly to price stability (legislate a unitary or hierarchical mandate rather than a dual mandate). Jan Libich, Petr Stehlik 2009-01 http://d.repec.org/n?u=RePEc:acb:cbeeco:2009-502&r=all Can a small, poor country reduce poverty by gaining increased market access to a large, rich country? The 2001 U.S.-Vietnam Bilateral Trade Agreement provides an excellent opportunity to examine this question as, unlike other bilateral trade agreements, the U.S. tariff cuts were not influenced by Vietnamese industries. Between 2002 and 2004, provinces that were more exposed to the U.S. tariff cuts experienced faster decreases in poverty. An increase of one standard deviation in provincial exposure leads to a reduction in the poverty headcount ratio of approximately 11 to 14 percent, but this effect diminishes the further the province is from a major seaport. Three labour market channels from the trade agreement to poverty alleviation are subsequently explored. Provinces that were more exposed to the tariff cuts experienced (1) increases in provincial wage premiums for low-skilled workers, (2) faster movement into wage and salaried jobs for low-skilled workers, and (3) more rapid job growth in formal enterprises Brian McCaig 2009-02 http://d.repec.org/n?u=RePEc:acb:cbeeco:2009-496&r=all China's industrial reforms have left many key industries dominated by few, often state owned, firms. Until recently, these firms were not required to pay dividends to the state and the post-2000 surge in growth made them very profitable, with their economic profits adding corporate saving amounting to a fifth of GDP. This bolstered China's overall saving-investment gap and hence its controversial current account surplus. In other countries, oligopolistic industries tend to be taxed more heavily and they are commonly subjected to price regulation. This study offers an economy-wide analysis of approaches to oligopoly rents in China. The results suggest that, while policy changes targeting national saving, including increased corporate taxation, expansionary fiscal policy and SOE privatisation all help to control the external imbalance, they tend also to turn demand inward, inducing higher oligopoly rents and slower growth. Competition policy, embodying both price cap regulation and free entry, proves more effective both in controlling the external imbalance and in fostering continued growth. Rod Tyers, Feng Lu 2009-03 http://d.repec.org/n?u=RePEc:acb:cbeeco:2009-500&r=all This paper investigates the consequences of receiving sexual favors or other services as an alternative form of bribery. It infers how these non-monetary payments are made by analyzing the relative effciency of sex bribes and the bargaining power of agents. By assumption, sex payments are less e¢ cient and harder to detect monetary payments. If the Receiver has a sufficiently high (low) utility for consuming sex, then only sex (money) bribes are feasible. In intermediate cases, sexual bribery is offered if and only if the relative bargaining power of the Receiver is sufficiently small compared to that of the Corruptor. José A. Rodrigues-Neto 2009-01 http://d.repec.org/n?u=RePEc:acb:cbeeco:2009-503&r=all Conventional wisdom holds that international political pressure and domestic civil unrest in the mid-1970s and 1980s brought an end to apartheid in South Africa. I show that, prior to these events, labor market pressure in the late 1960s/early 1970s caused a dramatic unraveling of apartheid in the workplace. Increased educational attainment among whites reduced resistance to opening semi-skilled jobs to Africans. This institutional change reflected white economic preferences rather than a relaxation of attitudes toward apartheid. I show that whites benefited from the relaxation of job reservation rules and that this is the primary cause of black occupational advancement. Martine Mariotti 2009-02 http://d.repec.org/n?u=RePEc:acb:cbeeco:2009-501&r=all Initially, the global financial crisis caused a surge of financial inflows, raising Chinese investment but this abated in 2008, to be replaced by a slowdown in export demand. The government's key response has been to commit to an unprecedented fiscal expansion. Two oft-ignored consequences are, first that government spending is on non-traded goods and services and so enlarges the consequent real appreciation and, second, that a more inward-looking economy causes firms to face less elastic demand and hence to increase oligopoly rents, further enlarging the real appreciation. Both are important for China because of the contribution of its real-exchange-rate sensitive, low-margin labour-intensive export sector to total employment. An economy-wide analysis is offered, using a model that takes explicit account of oligopoly behaviour. The results suggest that a conventional fiscal expansion would further contract the Chinese economy and, moreover, that the structural changes required would be considerable and painful. On the other hand, accelerated industrial reform, emphasising the sectors that remain dominated by state-owned oligopoly firms, would reduce costs and foster further export led growth in both output and modern sector employment. Rod Tyers, Ling Huang 2009-05 http://d.repec.org/n?u=RePEc:uam:wpaper:200905&r=all This paper explores the relationship between trade openness and economic growth through a change in institutions. To do so, the paper creates a theory of endogenous institutional change where there are three social groups, each one owns a specific production factor. An ellite (landowners) controlling the political power fix higher taxes to extract rents from the other groups of the society (capitalists). This reduces investment in capital, the source for endogenous growth. Endogenous institutional change is done by allowing the rival group (capitalists) to invest in a military action which expels out the group in power. The model studies optimal taxation, growth and institutional change under two scenarios, autarky and free trade. The model is calibrated according to the Western European experience in the Modern Age. Generally, economies opened to trade will experiment higher growth and earlier institutional change although economies specializing in manufacturing products tend to grow more and rise the institutional change earlier. These results are qualitatively very robust to change in parameter values. Navas-Ruiz, Antonio 2009-06 Growth, Institutions, Trade Openness http://d.repec.org/n?u=RePEc:uam:wpaper:200906&r=all Despite the well-known static cost-inefficiency of uniform emission standards to control pollution, governments continue to use them in a variety of settings. In this paper, we show that inspection agencies can sometimes use their informational advantage to design monitoring strategies that complement uniform emission standards in restoring efficiency. Arguedas, Carmen, Rousseau, Sandra 2009-06 pollution standards; monitoring; non-compliance. http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-24&r=all How do movements in the distribution of income affect the macroeconomy? Krusell and Smith (1998) analyzed this question in a neoclassical growth model, and their results show that the representative-agent assumption provides a good approximation for aggregate behaviors of heterogeneous agents. This paper extends their analysis to a cash-in-advance model with heterogeneous money demand. It is shown that movements in the distribution of monetary income can have significant impact on the macroeconomy. For example, the dynamic responses of aggregate output to monetary shocks behave very differently from those of a representative agent; the welfare costs of moderate inflation are much higher than previously thought, up to 20% of consumption when the inequality of cash distribution is sufficiently large. This is in sharp contrast to the findings of Cooley and Hansen (1989) and Lucas (2000) based on representative-agent models. Yi Wen 2009 Liquidity (Economics) ; Money theory http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-23&r=all Understanding the causes of terrorism is important in predicting it and in developing an effective counterterrorism strategy. Data on the incidence of terrorist attacks and casualties suggest that domestic terrorism poses a substantially larger threat than transnational terrorism in developing countries. In spite of this fact, research has focused mostly on the latter. In analyzing both types, we find that political freedom and civil liberties affect domestic terrorism in a non monotonic way. Countries with either authoritarian regimes or with mature democratic systems experience less terrorism. This result has important policy implications: It suggests that one needs to be patient in the path to democracy, because the transition is likely to be associated with more violence. Interestingly, more religious fractionalization is associated with less terrorism in most of our specifications, while ethnic fractionalization raises domestic terrorism. On the other hand, poverty and lack of education do not appear to directly influence either domestic or transnational terrorism. All specifications show that “rule of law” reduces terrorism. Subhayu Bandyopadhyay, Javed Younas 2009 Terrorism http://d.repec.org/n?u=RePEc:egu:wpaper:0906&r=all This paper employs a homogenous Þrms database to investigate industry localiza- tion in European countries. More speciÞcally, we compare, across industries and countries, the predictions of two of the most popular localization indices, i.e., the Ellison and Glaeser index (Ellison and Glaeser, 1997) and the Duranton and Over- man index (Duranton and Overman, 2005). We Þnd that, independently from the index used, localization is a pervasive phenomenon in all countries studied, but the degree of localization is very uneven across industries in each country. Furthermore, we Þnd that the two indices signiÞcantly diverge in predicting the intensity of the forces generating localization within each industry. Finally, we perform a cross- sectoral analysis of localized industries. We show that, in all countries, localized sectors are mainly ÒtraditionalÓ sectors (like jewelery, wine, and textiles) and sec- tors where scale economies are important. However, once one controls for countriesÕ industrial structures science-based sectors turn out to be the most localized ones. Stefania Vitali, Mauro Napoletano, Giorgio Fagiolo 2009-06 Industry Localization, Manufacturing Industries, Localization Indices, Spatial Concentration, Spatial correlation, Cross-country studies http://d.repec.org/n?u=RePEc:egu:wpaper:0905&r=all We propose an evolutionary perspective on the geography of network formation that is grounded in a dynamic proximity framework. In doing so, we root the proximity concept in an evolutionary approach to the geography of innovation networks. We discuss three topics. The first topic focuses on explaining the structure of networks. The second topic concentrates on explaining the effects of networks on the performance of actors. The third topic deals with the changing role of proximity dimensions in the formation and performance of innovation networks in the longer run. Ron Boschma, Koen Frenken 2009-06 evolutionary economic geography, knowledge networks, innovation networks, dynamic proximity http://d.repec.org/n?u=RePEc:rim:rimwps:13-09&r=all Kocherlakota (2003) presents an example of a monetary economy where efficiency is enhanced with the introduction of a nominally risk-free bond that is specifically designed to be illiquid. In his environment, an asset market involving swaps of money for bonds effects a socially desirable redistribution of purchasing power that might otherwise be replicated by a policy of type-contingent money transfers. In this paper, I recast Kocherlakota’s model in a fully dynamic quasilinear model and characterize optimal interventions when type-contingent transfers are feasible and when they are not. When they are not, an illiquid bond is essential. However, I also find that an illiquid bond may remain essential even when type-contingent transfers are feasible. David Andolfatto, , 2009-01 http://d.repec.org/n?u=RePEc:rim:rimwps:11-09&r=all A sequential Monte Carlo method for estimating GARCH models subject to an unknown number of structural breaks is proposed. Particle filtering techniques allow for fast and efficient updates of posterior quantities and forecasts in real-time. The method conveniently deals with the path dependence problem that arises in these type of models. The performance of the method is shown to work well using simulated data. Applied to daily NASDAQ returns, the evidence favors a partial structural break specification in which only the intercept of the conditional variance equation has breaks compared to the full structural break specification in which all parameters are subject to change. The empirical application underscores the importance of model assumptions when investigating breaks. A model with normal return innovations result in strong evidence of breaks; while more flexible return distributions such as t-innovations or a GARCH-jump mixture model still favor breaks but indicate much more uncertainty regarding the time and impact of them. Zhongfang He, John M. Maheu, 2009-01 particle filter, GARCH model, change point, sequential Monte Carlo http://d.repec.org/n?u=RePEc:rim:rimwps:04-09&r=all What are idiosyncratic shocks and how do people respond to them? This paper starts from the observation that idiosyncratic shocks are experienced at the individual level, but responses to shocks can encompass the whole household. Understanding and accurately modeling these responses is essential to the analysis of intra-household allocations, especially labor supply. Using longitudinal data from the Canadian Survey of Labour and Income Dynamics (SLID) we exploit information about disability and health status to develop a life-cycle framework which rationalizes observed responses of household members to idiosyncratic shocks. Two puzzling ndings associated to disability onset motivate our work: (1) the almost complete absence of `added worker' eects within households and, (2) the fact that single agents' labor supply responses to disability shocks are larger and more persistent than those of married agents. We show that a rst-pass, basic model of the household has predictions about dynamic labor supply responses which are at odds with these facts; despite such failure, we argue that these facts are consistent with optimal household behavior when we account for two simple mechanisms: the rst mechanism relates to selection into and out of marriage, while the second hinges on insurance transfers taking place within households. We show that these mechanisms arise naturally when we allow for three features: a linkage between human capital accumulation and life-cycle labor supply, endogenous marriage contracts and the possibility of time transfers between partners. We also report evidence that the extended model with endogenous marriage contracts can t divorce patterns observed in Canadian data, as well as correlations between disability prevalence and marital status, providing an ideal framework to study intra-household risk-sharing with limited commitment. Giovanni Gallipoli, Laura Turner, 2009-01 tourism specialisation, economic growth, developing countries http://d.repec.org/n?u=RePEc:rim:rimwps:03-09&r=all This paper uses plant level data on the worlds copper min- ing industry to measure changes in e¢ ciency from the adoption of the ISO 14001 environmental standard. The ISO 14001 is a voluntary standard that sets out minimum guidelines and procedures that …rms should follow in order to achieve more e¤ective management of the environment. Anecdotal and case study lit- erature suggests that …rms are motivated to adopt the ISO 14001 standard and seek certi…cation for a number of reasons. One important reason is the desire to achieve greater e¢ ciency and cost savings through changes in operating proce- dures and processes aimed at the minimization of waste pollution and reduction in the use of resource inputs. Using plant level data from 1992-2007 on virtually all of the worlds industrial copper mines the study tests this hypothesis in a stochastic frontier and random e¤ects model framework. The study measures the impact on operations of ISO 14001 adoption both in respect to the inten- tion to seek ISO 14001 certi…cation (the period before certi…cation when …rms must make necessary changes to their operations and management) and the pe- riod when and after certi…cation is achieved. The study …nds no evidence that adoption of the ISO 14001 standard imposes a cost on …rms either through lower e¢ ciencies or higher costs. In fact, in many cases adoption is associated with higher e¢ ciency, and to a certain extent, lower costs. Thus, the studys …ndings would tend to go against the claims of much of the academic literature that regulation has negative impacts on the …rm. Although …ndings were not robust to model choice or a subset sample, our results clearly indicate that, at a minimum, the adoption of the ISO 14001 does not raise costs or lower e¢ ciency for …rms. Lise Tole, , 2009-01 ISO 14001; stochastic frontier production function; e¢ - ciency; cost savings; mining. http://d.repec.org/n?u=RePEc:rim:rimwps:10-09&r=all We present empirical evidence that the marked rise in liquidity in 2001-2007 was due to large and persistent current account deficits and loose monetary policy. If this increase in liquidity was a pre-condition for the financial crisis that began in July 2007, we can conclude that loose monetary and the deterioration in current account balances were causes of the financial crisis. Christopher Martin, Costas Milas, 2009-01 financial crisis, liquidity, monetary policy, global imbalances http://d.repec.org/n?u=RePEc:rim:rimwps:05-09&r=all Completing data sets that are collected in heterogeneous units is a quite frequent problem. Chow and Lin (1971) were the rst to develop a unied framework for the three problems (interpolation, extrapolation and distribution) of predicting times series by related series (the `indicators'). This paper develops a spatial Chow-Lin procedure for cross-sectional and panel data and compares the classical and Bayesian estimation methods. We outline the error covariance structure in a spatial context and derive the BLUE for the ML and Bayesian MCMC estimation. Finally, we apply the procedure to Spanish regional GDP data between 2000-2004. We assume that only NUTS-2 GDP is known and predict GDP at NUTS-3 level by using socio-economic and spatial information available at NUTS-3. The spatial neighborhood is dened by either km distance, travel time, contiguity and trade relationships. After running some sensitivity analysis, we present the forecast accuracy criteria comparing the predicted values with the observed ones. Carlos Llano, Wolfgang Polasek, Richard Sellner 2009-01 Interpolation, Spatial panel econometrics, MCMC, Spatial http://d.repec.org/n?u=RePEc:rim:rimwps:01-09&r=all We provided an empirical assessment of the relationship between tourism specialisation and economic growth, by updating findings of previous papers written on this issue. We used data for more than 150 countries covering different time spans between 1980 and 2005. Contrary to previous findings (e.g., Brau et al., 2004 and 2007), tourism-based countries did not grow at a higher rate than non-tourism based countries, except for the 1980-1990 period for which, however, data on international tourism are not fully reliable. Paolo Figini, Laura Vici, 2009-01 tourism specialisation, economic growth, developing countries http://d.repec.org/n?u=RePEc:rim:rimwps:14-09&r=all This paper investigates the relationship between short term and long term ination expectations in the US and the UK with a focus on ination pass through (i.e. how changes in short term expecta- tions a¤ect long term expectations). An econometric methodology is used which allows us to uncover the relationship between ination pass through and various explanatory variables. We relate our empirical results to theoretical models of anchored, contained and unmoored ination expectations. For neither country do we …nd anchored or unmoored ination expectations. For the US, contained ination ex- pectations are found. For the UK, our …ndings are not consistent with the speci…c model of contained ination expectations presented here, but are consistent with a more broad view of expectations being constrained by the existence of an ination target. Deborah Gefang, Gary Koop, Simon M. Potter 2009-01 http://d.repec.org/n?u=RePEc:rim:rimwps:07-09&r=all In this paper, we present a review of various computational experiments – and consequent results – concerning Neural Network (NN) models developed for regional employment forecasting. NNs are widely used in several fields because of their flexible specification structure. Their utilization in studying/predicting economic variables, such as employment or migration, is justified by the ability of NNs of learning from data, in other words, of finding functional relationships – by means of data – among the economic variables under analysis. A series of NN experiments is presented in the paper. Using two data sets on German NUTS 3 districts (326 and 113 labour market districts in the former West and East Germany, respectively), the results emerging from the implementation of various NN models – in order to forecast variations in full-time employment – are provided and discussed In our approach, single forecasts are computed by the models for each district. Different specifications of the NN models are first tested in terms of: (a) explanatory variables; and (b) NN structures. The average statistical results of simulated out-of-sample forecasts on different periods are summarized and commented on. In addition to variable and structure specification, the choice of NN learning parameters and internal functions is also critical to the success of NNs. Comprehensive testing of these parameters is, however, limited in the literature. A sensitivity analysis is therefore carried out and discussed, in order to evaluate different combinations of NN parameters. The paper concludes with methodological and empirical remarks, as well as with suggestions for future research. Roberto Patuelli, Aura Reggiani, Peter Nijkamp, Norbert Schanne 2009-01 http://d.repec.org/n?u=RePEc:rim:rimwps:06-09&r=all This paper regards cultural heritage as a strategic development tool for urban tourist policy. It highlights the use of e-services as a central instrument in a competitive tourist sector. The appropriate choice of e-services – and packages thereof – depends on the various strategic considerations of urban stakeholders (agents) and may differ for each individual city. The paper offers a systematic analysis framework for supporting these choices and deploys multi-criteria analysis as a systematic evaluation methodology, in particular the Regime method. The evaluation framework is exemplified through an application to three field cases in Europe, viz. the cities of Amsterdam, Genoa and Leipzig. Our analysis concludes that tailor-made packages of e-services that serve the needs of the stakeholders can be made with the help of our evaluation tools. Frank Bruinsma, Karima Kourtit, Peter Nijkamp 2009-01 http://d.repec.org/n?u=RePEc:rim:rimwps:09-09&r=all Economists expect positive returns to investments in infrastructure. However a project with higher national returns might have less favorable eects on a regional level than the alternative. Therefore new infrastruc- ture should also be assessed on a regional level, but econom(etr)ic evalua- tion models are scarce, especially in regional science. This paper proposes new approaches to evaluate infrastructure by a dynamic spatial economet- ric model that allows long-term predictions. We investigate the regional eects for 2 Austrian railway projects and show that infrastructure returns are positive on an aggregate and at a regional level but spatial variation can be large. Wolfgang Polasek, Wolfgang Schwarzbauer, Richard Sellner 2009-01 Regional growth convergence, trac accessibility, infrastruc- ture evaluation, spatial econometrics http://d.repec.org/n?u=RePEc:rim:rimwps:15-09&r=all This paper investigates the relationship between short-term and long-term ination expectations using daily data on ination compen- sation. We use a exible econometric model which allows us to uncover this relationship in a data-based manner. We relate our …ndings to the issue of whether ination expectations are anchored, unmoored or contained. Our empirical results indicate no support for either unmoored or …rmly anchored ination expectations. Most evidence indicates that ination expectations are contained. Markus Jochmann, Gary Koop, Simon M. Potter 2009-01 http://d.repec.org/n?u=RePEc:rim:rimwps:02-09&r=all Regions, independent of their geographic level of aggregation, are known to be interrelated partly due to their relative locations. Similar economic performance among regions can be attributed to proximity. Consequently, a proper understanding, and accounting, of spatial liaisons is needed in order to effectively forecast regional economic variables. Several spatial econometric techniques are available in the literature, which deal with the spatial autocorrelation in geographically-referenced data. The experiments carried out in this paper are concerned with the analysis of the spatial autocorrelation observed for unemployment rates in 439 NUTS-3 German districts. We employ a semi-parametric approach – spatial filtering – in order to uncover spatial patterns that are consistently significant over time. We first provide a brief overview of the spatial filtering method and illustrate the data set. Subsequently, we describe the empirical application carried out: that is, the spatial filtering analysis of regional unemployment rates in Germany. Furthermore, we exploit the resulting spatial filter as an explanatory variable in a panel modelling framework. Additional explanatory variables, such as average daily wages, are used in concurrence with the spatial filter. Our experiments show that the computed spatial filters account for most of the residual spatial autocorrelation in the data. Roberto Patuelli, Daniel A. Griffith, Michael Tiefelsdorf, Peter Nijkamp 2009-01 spatial filtering, eigenvectors, Germany, unemployment http://d.repec.org/n?u=RePEc:rim:rimwps:16-09&r=all imports and exports and asymmetries in the adjustment of the US current account over the study period 1960Q4-2007Q2. We find evidence in favour of cointegration through the application of the standard Johansen methodology. Employing the Trace test procedure recursively, two distinct regimes are identified according to whether or not imports and exports are cointegrated. We also consider the Breitung (2002) and Breitung and Taylor (2003) nonparametric cointegration test procedures that do not assume linear short-run dynamics. Further analysis of the asymmetric short-run dynamics reveals that adjustment towards long-run equilibrium is primarily driven by US exports responding to current account deficits. Mark J. Holmes, Theodore Panagiotidis 2009-01 US Current Account, Sustainability, Cointegration, structural changes, nonparametric cointegration, recursive Trace test statistic, recursive betas, asymmetric error correction. http://d.repec.org/n?u=RePEc:use:tkiwps:0912&r=all We examine the reallocation of profits in the European and US banking sectors in the period of 1995 to 2004. Specifically, we ask whether the restructuring of both industries has contributed to an efficient reallocation of assets. Using a revised decomposition framework, we find that US banks are more flexible in the reallocation of profits than their European counterparts. In the US, efficient banks that appropriate assets decrease industry profitability, as expected in a market characterized by a sufficiently high level of competition. In addition, economies of scale are exploited more in the US than in Europe. Regulatory reforms in the EU, in particular in response to the current crisis, should therefore foster a more closely integrated European market. Jaap W.B. Bos, P.C. van Santen, P. Schilp 2009-05 market structure, efficiency, restructuring, stochastic frontier, banking http://d.repec.org/n?u=RePEc:use:tkiwps:0913&r=all This paper assesses the sophistication of pension funds' investment policies using data on 748 Dutch pension funds during the 1999.2006 period. We develop three indicators of sophistication: gross rounding of investment choices, investments in alternative sophisticated asset classes and 'home bias'. We find that pension funds' strategic portfolio choices are often based on coarse and possibly less sophisticated approaches. Most pension funds, particularly the medium-sized and smaller ones, round strategic asset allocations to the nearest multiple of 5%, similar to age heaping in demographic and historical studies. Second, many pension funds invest little or nothing in alternative asset classes besides equities and bonds, resulting in limited asset diversification. Third, medium-sized and smaller pension funds favor regional investments and as such not fully employ the opportunities of international diversification. Finally, we show that pension funds using less sophisticated asset allocation rules tend to opt for investment strategies with a lower risk-return profile. Jan de Dreu, Jacob A. Bikker 2009-05 Pension funds, investment policy, portfolio choice, gross rounding, heaping, diversification, home bias, alternative investments, behavioral finance. http://d.repec.org/n?u=RePEc:dlw:wpaper:09-03.&r=all Victory in the War for Independence brought a vast amount of land within the grasp of the new American nation—territory stretching from the Appalachian Mountains to the Mississippi River between the southern shores of the Great Lakes and Spanish Florida. These lands were initially claimed by several states. Pressure from states without land claims led to these lands being transferred to the national government. The land so transferred was to be used to pay for the revolution. By 1802 this national public domain totaled roughly 220 million acres of saleable land that was worth about $215 million dollars at constant-dollar long-run equilibrium land prices. A public finance approach is used to explain the choices facing the government regarding how to use its lands to pay for the revolution. The first choice—directly swapping land for war debt—was superseded by the second choice, namely “backing” the national debt with its land assets and pledging future proceeds from land sales to be used by law only to redeem the principal of the national debt and nothing else. This land policy helped stabilize the national government’s financial position and put the U.S. on a sound credit footing by the mid-1790s. Farley Grubb 2009 land policy; national debt, national net worth, national public finance, land history, land prices, public domain, early U.S. republic. http://d.repec.org/n?u=RePEc:dlw:wpaper:09-02.&r=all Congestion pricing of Canada’s four largest airports would save between seventy-two and one-hundred-five million dollars annually. Social cost of each aircraft movement would decrease by several hundred dollars at Toronto and Vancouver, and by about fifty dollars at Calgary and Montreal. Toronto currently experiences this congestion in spite of its slot control system. Congestion fees would be less than current weight-based landing fees on average. At projected traffic growth rates, social costs of landings and takeoffs would remain below current levels for at least five years—postponing the need for additional capacity. A stochastic bottleneck model indicates these substantial welfare gains regardless of whether dominant airlines internalize their self-imposed delays. This paper reports equilibrium congestion fee schedules by time of day and calculates equilibrium traffic rates, queuing delays, layover times, and connection times. Joseph I Daniel 2009 airport congestion pricing, stochastic queuing, bottleneck model, slot constraints. http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp631&r=all We study the relationship between liquid asset holding and the pattern of share ownership and control structures within the firm. We explore these issues using a data set of Belgian firms that is particularly well suited to studying the institutions of control oriented finance. The data include information on ownership concentration, voting alliances, managerial ownership, membership in family groups, institutional cross-share holdings, and coordination centers which under Belgian law permit consolidation of earnings and cash flow for a group of firms. We show that financial structures in Belgiumare strongly control oriented as evidenced by the very high levels of observed ownership concentration and the prevalence of pyramids, voting alliances, and participation in family groups. We find that the level of liquid asset holding is positively associated with ownership concentration and that this effect is particularly marked for family firms. Given the difficulties of family firms in achieving effective wealth diversificationwe interpret these results as indicating liquid asset holding is largely motivated by risk aversion. Cash holding is negatively associated with institutional cross share holdings, suggesting that these cross holdings facilitate an effective internal capital market. We find little evidence that managers have an independent influence on cash holdings. Ron Anderson, Malika Hamadi 2009-05 http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp633&r=all This paper studies asset markets in which ambiguity averse investors face Knightian uncertainty about expected payoffs. The same investors, however, might wish to resolve their uncertainty, although not risk, by just purchasing information. In these markets, uninformed and, hence, ambiguity averse, agents may coexist with informed agents, as a result of a rational information acquisition process. Moreover, there are complementaries in information acquisition, multiplicity of equilibria, history-dependent prices, and large price swings occurring after small changes in the uncertainty surrounding the asset expected payoffs. Our model suggests the importance of uncertainty, as a new channel for episodes of extreme price volatility, media frenzies and media glooms. Antonio Mele, Francesco Sangiorgi 2009-06 http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp632&r=all Speculative industries exploit novel technologies subject to two risks. First, there is uncertainty about the fundamental value of the innovation: is it strong or fragile? Second, it is difficult to monitor managers, which creates moral hazard. Because of moral hazard, managers earn agency rents in equilibrium. As time goes by and profits are observed, beliefs about the industry are rationally updated. If the industry is strong, confidence builds up. Initially this spurs growth. But increasingly confident managers end up requesting very large rents, which curb the growth of the speculative sector. If rents become too high, investors may give up on incentives, and risk and failure rates rise. Furthermore, if the innovation is fragile, eventually there is a crisis, and the industry shrinks. Our model thus captures important stylized facts of the financial innovation wave which took place at the beginning of this century. Bruno Biais, Paul Woolley, Jean-Charles Rochet 2009-05 http://d.repec.org/n?u=RePEc:lan:wpaper:006023&r=all This paper estimates the production function for university students in English universities. Taking as the output the quality of a university degree and the dropout rate, we use as inputs teaching quality and quantity, entry qualifications, and the effort level. Our results uncover new findings regarding the importance of each of these elements in university performance. In particular, we find that the quality of teaching and entry qualifications affect degree performance, but not the number of hours of teaching or private study. Controlling for unobserved ability through a 2SLS/GMM estimator suggests that entry scores have no additional impact on degree performance beyond its role as a measure of student ability. Kwok Tong Soo 2009 Production function estimation; Higher education; Instrumental variables http://d.repec.org/n?u=RePEc:lan:wpaper:006005&r=all Poland’s post-communist economic performance has been generally good. However, for many years its growth was jobless, it exhibited very high unemployment rates and concomitantly made little progress in approaching the targets set for EU Member States under the Lisbon Strategy. Unexpectedly, in 2003 the country’s labour market began to exhibit a new dynamism, with employment growing strongly and unemployment tumbling. This apparent improvement coincided with a liberalisation of its Labour Code. Unfortunately, the measures introduced to increase flexibility are seemingly at variance with the EU’s Fixed-Term Work Directive and might need to be modified. Hilary Ingham, Mike Ingham 2009 Poland, unemployment, temporary work contracts http://d.repec.org/n?u=RePEc:lan:wpaper:006024&r=all This paper estimates the efficiency of students in English universities using Data Envelopment Analysis (DEA) and a new dataset which is able to capture the behaviour of university students. Taking as the output the classification of a university degree, we use as inputs teaching hours and quality, entry qualifications, and the effort level. We find that university students differ in terms of the efficiency with which they use inputs in producing good degrees. In a second stage, we explore the determinants of the efficiency of university students using a truncated regression model. Higher student efficiency is found to be positively and significantly related to university size, and negatively and significantly related to the proportion of part-time students and the number of academic staff. The quality of a university has no significant impact on the efficiency of its students once endogeneity of university quality is controlled for. Kwok Tong Soo, Ching-Fu Chen 2009 Data Envelopment Analysis (DEA); Efficiency; Education http://d.repec.org/n?u=RePEc:mse:cesdoc:09032&r=all In this paper, we argue that credit market imperfections impact not only the level of unemployment, but also its persistence. For this purpose, we first develop a theoretical model based on the equilibrium matching framework of Mortensen and Pissarides (1999) and Pissarides (2000) where we introduce credit constraints. We show these credit constraints not only increase steady-state unemployment, but also slow down the transitional dynamics. We then provide an empirical illustration based on a country panel dataset of 19 OECD countries. Our results suggest that credit market imperfections would significantly increase the persistence of unemployment. Nicolas L. Dromel, Elie Kolakez, Etienne Lehmann 2009-05 Credit markets, labor markets, unemployment, credit constraints, search frictions. http://d.repec.org/n?u=RePEc:mse:cesdoc:09035&r=all In a Bayesian game some players might receive a noisy signal regarding the specific game actually being played before it starts. We study zero-sum games where each player receives a partial information about his own type and no information about that of the other player and analyze the impact the signals have on the payoffs. It turns out that the functions that evaluate the value of information share two property. The first is Blackwell monotonicity, which means that each player gains from knowing more. The second is concavity on the space of conditional probabilities. Bernard De Meyer, Ehud Lehrer, Dinah Rosenberg 2009-05 Value of information, Blackwell monotonicity, concavity. http://d.repec.org/n?u=RePEc:mse:cesdoc:09040&r=all This paper is concerned with multistage bidding models introduced by De Meyer and Moussa Saley (2002) to analyze the evolution of the price system at finance markets with asymmetric information. The zero-sum repeated games with incomplete information are considered modeling the bidding with countable sets of possible prices and admissible bids. It is shown that, if the liquidation price of a share has a finite variance, then the sequence of values of n-step games is bounded and converges to the value of the game with infinite number of steps. We construct explicitly the optimal strategies for this game. The optimal strategy of Player 1 (the insider) generates a symmetric random walk of posterior mathematical expectations of liquidation price with absorption. The expected duration of this random walk is equal to the initial variance of liquidation price. The guaranteed total gain of Player 1 (the value of the game) is equal to this expected duration multiplied with the fixed gain per step. Victor C. Domansky, Victoria L. Kreps 2009-01 Multistage bidding, asymmetric information, repeated games, optimal strategy. http://d.repec.org/n?u=RePEc:mse:cesdoc:09041&r=all We study the structure of unstable local effectivity functions defined for n players and p alternatives. A stability index based on the notion of cycle is introduced. In the particular case of simple games, the stability index is closely related to the Nakamura Number. In general it may be any integer between 2 and p. We prove that the stability index for maximal effectivity functions and for maximal local effectivity functions is either 2 or 3. Joseph Abdou 2009-01 Stability index, acyclicity, strong Nash equilibrium, core, solvability, consistency, simple game, effectivity function. http://d.repec.org/n?u=RePEc:mse:cesdoc:09030&r=all We analyze how investment subsidies can affect aggregate volatility and growth in economies subject to capital market imperfections. Within a model featuring both frictions on the credit market and unequal access to investment opportunities among individuals, we provide specific fiscal parameters able to reduce the probability of recessions, fuel the economy long-run growth rate and place it on a permanent-boom dynamic path. We analyze how conditions on the stabilizing fiscal parameters are modified when frictions in the economy evolve. Eventually, we show how this tax and transfer system can moderate persistence in the economy's response to temporary and permanent productivity shocks. Nicolas L. Dromel 2009-05 Endogenous business cycles, capital market imperfections, access to productive investment, fiscal policy, macroeconomic stabilization. http://d.repec.org/n?u=RePEc:mse:cesdoc:09039&r=all This paper investigates the relation between liquidity and asset prices. It shows that, when banks balance sheets are marked to market and banks are targeting a financial leverage level - a situation similar to current environment - formation of Leverage Bubble phenomenon and suggests a new regulation rule based on a Dynamic Leverage Ratio (DLR) rule. Fares Triki 2009-05 Financial crises, rational bubbles, dynamic leverage ratio, mark to market accounting, asset pricing, macroprudential regulation, market liquidity. http://d.repec.org/n?u=RePEc:mse:cesdoc:09031&r=all Firms devote significant resources to maintain and repair thei existing capital. Within a real business cycle model featuring arguably small aggregate increasing returns, this paper assesses the stabilizing effects of fiscal policies with a maintenance expenditure allowance. In this setup, firms are authorized to deduct their maintenance expenditures from revenues in calculating pre-tax profits, as in many prevailing tax codes. While flat-rate taxation does not prove useful to insulate the economy from self-fulfilling beliefs, a progressive tax can render the equilibrium unique. However, we show that the required progressivity to protect the economy against sunspot-driven fluctuations is increasing in the maintenance-to-GDP ratio. Taking into account the maintenance and repair activity of firms, and the tax deductibility of the related expenditures, would then weaken the expected stabilizing properties of progressive fiscal schedules. Nicolas L. Dromel 2009-05 Business cycles, maintenance and repair allowances, capital utilization, progressive income taxes, local indeterminacy and sunspots. http://d.repec.org/n?u=RePEc:mse:cesdoc:09029&r=all We report in this paper the result of three experiments on risk, ambiguity and time attitude. The first two differed by the population considered (students vs general population) while the third one used a different protocol and concerned students and portfolio managers. We find quite a lot of heterogeneity at the individual level. Of principal interest was the elicitation of risk, time and ambiguity attitudes and the relationship among these (model free) measures. We find that on the student population, there is essentially no correlation. A non negligible fraction of the population behaves in an extremely cautions manner in the risk and ambiguity domain. When we drop this population from the sample, the correlation between our measures is also non significant. We also raise three questions linked to measurement of ambiguity attitudes that come out from our data sets. Michèle Cohen, Jean-Marc Tallon, Jean-Christophe Vergnaud 2009-03 Experiments, risk aversion, impatience, imprecision aversion. http://d.repec.org/n?u=RePEc:mse:cesdoc:09038&r=all The aim of this work is to bring an econometric approach upon the CO2 market. We identify the specificities of this market, and regarding the carbon as a commodity. We investigate the econometric particularities of CO2 prices behavior and their result of the calibration. We apprehend and explain the reasons of the non-Gaussian behavior of this market focusing mainly upon jump diffusion and generalized hyperbolic distributions. We test these results for the risk modeling of a structured product specific to the carbon market, the swap between two carbon instruments : The European Union Allowances and the Certiified Emission Reductions. We estimate the counterparty risk for this kind of transaction and evaluate the impact of different models upon the risk measure and the allocated capital. Marius-Cristian Frunza, Dominique Guegan 2009-05 Carbon, Normal Inverse Gaussian, CER, EUA, Swap. http://d.repec.org/n?u=RePEc:mse:cesdoc:09042&r=all A power system is modeled by an interaction form, the solution of which is called a settlement. By stability we mean the existence of some settlement for any preference profile. Like in other models of power structure, instability is equivalent to the existence of a cycle. Structural properties of the system like maximality, regularity, superadditivity and exactness are defined and used to determine the type of instability that may affect the system. A stability index is introduced. Loosely speaking this index measures the difficulty of the emergence of configurations that produce a deadlock. As applications we have a characterization of solvable game forms, an analysis of the structure of their instability and a localization of their stability index in case where solvability fails. Joseph Abdou 2009-05 Interaction form, effectivity function, stability index, Nash equilibrium, strong equilibrium, solvability, acyclicity, Nakamura number, collusion. http://d.repec.org/n?u=RePEc:mse:cesdoc:09036&r=all We overview different methods of modeling volatility of stock prices and exchange rates, focusing on their ability to reproduce the empirical properties in the corresponding time series. The properties of price fluctuations vary across the time scales of observation. The adequacy of different models for describing price dynamics at several time horizons simultaneously is the central topic of this study. We propose a detailed survey of recent volatility models, accounting for multiple horizons. These models are based on different and sometimes competing theoretical concepts. They belong either to GARCH or stochastic volatility model families and often borrow methodological tools from statistical physics. We compare their properties and comment on their pratical usefulness and perspectives. Alexander Subbotin, Thierry Chauveau, Kateryna Shapovalova 2009-05 Volatility modeling, GARCH, stochastic volatility, volatility cascade, multiple horizons in volatility. http://d.repec.org/n?u=RePEc:mse:cesdoc:09037&r=all It is a common wisdom that individual stocks' returns are difficult to predict, though in many situations it is important to have such estimates at our disposal. In particular, they are needed to determine the cost of capital. Market equilibrium models posit that expected returns are proportional to the sensitivities to systematic risk factors. Fama and French (1993) three-factor model explains the stock returns premium as a sum of three components due to different risk factors : the traditional CAPM market beta, and the betas to the returns on two portfolios, "Small Minus Big" (the differential in the stock returns for small and big companies) and "High Minus Low" (the differential in the stock returns for the companies with high and low book-to-price ratio). The authors argue that this model is sufficient to capture the impact on returns of companies' accounting fundamentals, such as earnings-to-price, cash flow-to-price, past sales growth, long term and short-term past earnings. Using a panel of stock returns and accounting data from 1979 to 2008 for the companies listed on NYSE, we show that this is not the case, at least at individual stocks' level. According to our findings, fundamental characteristics of companies' performance are of higher importance to predict future expected returns than sensitivities to the Fama and French risk factors. We explain this finding within the rational pricing paradigm : contemporaneous accounting fundamentals may be better proxies for the future sensitivity to risk factors, than the historical covariance estimates. Kateryna Shapovalova, Alexander Subbotin 2009-05 Accounting fundamentals, equity performance, style analysis, value and growth, cost of capital. http://d.repec.org/n?u=RePEc:mse:cesdoc:09034&r=all Controlling and managing potential losses is one of the main objectives of the Risk Management. Following Ben Ameur and Prigent (2007) and Chen et al. (2008), and extending the first results by Hamidi et al. (2009) when adopting a risk management approach for defining insurance portfolio strategies, we analyze and illustrate a specific dynamic portfolio insurance strategy depending on the Value-at-Risk level of the covered portfolio on the French stock market. This dynamic approach is derived from the traditional and popular portfolio insurance strategy (Cf. Black and Jones, 1987 ; Black and Perold, 1992) : the so-called "Constant Proportion Portfolio Insurance" (CPPI). However, financial results produced by this strategy crucially depend upon the leverage - called the multiple - likely guaranteeing a predetermined floor value whatever the plausible market evolutions. In other words, the unconditional multiple is defined once and for all in the traditional setting. The aim of this article is to further examine an alternative to the standard CPPI method, based on the determination of a conditional multiple. In this time-varying framework, the multiple is conditionally determined in order to remain the risk exposure constant, even if it also depends upon market conditions. Furthermore, we propose to define the multiple as a function of an extended Dynamic AutoRegressive Quantile model of the Value-at-Risk (DARQ-VaR). Using a French daily stock database (CAC 40) and individual stocks in the period 1998-2008), we present the main performance and risk results of the proposed Dynamic Proportion Portfolio Insurance strategy, first on real market data and secondly on artificial bootstrapped and surrogate data. Our main conclusion strengthens the previous ones : the conditional Dynamic Strategy with Constant-risk exposure dominates most of the time the traditional Constant-asset exposure unconditional strategies. Benjamin Hamidi, Bertrand Maillet, Jean-Luc Prigent 2009-05 CPPI, portfolio insurance, VaR, CAViaR, quantile regression, dynamic quantile model. http://d.repec.org/n?u=RePEc:mse:cesdoc:09033&r=all In a Constant Proportion Portfolio Insurance (CPPI) framework, a constant risk exposure is defined by the multiple of the strategy. This article proposes an alternative conditional multiple estimation model, which is based on an autoregressive quantile regression dynamic approach. We estimate several specifications of the conditional multiple model on the American equity market, and we compare relative performances of cushioned portfolios using conditional and unconditional multiples. Benjamin Hamidi, Emmanuel Jurczenko, Bertrand Maillet 2009-05 Portfolio insurance, CPPI, quantile regression. http://d.repec.org/n?u=RePEc:vic:vicewp:0903&r=all In this study we suggest a Bayesian approach to fuzzy clustering analysis – the Bayesian fuzzy regression. Bayesian Posterior Odds analysis is employed to select the correct number of clusters for the fuzzy regression analysis. In this study, we use a natural conjugate prior for the parameters, and we find that the Bayesian Posterior Odds provide a very powerful tool for choosing the number of clusters. The results from a Monte Carlo experiment and three illustrative applications with economic data are very encouraging. Hui Feng, David E. Giles 2009-06-11 Bayesian posterior odds, model selection, fuzzy regression, fuzzy clustering http://d.repec.org/n?u=RePEc:sal:celpdp:0111&r=all This paper provides a theoretical model and an empirical investigation on unpaid labour regularly supplied in non profit organisations. The contribution is threefold. First, intrinsic motivation in unpaid labour supply is considered, taking into account simultaneity between investment and consumption motives. Second, we study the impact of family care responsibilities on the determination of unpaid labour supply. Third, the specific activity a person is engaged in is shown to have a significant relevance. Empirical analysis, on data from Indagine Multiscopo sulle Famiglie, Aspetti della Vita Quotidiana, 1997, shows that frequently supplied unpaid labour depends on intrinsic motivation, income, age, family responsibilities and the specific task carried out in non profit organisations. The analytical framework suggests that these determinants support the hypothesis that both investment and consumption motives interact in shaping unpaid labour supply, with a stronger impact of consumption purposes. Bruna, Bruno, Damiano, Fiorillo 2009-06-05 unpaid labour; non profit organisations; http://d.repec.org/n?u=RePEc:uwe:wpaper:0908&r=all In little more than twenty years, it has become widely accepted that the optimal design of monetary policy should include provision for a central bank that is independent of government influence. This is a remarkably short period of time for any idea in economics to become so widely-accepted. But there are problems. In this paper we show that there are many confusions and even some contradictions associated with central bank independence. To begin with, it is not entirely clear what it is exactly that central banks need to be independent of. Furthermore, there is confusion over the mechanisms whereby independence is supposed to deliver its benefits. The literature which is commonly said to provide the rationale for independence is often misunderstood and the evidence that independence does in fact enhance policy outcomes is extremely weak. Peter Howells 2009-06 independent central banks http://d.repec.org/n?u=RePEc:ema:worpap:2009-05&r=all The paper investigates the determinants of international business cycle comovement in a two-country Dynamic Stochastic General Equilibrium (DSGE) model featured by monopolistic competition and nominal price rigidity, following so the New Open Economy Macroeconomy (NOEM) literature. Within this framework, we assess the role of labor market search and matching frictions in the international propagation of supply and monetary shocks. Our results show that labor market frictions improve the ability of the New Open Economy Macroeconomy framework to account for international business cycles comovement. In particular, the NOEM model with labor market search is consistent with the international propagation mechanism of monetary shocks identified in the data. Through their impact on labor market dynamics, labor market institutions affect the magnitude of international comovement. Business cycle synchronization is thus found to increase with the generosity of the unemployment benefits system, whereas it decreases with the strictness of employment protection. Lise Patureau 2009 International business cycles, Search, Labor market institutions, Wage bargaining, International transmission of shocks http://d.repec.org/n?u=RePEc:ema:worpap:2009-04&r=all We present a system of behavioral axioms for preferences over menus that is motivated by three assumptions. First, the decision maker is uncertain ex ante (i.e. at the time of choosing a menu) about her ex post (i.e. at the time of choosing an option within her chosen menu) preferences over options, and she anticipates that this subjective uncertainty will only resolve after the ex post stage. Second, she is averse to ex post indecisiveness (i.e. to having to choose between options that she cannot rank with certainty). Third, when evaluating a menu she discards options that are dominated (i.e. inferior to another option whatever her ex post preferences may be) and restricts attention to the undominated ones. Under these assumptions, the decision maker has a preference for commitment in the sense of preferring menus with fewer undominated alter