|
on Discrete Choice Models |
| By: | Jang, Tae-Seok; Sacht, Stephen |
| Abstract: | In this paper we empirically examine a heterogeneous bounded rationality version of a hybrid New-Keynesian model. The model is estimated via the simulated method of moments using Euro Area data from 1975Q1 to 2009Q4. It is generally assumed that agents' beliefs display waves of optimism and pessimism - so called animal spirits - on future movements of the output and inflation gap. Our main empirical findings show that a bounded rationality model with cognitive limitation provides a reasonable fit to auto- and cross-covariances of the data. This result is mainly driven by a high degree of intrinsic persistence in the output and inflation gap due to the impact of animal spirits on economic dynamics. Further, over the whole time interval the agents had expected moderate deviations of the future output gap from its steady state value with low uncertainty. Finally, we find strong evidence for an autoregressive expectation formation process regarding the inflation gap. -- |
| Keywords: | Animal Spirits,Bounded Rationality,Discrete Choice Theory,Euro Area,New-Keynesian Model,Simulated Method of Moments |
| JEL: | C53 D83 E12 E32 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cauewp:201212&r=dcm |
| By: | Dieckhoener, Caroline (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Hecking, Harald (Energiewirtschaftliches Institut an der Universitaet zu Koeln) |
| Abstract: | In this paper, we develop a microeconomic approach to deduce greenhouse gas abatement cost curves of the residential heating sector. By accounting for household behavior, we find that welfare-based abatement costs are generally higher than pure technical equipment costs. Our results are based on a microsimulation of private households' investment decision for heating systems until 2030. The households' investment behavior in the simulation is derived from a discrete choice estimation which allows investigating the welfare costs of different abatement policies in terms of the compensating variation and the excess burden. We simulate greenhouse gas abatements and welfare costs of carbon taxes and subsidies on heating system investments until 2030 to deduce abatement curves. Given utility maximizing households, our results suggest a carbon tax to be the welfare efficient policy. Assuming behavioral misperceptions instead, a subsidy on investments might have lower marginal greenhouse gas abatement costs than a carbon tax. |
| Keywords: | Household behavior; discrete choice; Pigou; greenhouse gas abatement costs |
| JEL: | C35 C61 Q47 Q53 R21 |
| Date: | 2012–10–29 |
| URL: | http://d.repec.org/n?u=RePEc:ris:ewikln:2012_016&r=dcm |