on measuring uncertainty and its impact on investment cross country evidence from the euro area abstract investment fell sharply in the euro area after the financial crisis and has not yet returned to pre crisis levels in many core economies focusing on the four largest euro area countries this paper investigates the role of uncertainty for investment dynamics by doing so we compare five prominent uncertainty proxies put forward in the recent literature the implied stock market volatility a survey derived measure of expectations dispersion a newspaper based indicator of policy uncertainty and two indicators taking up the concept of econometric unpredictability although all uncertainty measures show countercyclical behavior we find uncertainty as measured by the conditional volatility of the unforecastable components of a broad set of time series to exhibit noticeable robust effects across different model specifications and countries based on this type of uncertainty proxy we document pronounced negative investment responses to uncertainty shocks we further show that these effects can explain a relevant portion of the decrease in investment in the course of the great recession

volatility and investment interpreting evidence from developing countries we uncover a significant negative correlation between various volatility measures and private investment in developing countries even when adding the standard control variables no such correlation is uncovered when the investment measure is the sum of private and public investment spending indeed public investment spending is positively correlated with some ineasures of volatility these findings suggest that the detrimental impact of volatility on investment may be easier to detect using disaggregated data we provide several possible interpretations for our findings nonlinearities in preferences or budget constraints can cause volatility to have first order negative effects on private investment

oil price shocks economic policy uncertainty and industry stock returns in china asymmetric effects with quantile regression abstract this paper investigates the impact of crude oil shocks and china s economic policy uncertainty on stock returns at different locations on the return distributions based on monthly data from 1995 1 to 2016 3 we address this issue by employing the quantile regression technique this approach enables a more detailed investigation in different market circumstances namely bearish normal and bullish markets empirical results indicate that the effects of oil price shocks and economic policy uncertainty are asymmetric and highly related to stock market conditions moreover both the nexus of oil and economic policy uncertainty stock are changed at the onset of a crisis specially rising oil prices have greater negative effects on stock returns when stock markets are bullish extreme higher quantiles before a crisis whereas the effects are significantly positive under different market conditions after the onset of the crisis falling oil prices lower stock returns when stock markets are bullish and normal before the crisis whereas lower stock returns under different market conditions except extreme bullish after the onset of the crisis these findings might be related to the optimistic or pessimistic investor sentiments and investors might become more frightened after the crisis

rational asset price movements without news this paper argues that an important part of movements in asset prices may be caused by neither external news nor irrationality but by the revelation of information by the trading process itself two models are developed that illustrate this general idea one model is based on investor uncertainty about the quality of other investors information the other is based on dispersion of information and small costs to trading the analysis is used to suggest a possible rational explanation of the october 1987 crash copyright 1993 by american economic association

optimal strategy for the integrated vendor buyer inventory model this note is concerned with the integrated vendor buyer inventory model two different strategies have been proposed in the literature for the problem one where the delivery quantity to the buyer at each replenishment is identical and another strategy where at each delivery all the inventory available with the vendor is supplied to the buyer we show that there is no one strategy that obtains the best solution for all possible problem parameters we also present the results of a detailed numerical study that analyses the relative performance of the two strategies for various problem parameters

covariance breakdowns and connectedness of crude oil futures markets with non synchronous data this article identifies the breakdowns in the covariance of three benchmark crude oil futures markets wti brent and dubai and investigates the changes of market connectedness across the breakdow

capabilities as real options strategy research consists of a balance between positive and normative theory normative theories suggest particular heuristics or cognitive representations to find appropriate solutions heuristics permit faster solutions to real time problems they also suffer from the potential of negative transfer to inappropriate applications the theory of real options provides the appropriate heuristic framing of competencies and exploratory search a real options approach marries the theory of financial options to foundational ideas in strategy organizational theory and complex systems we join these approaches to identify three pairs of concepts scarce factor and the underlying asset in option theory inertia and irreversibility and the ruggedness of landscape and option values strategic theories of resources largely define a core competence as unique and nonimmutable in doing so this definition has wrongly forgotten barney s initial insight into scarce factor markets as determining the valuation of a competitive asset financial theory of real options derives its heuristics of investing in exploratory search by inferring future value of today s investments from market prices we apply the three conceptual pairs to the evaluation of capabilities as real options through a formal descriptive model the valuation of core capabilities is derived from observing the price dynamics of correlated strategic factors in the market because of inertia managers cannot easily adjust the wrong set of organizational capabilities to the emergence of market opportunities however firms that have made investments in capabilities appropriate to these opportunities are able to respond from this description we define core competence as the choice of capabilities that permits the firm to make the best response to market opportunities the heuristic framing of capabilities as real options guides the normative evaluation of the balance between exploitation and exploration

long memory economic policy uncertainty and forecasting us inflation a bayesian varfima approach abstractwe compare inflation forecasts of a vector autoregressive fractionally integrated moving average varfima model against standard forecasting models u s inflation forecasts improve when controlling for persistence and economic policy uncertainty epu importantly the varfima model comprising of inflation and epu outperforms commonly used inflation forecast models

patent protection market uncertainty and r d investment the real options investment theory shows that greater uncertainty about market revenues reduces current r d investment by increasing the value of waiting this paper presents empirical evidence that patent protection mitigates the effect market uncertainty on r d investment

the importance of local corporate taxes in business location decisions evidence from french micro data determinants of businesses locations are known to be multiple locations of partners and competitors are crucial as well as the territory s local characteristics to consider the importance of local taxes we build a poisson model to explain the number of business creations observed in a given municipality first results suggest that there are unobserved factors driving firm creation that are positively correlated with the level of local taxes to deal with this potential source of endogeneity we present an approach close to regression discontinuity design we find that everything else being equal higher local taxes actually tend to deter firms from setting up in a given zone but the effect is weak

measuring financial asset return and volatility spillovers with application to global equity markets we provide a simple and intuitive measure of interdependence of asset returns and or volatilities in particular we formulate and examine precise and separate measures of return spillovers and volatility spillovers our framework facilitates study of both non crisis and crisis episodes including trends and bursts in spillovers and both turn out to be empirically important in particular in an analysis of sixteen global equity markets from the early 1990s to the present we find striking evidence of divergent behavior in the dynamics of return spillovers vs volatility spillovers return spillovers display a gently increasing trend but no bursts whereas volatility spillovers display no trend but clear bursts

the joint economic lot size problem a review abstract this article reviews lot size models which focus on coordinated inventory replenishment decisions between buyer and vendor and their impact on the performance of the supply chain these so called joint economic lot size jels models determine order production and shipment quantities from the perspective of the supply chain with the objective of minimizing total system costs this paper first describes the problem studied introduces the methodology of the review and presents a descriptive analysis of the selected papers subsequently papers are categorized and analyzed with respect to their contribution to the coordination of different echelons in the supply chain finally the review highlights gaps in the existing literature and suggests interesting areas for future research

why has us policy uncertainty risen since 1960 we consider two classes of explanations for the rise in policy related economic uncertainty in the united states since 1960 the first stresses growth in government spending taxes and regulation a second stresses increased political polarization and its implications for the policymaking process and policy choices

a cooperative inventory policy with deteriorating items for a two echelon model a cooperative inventory policy between supplier and buyer is proposed unlike other studies we consider the case of deteriorating items and permit the completed back order in the problem we solve the problem without the condition of equal replenishments periods during a specified planning horizon and present a procedure to find the optimal solution a case is presented to demonstrate the application of the proposed approach the sensitivity analysis for a cooperation policy between supplier and buyer also are explored

international economic policy uncertainty and stock prices wavelet approach this paper examines the link between economic policy uncertainty and stock price in both a time and frequency domain wavelet analysis reveals that the relationship is generally negative but changes over time exhibiting low to high frequency cycles moreover the timing of frequency changes overlaps when us policy uncertainty comoves with other countries policy uncertainty

forecasting aggregate retail sales the case of south africa abstract forecasting aggregate retail sales may improve portfolio investors ability to predict movements in the stock prices of retail chains this paper uses 26 23 single and 3 combination forecasting models to forecast south africa s aggregate seasonal retail sales we use data from 1970 01 2012 05 with 1987 01 2012 05 as the out of sample period unlike the previous literature on retail sales forecasting we not only look at a wide array of linear and nonlinear models but also generate multi step ahead forecasts using a real time recursive estimation scheme over the out of sample period to better mimic the practical scenario faced by economic agents making retailing decisions in addition we deviate from the uniform symmetric quadratic loss function typically used in forecast evaluation exercises by considering loss functions that overweight the forecast error in booms and recessions focusing on the results of single models alone shows that their performances differ greatly across forecast horizons and for different weighting schemes with no unique model performing the best across various scenarios however combination forecast models especially the discounted mean square forecast error method which weighs current information more than past not only produced better forecasts but were also largely unaffected by business cycles and time horizons this result along with individual nonlinear models performing better than linear models led us to conclude that theoretical research on retail sales should look at developing dynamic stochastic general equilibrium models that not only incorporate learning behavior but also allow the behavioral parameters of the model to be state dependent to account for regime switching behavior across alternative states of the economy

policy uncertainty and long run investment and output across countries i present a model economy where policy uncertainty creates short term bias in investment and leads to a higher capital price and lower long run investment and output i conduct a calibration exercise using a set of industry level investment data across countries between the lowest income and the highest income countries policy uncertainty can account for capital price and investment level differences by a factor of about 3 and for the output level difference by a factor of about 2 copyright economics department of the university of pennsylvania and the osaka university institute of social and economic research association

investment uncertainty and liquidity we analyze the dynamic investment decision of a firm subject to an endogenous financing constraint the threat of future funding shortfalls lowers the value of the firm s timing options and encourages acceleration of investment beyond the first best optimal level as well as highlighting another way by which capital market frictions can distort investment behavior this result implies that 1 the sensitivity of investment to cash flow can be greatest for high liquidity firms and 2 greater uncertainty has an ambiguous effect on investment

on the global optimal solution to an integrated inventory system with general time varying demand production and deterioration rates in this paper a unified inventory model for integrated production system with a single product is presented the production demand and deterioration rates for the finished product and the deterioration rates for raw materials are assumed to be functions of time a rigorous mathematical proof which shows the global optimality of the solution to the considered inventory system is introduced a numerical example that illustrates the solution procedure is included

does economic policy uncertainty matter for commodity market in china evidence from quantile regression this paper investigates the effect of economic policy uncertainty epu on china s agricultural and metal commodity futures returns across quantiles we address this issue using the panel quantile

economic policy uncertainty shocks economic activity and exchange rate adjustments abstract we investigate the impact of foreign and domestic economic policy uncertainty epu shocks on the uk economy simulations with a structural var model indicate that domestic industrial production declines after a shock to the epu index in the us on the contrary disturbances to domestic uncertainty are an important source of real exchange rate fluctuations historical decomposition shows that a surge in domestic epu after brexit referendum was the reason behind a massive depreciation of the british pound these results are robust to different model specifications

the time varying correlation between uncertainty output and inflation evidence from a dcc garch model abstract using a new uncertainty index from baker et al 2012 we evaluate the time varying correlation between macroeconomic uncertainty inflation and output estimation results from a multivariate dcc garch model reveal that the sign of the correlation between macroeconomic uncertainty and inflation changed from negative to positive during the late 1990s whereas the correlation between uncertainty and output is consistently negative

integrating deterioration and lifetime constraints in production and supply chain planning a survey abstract items with short lifetimes that are subject to deterioration are important in the business world research has a long tradition in integrating deterioration and value loss effects into mathematical models for inventory planning and control where such effects are understood as a general loss or shrinkage of inventory however there has been little work in the modeling of lifetime restrictions of items to prevent wastage and disposals especially in a dynamic planning context globalization and other trends extend the consideration of single companies to whole supply chains implying increased coordination and information needs this is important as planning decisions impact lead times and thus the quality of items in the whole supply chain products that exceed their useful lifetime can impose high costs due to inventory loss or the need to rework them this implies increased utilization of scarce resources e g machine time metals and or energy thereby increasing co 2 levels we survey the state of the art regarding depreciation effects and the modeling of lifetime constraints as well as a classification of models following business planning functions of the value chain a critical evaluation of approaches and their limitations is provided highlighting directions for future research

how do exchange rates co move a study on the currencies of five inflation targeting countries abstract this paper does three things first it explores the type of asymmetry in exchange rate correlation for five inflation targeting countries we show their currencies co move more closely with the currencies of some influential foreign countries during joint appreciations than joint depreciations against a world currency second it establishes empirically the linkage between interest rate differentials and exchange rate correlation we find evidence that both widening and narrowing interest rate differentials will reduce the correlation third it proposes a new version of the asymmetric dynamic conditional correlation model the model proves to be capable of providing great insight into the two issues investigated

economic policy uncertainty and dollar pound exchange rate return volatility abstract the extent to which economic policy uncertainty epu amplifies exchange rate volatility has been an important research question for at least a decade previous research has investigated this relationship using monthly data concluding that epu imparts an effect on exchange rate volatility either contemporaneously or with a one month lag the use of monthly frequency however may not provide an accurate causal interpretation and may even compromise the accuracy of the estimates if the natural cycles of epu are shorter than a month to address this econometric concern i construct uncertainty measures at a daily frequency and estimate a garch model using daily usd british pound returns the evidence indicates that epu contributes to exchange rate volatility much more quickly than monthly data can detect using a regression technique for separating epu from non policy economic uncertainty i find that non policy market uncertainty increases volatility more than epu does

review of inventory systems with deterioration since 2001 abstract this paper presents an up to date review of the advances made in the field of inventory control of perishable items deteriorating inventory the last extensive review on this topic dates back to 2001 goyal s k and giri b c recent trends in modeling of deteriorating inventory european journal of operational research 134 1 16 since then over two hundred articles on this subject have been published in the major journals on inventory control indicating the need for a new review we use the classification of goyal and giri based on shelf life characteristics and demand characteristics contributions are highlighted by discussing main system characteristics including price discounts backordering or lost sales single or multiple items one or two warehouses single or multi echelon average cost or discounted cash flow and payment delay

on improving the single vendor single buyer integrated production inventory model with a generalized policy abstract in this note a simple procedure is suggested for modifying shipment size as obtained on applying the procedure given by hill european journal of operational research 97 1997 493 499

the impact of the volatility of monetary policy shocks this paper studies the impact of the volatility of monetary policy using a structural vector auroregression svar model enriched along two dimensions first it allows for time varying variance of monetary policy shocks via a stochastic volatility specification second it allows a dynamic interaction between the level of the endogenous variables in the var and the time varying volatility the analysis establishes that the nominal interest rate output growth and inflation fall in reaction to an increase in the volatility of monetary policy the analysis also develops a dynamic stochastic general equilibrium model enriched with stochastic volatility to monetary policy that generates similar responses and provides a theoretical underpinning of these findings

does the u s economic policy uncertainty connect financial markets evidence from oil and commodity currencies abstract we provide novel insight to the emerging literature on the role of u s monetary policy as a driver of a global financial cycle by examining the possible causal effect of u s economic policy uncertainty on the connectedness of crude oil and currency markets using a sample of commodity currencies from advanced and emerging nations a battery of linear and nonlinear granger based causality tests indicate the presence of a causal relationship between economic policy uncertainty and the connectedness of oil and currency markets particularly at low frequencies and more significantly after the outburst of the global financial crisis while crude oil generally serves as a net transmitter of shocks to currencies across all frequency bands the spillover effects from oil are largely concentrated towards the g10 currencies of australian and new zealand dollar that are often used as investment currencies in global carry trade strategies overall our findings suggest the presence of a significant pass through effect of economic policy uncertainty via oil prices spilling over to the currency market in line with the emerging evidence that the monetary policy by the u s fed serves as a major driver of a global financial cycle that describes patterns in global capital flows credit activity and asset prices across financial markets

a fuzzy mathematical model for the joint economic lot size problem with multiple price breaks abstract this paper applies fuzzy mathematical programming to solve the joint economic lot size problem with multiple price breaks in order to entice the buyer to increase the order quantity it is a common practice for the seller to offer quantity discounts to the buyer from the system viewpoint the joint cost for the seller and buyer can be minimized only when the buyer increases his economic order quantity the problem is how to determine the number of price breaks as well as the quantity discount and order quantity at each price break to achieve the optimal joint cost fuzzy mathematical programming provides a very efficient algorithm to solve the above problem simultaneously from the perspectives of the seller and the buyer another common problem in joint economic lot size model is how to split the system profit between the seller and the buyer whereas the traditional approach to this problem is to divide the profit based on a certain ratio determined by the bargaining power of both parties fuzzy mathematical programming can achieve the same satisfaction level to both parties based on their respective cost functions

tax uncertainty and business activity abstract we investigate the extent to which uncertainties about tax policies affect business activities we develop a statewide tax uncertainty measure tu measure and show that it captures state corporate tax uncertainty by comparing adjacent counties across state borders we show that increasing tax uncertainty by one standard deviation a 30 increase in the tu measure leads to a 0 17 point per year decrease in the growth rate of establishments over two years the result holds after conducting a variety of robustness checks and is not likely to be driven by general state policy uncertainties

economic policy uncertainty in the us does it matter for the euro area abstract we investigate the effects of a us economic policy uncertainty shock on some euro area macroeconomic aggregates via structural vars we model the indicators of economic policy uncertainty recently developed by baker et al 2013 jointly with the aggregate price indexes and alternative indicators of the business cycle for the two above indicated economic areas according to our svars a one standard deviation shock to us economic policy uncertainty leads to a statistically significant fall in the european industrial production and prices of 0 12 and 0 06 respectively the contribution of the us uncertainty shock on the european aggregates is shown to be quantitatively larger than the one exerted by an euro area specific uncertainty shock

on the transmission mechanism of country specific and international economic uncertainty spillovers evidence from a tvp var connectedness decomposition approach abstract we investigate the internal and external categorical economic policy uncertainty epu spillovers between the us and japan using a novel extension of the tvp var connectedness approach of antonakakis and gabauer 2017 the decomposition of our approach gives us insights about the dynamics with and without international spillovers which has essential policy implications our results suggest that monetary policy uncertainty is the main driver followed by uncertainties associated with fiscal currency market and trade policies furthermore we find that the fukushima daiichi accident can be interpreted as a negative trade shock that spread internationally

revisiting the minimum wage employment debate throwing out the baby with the bathwater we revisit the minimum wage employment debate which is as old as the department of labor in particular we assess new studies claiming that the standard panel data approach used in much of the new minimum wage research is flawed because it fails to account for spatial heterogeneity these new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the united states have not reduced employment we explore the ability of these research designs to isolate reliable identifying information and test the untested assumptions in this new research about the construction of better control groups our evidence points to serious problems with these research designs we conclude that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage

the impact of uncertainty shocks in emerging economies abstract a recent strand of research proposes that sudden jumps in uncertainty generate rapid drops and recoveries in real macroeconomic variables that drive the business cycle using an empirical model we find substantial heterogeneity in reactions to these shocks across countries in comparison to the u s and other developed countries emerging economies suffer much more severe falls in investment and private consumption following an exogenous uncertainty shock take significantly longer to recover and do not experience a subsequent overshoot in activity we provide evidence that the dynamics of investment and consumption are correlated with the depth of financial markets we control for the potential role of a credit channel and estimate that it can account for up to one half of the increased fall in investment generated by uncertainty shocks among emerging economies with less developed financial markets in this context monetary and fiscal policy actions that alleviate the impact of credit constraints facing firms may reduce the impact of uncertainty shocks in these economies

a new technique for postsample model selection and validation abstract the model selection and granger causality literatures have focused on insample rather than postsample hypothesis testing this is because postsample model validation periods are usually short whereas the correlations in typical postsample forecast errors require large sample methods a resampling based postsample inference procedure is described which explicitly estimates the uncertainty which its large sample approximation induces in the inference significance levels it produces the procedure is applied to postsample forecasting errors from the ashley et al 1980 study examining granger causation between us consumption and advertising expenditures postsample model validation is apparently feasible but requires longer postsample periods than past studies have allocated

investment with uncertain tax policy does random tax policy discourage investment we consider the impact of tax policy uncertainty on firm level and aggregate investment comparing investment behaviour when uncertainty is due to a shock following geometric brownian motion gbm versus when random discrete jumps in tax policy occur expectations of the likelihood of a tax policy switch have an important negative impact on the gain to delaying investment in the latter model and time to investment can fall with increasing tax policy uncertainty aggregate investment simulations indicate that capital formation is adversely affected by increases in uncertainty in the traditional gbm model but can be enhanced in the jump process model

why did wicksell change his mind about the machinery question abstract the article investigates wicksell s change of mind about the machinery question between 1890 and 1900 1901 wicksell at first sided with the so called compensation theory that workers are not harmed by the introduction of machinery in his lecture notes of april 1900 made available here for the first time wicksell deployed marginal productivity theory to discuss the effects of labour saving technical progress with inconclusive results finally in his published 1901 lectures and in his 1900 article about marginal productivity wicksell claimed that the introduction of machinery increases output and reduces wages his analysis was based on the demonstration that free competition maximizes output but not total utility it is argued that wicksell s change of mind and his mature formulation of the machinery question result from his critical assessment of the then new concept of pareto optimality together with his reinterpretation and rejection of ricardo s 1821 contention that the introduction of machinery may diminish output and employment

a dynamic model for the single vendor multi buyer problem abstract we consider a problem of a dynamic production distribution situation for a single product we examine the situation where a vendor produces a product in a batch production environment and supplies it to multiple buyers under deterministic conditions stationarity of buyers demands does not imply stationarity of the demand at the vendor which follows a periodic sequence we consider buyers and the vendor demands as periodic sequences in this case some turnpike policies relative to the class of periodic dynamic parameter problems are recommended some remarks on the existence of planning and forecast horizons are also given

economic policy uncertainty shocks and stock bond correlations evidence from the us market abstract this paper examines the effects of economic policy uncertainty shocks on stock bond correlations for the us market we devise a general framework which distinguishes a positive shock from a negative one and nests either as its special case the results show that innovations in the policy uncertainty index impact negatively and asymmetrically on the subsequent stock bond correlations which are characterized by a structural break and positive type asymmetry

coveting thy neighbor s manufacturing the dilemma of state income apportionment abstract this paper investigates the economic impact of the apportionment formulae used to divide corporate income taxes among the states most apportionment formulae by including payroll turn the state corporate income tax at least partially into a payroll tax using panel data from 1978 1994 the results show that this distortion has an important effect on state level employment for the average state reducing the payroll weight from one third to one quarter increases manufacturing employment around 1 1 concentrated in durable goods manufacturing and with larger effects in the long run the results also suggest that apportionment changes have important negative externalities on other states on average the aggregate effects of apportionment formula changes are close to zero

on the different approaches of measuring uncertainty shocks as uncertainty has become an increasingly prominent source of business cycle fluctuations various uncertainty proxies have been proposed in the literature this paper shows that uncertainty measures based on realized variables fluctuate more than the measures that are based on forecasts more precisely the variation in the realized cross sectional standard deviation of profit growth and stock returns is larger than the variation in the forecast standard deviation moreover the forecast standard deviation of profit growth and stock returns are negatively or uncorrelated the uncertainty measures increase stock returns due to a risk premium but they decrease profit growth

market crashes and informational avalanches this paper analyses a security market with transaction costs and a sequential trading structure transaction costs may prevent many traders from revealing their private information if they trade in a sequential fashion due to the information aggregation failure hidden information gets accumulated in the market which may be revealed by a small trigger yielding a high volatility in the absence of an accompanying event the paper first characterizes the optimal trading strategy of the agent which constitute the unique equilibrium further properties of the price sequence are obtained using the concepts of informational cascade and informational avalanche the results are applied to the explanation of market crashes in particular the dynamics of market crashes are illustrated as evolving through the following four phases 1 boom 2 euphoria 3 trigger and 4 panic where the euphoria corresponds to the informational cascade and the panic corresponds to the informational avalanche

presidential cycles and time varying bond stock market correlations evidence from more than two centuries of data abstract utilizing a dcc garch model to capture time varying correlations we show that democratic administrations are generally associated with lower degree of co movement between the stock and government bond returns the findings are in line with the documented presidential cycle effect on stock market returns and corroborate recent evidence that when risk aversion is high agents tend to elect the democratic party

investment and cash flow new evidence we study the investment cash flow sensitivities of u s firms from 1971 2009 our tests extend the literature in several key ways and provide strong evidence that cash flow explains investment beyond its correlation with q a dollar of current and prior year cash flow is associated with 0 63 of additional investment for firms that are the most likely to be constrained even after correcting for measurement error in q our results suggest that financing constraints and free cash flow problems are important for investment decisions

option exercise games an application to the equilibrium investment strategies of firms under the standard real options approach to investment under uncertainty agents formulate optimal exercise strategies in isolation and ignore competitive interactions however in many real world asset markets exercise strategies cannot be determined separately but must be formed as part of a strategic equilibrium this article provides a tractable approach for deriving equilibrium investment strategies in a continuous time cournot nash framework the impact of competition on exercise strategies is dramatic for example while standard real options models emphasize that a valuable option to wait leads firms to invest only at large positive net present values the impact of competition drastically erodes the value of the option to wait and leads to investment at very near the zero net present value threshold copyright 2002 oxford university press

coordinated supply chain management abstract historically the three fundamental stages of the supply chain procurement production and distribution have been managed independently buffered by large inventories increasing competitive pressures and market globalization are forcing firms to develop supply chains that can quickly respond to customer needs to remain competitive these firms must reduce operating costs while continuously improving customer service with recent advances in communications and information technology as well as a rapidly growing array of logistics options firms have an opportunity to reduce operating costs by coordinating the planning of these stages in this paper we review the literature addressing coordinated planning between two or more stages of the supply chain placing particular emphasis on models that would lend themselves to a total supply chain model finally we suggest directions for future research

analysis of deteriorating inventory production systems using a linear quadratic regulator we consider an inventory production system where items deteriorate at a constant rate the objective is to develop an optimal production policy that minimizes the cost associated with inventory and production rate the inventory problem is first modeled as a linear optimal control problem then linear quadratic regulator lqr technique is applied to the control problem in order to determine the optimal production policy examples are solved for three different demand functions sensitivity analysis is then conducted to study the effect of changing the cost parameters on the objective function

economic policy uncertainty and risk spillovers in the eurozone this paper focuses on the impact of economic policy uncertainty on risk spillovers within the eurozone and contributes to these two growing literatures to this end we adapt the two step procedure developed by adrian and brunnermeier forthcoming in the framework of financial systemic risk to the sovereign bond market accordingly we attempt i to measure the extent to which distress affecting one given country s sovereign spreads can affect the eurozone s bond market as a whole and then ii to identify the determinants of risk spillovers by estimating a panel data model with macroeconomic state variables and economic policy uncertainty epu indices introduced by baker et al 2013 as regressors epu indices considered concern the four largest eurozone countries i e germany france italy and spain as well as the united states the model is estimated with quarterly data for ten countries representing the bulk of debt issuances within the eurozone over a period ranging from q4 2008 to q2 2013 which is characterized by historically high dispersion of sovereign bond spreads either across time or across countries our results support the idea that economic policy uncertainty in the core economies of the eurozone i e germany and france as well as in the largest periphery countries i e italy and spain can create an environment likely to exacerbate the transmission of risk arising from abnormal developments of individual countries sovereign spreads to the eurozone bond market as a whole in this respect our results plead for larger effort of eurozone leaders to reduce the uncertainty surrounding their economic policy in periods of crisis not only to avoid adverse effects on their own economies but also to reduce the risk of a destabilization of the eurozone sovereign bond market as a whole

does economic policy uncertainty in the u s influence stock markets in china and india time frequency evidence this paper uses continuous and discrete wavelet tools to evaluate the dynamic correlation and causality between the u s economic policy uncertainty epu and stock markets in china and india from

tax uncertainty and investment a cross country empirical examination i introduction spanning a period of nearly 100 years of economic research a substantial body of literature has developed with the goal of explaining the behavior of investment over time 1 although many of these studies have considered the implications of tax policy for investment in an uncertain world most have also implicitly assumed that the tax policy itself does not contribute to the uncertainty the problem is that tax policy can be very uncertain in many cases 2 and to date we know little about the consequences especially from an empirical standpoint more generally empirical evaluations of uncertainty and investment are very limited compared with the development of theoretical analyses calcagnini and saltari 2000 and the case of tax uncertainty is no exception this article sets out to fill part of the intellectual void by empirically investigating the impact of volatility in effective tax rates on investment in a cross section of countries namely the 15 countries of the european union eu the united states and japan in doing so i first estimate tax rate volatility using an arch specification with data on effective capital tax rates i then provide panel regression results using the system generalized method of moments gmm sys estimator of arellano and bover 1995 see also blundell and bond 1998 which suggest that the volatility of effective tax rates on capital have a significant negative impact on investment per worker in these countries the remainder of the article proceeds as follows section ii briefly reviews the existing literature on tax policy uncertainty and investment as well as existing empirical studies of uncertainty in general and investment section iii develops the empirical model i employ to estimate the relationship between tax volatility and investment section iv then presents an analysis of effective tax rates in the eu countries the united states and japan followed by a discussion of the data and econometric issues in section v and an examination of the effects of tax rate volatility on investment in section vi section vii provides concluding remarks ii theoretical foundations tax policy uncertainty and investment although most of the voluminous literature on tax policy and investment under uncertainty ignores observed randomness in tax policy a recent set of literature has begun to explore these issues in some detail mostly through simulation 3 the basic premise underlying these studies is that because output price uncertainty tends to retard investment pindyck 1988 4 tax uncertainty might be expected to harm investment as well hassett and metcalf 1999 further credence to a negative relationship between tax uncertainty and investment is given by the business community s mantra that they cannot make plans if they don t have confidence in the tax structure bizer and judd 1989 223 these simulation studies however demonstrate that the impact of tax uncertainty depends crucially on the source and nature of the uncertainty contrary perhaps to conventional wisdom in some cases increased uncertainty can be shown to have positive effects on investment growth or welfare bizer and judd 1989 simulate the economic effects of introducing random tax policy in a dynamic general equilibrium model they find that if random tax rates or credits are serially correlated the target capital stock falls when taxes are high and rises when taxes are low their more interesting case considers independently and identically distributed random tax shocks in this case the authors find that randomness in investment tax credits generates large fluctuations in investment which have the effect of reducing both utility and production because both are concave functions as well revenue 5 they find that variance in future tax rates however is not important for long term investments and in fact raises nontrivial mounts of revenue at a welfare cost that is never more than the cost associated with raising an equivalent amount of revenue with a permanent increase in a deterministic tax rate

assessing the effects of local taxation using microgeographic data we study the impact of local taxation on the location and growth of firms our empirical methodology pairs establishments across jurisdictional boundaries to estimate the impact of taxation our approach improves on existing work as it corrects for unobserved establishment heterogeneity for unobserved time varying site specific effects and for the endogeneity of local taxation applied to data for english manufacturing establishments we find that local taxation has a negative impact on employment growth but no effect on entry

uncertainty and the geography of the great recession we document the link between increased levels of economic and policy uncertainty and unemployment at the state level during the 2007 2009 recession the cross sectional variation in uncertainty robustly matches the distribution of employment outcomes during this period when we instrument for this cross sectional variation using preexisting institutions we find evidence for a causal role for uncertainty in increasing unemployment a simple model of hiring and firing under uncertainty rationalizes these results and the within state distribution of effects across industries occupations and individuals is consistent with this model s predictions together these results suggest that increased uncertainty contributed to the severity of the great recession

uncertainty and crude oil returns we use a copula approach to investigate the effect of uncertainty on crude oil returns using copulas to construct multivariate distributions of time series data permit the calculation of the dependence structure between the series independently of the marginal distributions further we implement the copula estimation using a rolling window method to allow for a time varying effect of equity and economic policy uncertainty on oil returns the results show that higher uncertainty as measured by equity and economic policy uncertainty indices significantly increase crude oil returns only during certain periods of time that is we find a positive dependence prior to the financial crisis and great recession interestingly estimation of the copula over the entire sample period leads to a negative dependence between the equity and economic policy indices and the crude oil return

tax avoidance and business location in a state border model abstract previous studies have struggled to demonstrate that higher taxes deter business activity we revisit this issue by estimating the effect of changes over time in cross border differences in state tax conditions on the tendency for new establishments to favor one side of a state border over the other identification is enhanced by taking account of previously overlooked reciprocal agreements that require workers to pay income tax to their state of residence as opposed to their state of employment when reciprocal agreements are in force higher personal income tax rates lure companies from across the border while corporate income tax and sales tax rates have the opposite effect where reciprocal agreements are not in place the results are largely reversed these patterns are amplified in heavily developed locations and differ in anticipated ways by industry and corporate non corporate status of the establishment overall results strengthen the view that state level tax policies do affect the location decisions of entrepreneurs and new business activity but not in a way that lends itself to a one size fits all summary

economic policy uncertainty financial markets and probability of us recessions we use probit recession forecasting models to assess the ability of economic policy uncertainty indexes developed by baker et al 2013 to predict future us recessions the model specifications include policy indexes on their own and in combination with financial variables such as interest rate spreads stock returns and stock market volatility both in sample and out of sample analysis suggests that the policy uncertainty indexes are statistically and economically significant in forecasting recessions at the horizons beyond five quarters the index based on newspaper reports emerges as the best predictor outperforming the term spread at the longer forecast horizons

does bankruptcy law affect business turnover evidence from new and existing business this study examines how differences in state bankruptcy laws specifically the homestead exemption affect business turnover by studying both new and existing businesses we focus on areas just near state boundaries to control for unobserved local attributes to better isolate the effect of more wealth protection we find that an increase in the homestead exemption attracts new businesses but also has a positive impact on existing businesses suggesting that asset protection through bankruptcy law encourages successful entrepreneurs to incur the risks our results indicate that the personal bankruptcy law is an important policy tool that governments can use to encourage business growth without causing business turnover jel k30 k36 r11 r1

state investment tax incentives a zero sum game abstract over the past four decades state investment tax incentives have proliferated this emergence of state investment tax credits itc and other investment tax incentives raises two important questions 1 are these tax incentives effective in achieving their stated objective to increase investment within the state 2 to the extent these incentives raise investment within the state how much of this increase is due to investment drawn away from other states to begin to answer these questions we construct a detailed panel dataset for 48 states for 20 years the dataset contains series on output and capital their relative prices and establishment counts the effects of tax variables on capital formation and establishments are measured by the jorgensonian user cost of capital that depends in a nonlinear manner on federal and state tax variables cross jurisdictional differences in state investment tax credits and state corporate tax rates entering the user cost combined with a panel that is long in the time dimension are key to identifying the effectiveness of state investment incentives two models are estimated the capital demand model is motivated by the first order condition for a profit maximizing firm and relates at the state level the capital output ratio to the relative user cost of capital the twin counties model exploits both the spatial breaks discontinuities in tax policy at state borders and our panel dataset to relate at the county level the relative user cost to the location of manufacturing establishments using the capital demand model we find that own state capital formation is substantially increased by tax induced reductions in the own state price of capital and more interestingly substantially decreased by tax induced reductions in the price of capital in competitive states similarly using our twin counties model we find that county manufacturing establishment counts around state borders are higher on the side of the border with the lower price of capital but the difference is economically small suggesting that establishments are much less mobile than overall capital extensions of the capital demand model also reveal that state capital tax policy appears to be a zero sum game among the states in that an equiproportionate increase in own state and competitive states user costs tends to have no effect on own state capital formation

credible research designs for minimum wage studies a response to neumark salas and wascher the authors assess the critique by neumark salas and wascher 2014 of minimum wage studies that found small effects on teen employment data from 1979 to 2014 contradict nsw the authors show th

directional predictability from oil market uncertainty to sovereign credit spreads of oil exporting countries evidence from rolling windows and crossquantilogram analysis abstract given the recent collapse of oil prices this study investigates the directional predictability from the oil market uncertainty to the sovereign credit default swap cds spreads of four oil exporting gcc countries bahrain qatar saudi arabia and united arab emirates and five other oil exporting countries brazil mexico norway russia and venezuela using the modified bootstrap rolling window approach the empirical results reveal a significant directional predictability from oil uncertainty to the cds spreads of most of those oil exporting countries during the subperiods 2010 2011 and 2014 2015 that is during the periods when oil volatility follows a rising trend the most significant directional predictability is found for qatar bahrain saudi arabia and norway particularly during the 2014 2015 oil price collapse subperiod whereas there is no directional predictability found in the case of brazil for mexico the oil market uncertainty predicts cds spreads mostly during 2014 and for venezuela the directional predictability flows are highly impactful and concentrated during 2011 13 to check the robustness of our estimations we use a novel quantile dependence measure called the cross quantilogram that was developed by han et al 2016 the estimation results of this approach confirm our main findings and indicate that the surge in oil volatility predicts the cds spreads in different quantiles overall the findings highlight that the sovereign credit risk of the gcc and the other oil exporting countries is at least partially driven or directionally predicted by the oil volatility shocks this has important implications for investment and policy decisions

samuelson and neoclassical economics this is not a festschrift but a study of the prodigious samuelson phe nomenon his history making contributions to and impact on the econom ics of our age and the intricate often perplexing and divergent trends in modern economics all intensely controversial subjects that will be argued scrutinized and periodically reassessed by economists of various strands and traditions for years to come for as samuelson wrote of pigou immortality does have its price a scholar with such an out standing body of contributions must expect other men to swarm about it 1966 p 1233 subject it to scholarly scrutiny and challenge it although paul samuelson was 65 on may 15 1980 and our best wishes go out to him for long life and continued enrichment of economics this is neither a birthday party nor a gathering of only the good fairies for as he himself has said of marx a great scholar deserves the compliment of being judged seriously and critically 1972 p 268 in accordance with the rule of roman law audiatur et altera pars i have invited representative scholars of widely divergent perceptions to offer their critical evaluation of the age of samuelson while the response was by and large gratifying some scholars were unable to meet the deadline ix x preface and with much compunction i have had to expand my own essays to partly fill the gaps

the single vendor single buyer integrated production inventory model with a generalised policy abstract this note considers a more general type of policy for the single vendor single buyer integrated production inventory model than has hitherto been presented based on successive shipments to the buyer within a single production batch increasing by a fixed factor

strategic growth options we provide a strategic rationale for growth options under uncertainty and imperfect competition in a market with strategic competition investment confers a greater capability to take advantage of future growth opportunities this strategic advantage leads to the capture of a greater share of the market either by dissuading entry or by inducing competitors to make room for the stronger competitor as a result of this strategic effect payoffs are in a rough sense more convex than in the case of no investment in a growth option when the strategic advantage is strong increased uncertainty encourages investment in growth options higher uncertainty means more opportunity rather than simply larger risk if the strategic effect is weak the reverse is true on the other hand an increase in systematic risk discourages the acquisition of growth options our results contradict the view that volatility is a strong disincentive for investment

dynamic co movements of stock market returns implied volatility and policy uncertainty we examine time varying correlations among stock market returns implied volatility and policy uncertainty our findings suggest that correlations are indeed time varying and sensitive to oil demand shocks and us recessions

how does economic policy uncertainty drive gold stock correlations evidence from the uk abstractin this article we investigate the effects of economic policy uncertainty epu on correlations between the uk stock market and gold market we find that less certain economic policies result in lower correlations while more certain economic policies result in higher correlations the correlations are symmetric and show no structural breaks caused by the recent financial crisis the recent financial crisis has not changed epu effects on the correlations the effects of one positive one standard deviation shock of the logarithmic change rate of the epu on the correlations last approximately 19 months

business cycle synchronization during us recessions since the beginning of the 1870s this paper examines the synchronization of business cycles across the g7 countries during us recessions since the 1870 s using a dynamic measure of business cycle synchronization results depend on the globalisation period under consideration on average us recessions have significantly positive effects on business cycle co movements only in the period following the breakdown of the bretton woods system of fixed exchange rates while strongly decoupling effects among the g7 economies are documented during recessions that occurred under the classical gold standard during the 2007 2009 recession business cycles co movements increased to unprecedented levels

on the link between the us economic policy uncertainty and exchange rates employing dynamic conditional correlation garch dcc garch model this paper analyzes spillover effects of the us economic policy uncertainty shock on real effective exchange rates with the data from january 2000 to december 2014 we find that the correlations between the us epu and the returns of the high yielding currencies are consistently negative throughout the sample period while the correlation between the us epu and the returns of japanese yen is consistently positive moreover we find that the correlations tend to be intensified during two post 2000 recession episodes

macroeconomic uncertainty cultural traits and entrepreneurship the relationship between macroeconomic uncertainty and entrepreneurial activities has been the subject of intense debate among researchers however existing empirical studies report mixed findings

dynamic spillovers of oil price shocks and economic policy uncertainty this study examines the dynamic relationship between changes in oil prices and the economic policy uncertainty index for a sample of both net oil exporting and net oil importing countries over the period 1997 01 2013 06 to achieve that an extension of the diebold and yilmaz 2009 2012 dynamic spillover index based on structural decomposition is employed the results reveal that economic policy uncertainty oil price shocks responds negatively to aggregate demand oil price shocks economic policy uncertainty shocks furthermore during the great recession of 2007 2009 total spillovers increase considerably reaching unprecedented heights moreover in net terms economic policy uncertainty becomes the dominant transmitter of shocks between 1997 and 2009 while in the post 2009 period there is a significant role for supply side and oil specific demand shocks as net transmitters of spillover effects these results are important for policy makers as well as investors interested in the oil market

economic policy uncertainty and unemployment in the united states a nonlinear approach we model us post wwii monthly data with a smooth transition var model and study the effects of an unanticipated increase in economic policy uncertainty on unemployment in recessions and expansions we find the response of unemployment to be statistically and economically larger in recessions a state contingent forecast error variance decomposition analysis confirms that the contribution of epu shocks to the volatility of unemployment at business cycle frequencies is markedly larger in recessions

the economic policy uncertainty and firm investment in australia this paper examines the impact of economic policy uncertainty epu on the australian firm investment activity we find a significant positive relationship between the epu and the firm investment o

policy uncertainty and mergers and acquisitions this research examines the relationship between policy uncertainty and mergers and acquisitions m as we find that policy uncertainty is negatively related to firm acquisitiveness and positively related to the time it takes to complete m a deals in addition policy uncertainty motivates acquirers to use stock for payment and to pay lower bid premiums acquirers on average create larger shareholder value from m a deals undertaken during periods of high policy uncertainty which is attributable to their prudence as well as the wealth transfer from the financially constrained targets to acquirers

business as usual market crashes and wisdom after the fact the authors present a three stage model of market dynamics in the first stage routine behavior tends to keep information of common interest trapped in private hands in the second stage private information reaches a threshold that triggers some agents to alter their behavior these actions release information to the market the final stage involves the market s response to this news as other participants react to the initial departure from routine behavior the authors present an application to industry investment they also outline applications to the international debt crisis to bank runs and to political upheavals copyright 1994 by american economic association

uncertainty shocks and unemployment dynamics in u s recessions abstract what are the effects of uncertainty shocks on unemployment dynamics we answer this question by estimating non linear smooth transition vars with post wwii u s data the relevance of uncertainty shocks is found to be much larger than that predicted by standard linear vars in terms of i magnitude of the reaction of the unemployment rate to such shocks and ii contribution to the variance of the prediction errors of unemployment at business cycle frequencies the ability of different classes of dsge models to replicate our results is discussed

is there a role for uncertainty in forecasting output growth in oecd countries evidence from a time varying parameter panel vector autoregressive model this paper uses a time varying parameter panel vector autoregressive tvp pvar model to analyze the role played by domestic and us news based measures of uncertainty in forecasting the growth of industrial production of 12 organisation for economic co operation and development oecd countries based on a monthly out of sample period of 2009 06 to 2017 05 given an in sample of 2003 03 to 2009 05 there are only 46 of cases where domestic uncertainty can improve the forecast of output growth relative to a baseline monetary tvp pvar model which includes inflation interest rate and nominal exchange rate growth besides output growth moreover including us uncertainty does not necessarily improve the forecasting performance of output growth from the tvp pvar model which includes only the domestic uncertainty along with the baseline variables so in general while uncertainty is important in predicting the future path of output growth in the 12 advanced economies considered a forecaster can do better in majority of the instances by just considering the information from standard macroeconomic variables

international spillovers of policy uncertainty using the baker et al 2013 index of policy uncertainty for six developed countries this paper estimates spillovers of policy uncertainty we find that spillovers account for slightly more than one fourth of the dynamics of policy uncertainty in these countries with this share rising to one half during the financial crisis the us and uk are responsible for a large fraction of the spillovers since the financial crisis while the remaining countries are all net receivers of policy uncertainty shocks during and after this period

on international uncertainty links bart based empirical evidence for canada we use the indexes of economic policy uncertainty epu developed by baker et al 2015 for canada and seven china france germany japan russia united kingdom and united states other countries to study international uncertainty links by means of a bayesian additive regression trees bart algorithm using partial dependence plots relative importance measures and permutation tests we shed light on how epu in canada is linked to epu in seven other countries

investigating asymmetric determinants of the cny cnh exchange rate spreads the role of economic policy uncertainty abstract this study investigates the asymmetric effects of economic policy uncertainty epu and other possible determinants on the cny cnh spreads by utilizing the nonlinear ardl model for this purpose we construct a novel epu index based on the epu indices of china and the g7 countries by using principal component analysis the results show substantial asymmetric effects of the concerned determinants on the spreads moreover the composite epu significantly affects the spreads with positive shocks to the composite epu inducing widening cny cnh spreads