a semiparametric approach to short term oil price forecasting abstract in this paper it is shown how the garch properties of oil price changes can be employed to forecast the oil price distribution over short term horizons the forecasting methodology is semiparametric and it is based on the bootstrap approach the results of an out of sample forecasting exercise carried out using the brent oil price series suggest that the forecasting approach can be used to obtain a performance measure for the forward price in addition to compute interval forecasts for the oil price

candidate selection procedures seniority and vote seeking behavior it has been argued that inclusive and decentralized selection procedures create greater incentives for parliamentarians to enhance their personal reputations however while the observable implications of this theory are at the level of individual members the empirical data often brought to bear on this question to date have been collected at an aggregate level the partisan bloc or legislative term despite some previously positive aggregate results the author finds no discernible support for the connection between candidate selection procedures and vote seeking behavior in israel at the individual parliamentarian level the author suggests an alternative theory based on the stage of the legislative career that explains both individual level behavior and the aggregate level trend

pitfalls in the measurement of real exchange rate effects on agriculture abstract studies of the effects of real exchange rates on agriculture commonly assume that these effects can be identified as those which pertain to traded goods in the standard australian model of an open economy further it is common to assume that the indirect effects of changes in the real exchange rate have the same impact on the various production activities within agriculture this paper discusses the extent to which these stylized facts reflect reality focusing in particular on the extent of tradibility in agricultural markets the irrelevance of results based on free trade equilibria to policy analyses and the importance of the characteristics of crop production functions in estimating the effects of real exchange rate changes ignoring these considerations can cause errors in the measurement of policy effects on agricultural incentives

contingent transmission rights in the standard market design we define transmission rights that are compatible with the federal energy regulatory commission s proposed standard market design smd and that provide flexibility in the points of receipt or delivery of energy contracts the contingent transmission rights introduced here provide a viable flexible method for defining smd compatible rights for transmission customers having current pre smd transmission rights that cover multiple points these contingent rights can be bought and sold in the transmission rights auctions under smd

forecasting electricity prices and their volatilities using unobserved components abstract the liberalization of electricity markets more than ten years ago in the vast majority of developed countries has introduced the need of modelling and forecasting electricity prices and volatilities both in the short and long term thus there is a need of providing methodology that is able to deal with the most important features of electricity price series which are well known for presenting not only structure in conditional mean but also time varying conditional variances in this work we propose a new model which allows to extract conditionally heteroskedastic common factors from the vector of electricity prices these common factors are jointly estimated as well as their relationship with the original vector of series and the dynamics affecting both their conditional mean and variance the estimation of the model is carried out under the state space formulation the new model proposed is applied to extract seasonal common dynamic factors as well as common volatility factors for electricity prices and the estimation results are used to forecast electricity prices and their volatilities in the spanish zone of the iberian market several simplified alternative models are also considered as benchmarks to illustrate that the proposed approach is superior to all of them in terms of explanatory and predictive power

primaries the unifying force we present a formal model of intra party politics to explain candidate selection within political parties we think of parties as heterogeneous groups of individuals who aim to implement a set of policies but who differ in their priorities when party heterogeneity is too great parties are in danger of splitting into smaller yet more homogeneous political groups in this context we argue that primaries can have a unifying role if the party elite cannot commit to policy concessions our model shows how three factors interact to create incentives for the adoption of primary elections namely 1 the alignment in the preferred policies of various factions within a party 2 the relative weight of each of these factions and 3 the electoral system we discuss the existing empirical literature and demonstrate how existing studies can be improved in light of our theoretical predictions to provide a new structured perspective on the adoption of primary elections

policy adjustments to the oil boom and their evaluation the dutch disease in indonesia abstract this paper analyzes the effects of two policy adjustments namely exchange rate devaluation and the accumulation of budget surpluses to the oil export boom in indonesia by using a simple simulation model our results indicate that exchange rate adjustment had a significant impact on expansion of tradable sectors especially the manufacturing sector by reversing the real exchange rate while officially maintaining the balanced budget principle the government exercised delicate operations whereby the budget surpluses were covertly accumulated as government deposits such operations were executed as a necessary demand management policy to ensure that the effect of devaluation was persistent these policy adjustments were consistent from a macroeconomic management point of view and have contributed to avoiding the dutch disease that indonesia otherwise might have suffered because of its oil bonanza

real exchange rates and macroeconomics a selective survey the paper discusses real exchange rate issues of industrial and of developing countries for real exchange rates among the key industrial countries we ask what is the best conceptual framework to shed light on this question we look at alternative theoretical approaches and at empirical evidence on the relation among interest rates expectations and depreciation the discussion of developing countries real exchange rates focuses on the link between real exchange rates real wages and the profitability of capital the model highlights the discrepancy between the mobility of capital including in the long run physical capital and

financial bilateral contract negotiation in wholesale electricity markets using nash bargaining theory bilateral contracts are important risk hedging instruments constituting a major component in the portfolios held by many electric power market participants however bilateral contract negotiation is a complicated process as it involves risk management strategic bargaining and multi market participation this study analyzes a financial bilateral contract negotiation process between a generation company and a load serving entity in a wholesale electric power market with congestion managed by locational marginal pricing nash bargaining theory is used to model a pareto efficient settlement point the model predicts negotiation outcomes under various conditions and identifies circumstances in which the two parties might fail to reach an agreement both analysis and simulation are used to gain insight regarding how these negotiation outcomes systematically vary in response to changes in the participants risk preferences and price biases

risk constrained ftr bidding strategy in transmission markets in electricity markets financial transmission right is an important instrument for hedging congestion charges there are two types of financial transmission rights point to point right ftr and flow based right fgr this paper proposes a risk constrained ftr bidding strategy in transmission auction markets based on the forecasted lmp differences between sink and source points of certain ftrs bidders try to maximize their expected payoffs by taking into account the associated risks supposing the forecasted distribution of lmp differences and bidders risk preferences are known to respective bidders the ftr bidding problem is modeled as a bilevel optimization with the upper subproblem representing bidders and the lower subproblem representing the solution to the iso s ftr market clearing problem for maximizing the revenues collected from the ftr auction the bilevel optimization problem is solved by developing the sensitivity of a bidder s expected utility with respect to its bidding strategy a three bus system with four bidders is considered for illustrating the proposed method the numerical results discuss the distinction between ftr obligation and ftr option bidding strategies the results further demonstrate the impact of contingency constraints forecasted lmp differences and bidders preferred risk levels on ftr bidding strategies

why are services cheaper in the poor countries in their important work on international comparisons of national incomes and of comparative price structure kravis heston and summers i982 p 8 have noted that services are much cheaper in the relative price structure of a typical poor country than in that of a rich country this phenonomen has been documented now fairly systematically by the data gathered under their guiding hand of the united nations international comparison icp which covers 34 countries table i reproduced from their work i982 and fig i based on rows 3 and ii 13 indeed show this tendencyfor the relationship between relative service prices and real per capita gdp in this kravis heston summers 34 country 6 group sample the tendency is strongly evident except for the intermediate groups iii and iv

the politics of federalism in argentina and its implications for governance and accountability summary this paper contributes to an agenda that views the effects of federalism and decentralization as dependent on the incentives of national and subnational political actors it studies the mechanisms by which subnational actors affect decisions at the central level in the context of a highly decentralized middle income democracy argentina in this federal country provincial actors and concerns weigh heavily on national decisions most argentine provinces are dominated by entrenched elites with limited political competition weak division of powers and clientelistic political linkages provincial dominance and national relevance reinforce each other dragging argentine politics toward the practices and features of its most background regions

bidding strategy of virtual power plant for participating in energy and spinning reserve markets part i problem formulation this paper addresses the bidding problem faced by a virtual power plant vpp in a joint market of energy and spinning reserve service the proposed bidding strategy is a non equilibrium model based on the deterministic price based unit commitment pbuc which takes the supply demand balancing constraint and security constraints of vpp itself into account the presented model creates a single operating profile from a composite of the parameters characterizing each distributed energy resources der which is a component of vpp and incorporates network constraints into its description of the capabilities of the portfolio the presented model is a nonlinear mixed integer programming with inter temporal constraints and solved by genetic algorithm ga

the real exchange rate abstract this essay concerns the real value of the u s relative to the g 10 i what are the dynamics of the fundamental determinants of the real exchange rate and its steady state value ii to what extent are the observed movements in the exchange rate from 1973 to 1988 due to the fundamentals iii how integrated are international capital markets iv how does the real exchange rate respond to a changes in the cyclically adjusted government budget deficit and to b changes in the marginal efficiency of investment

which way the natural gas price an attempt to predict the direction of natural gas spot price movements using trader positions abstract this research provides a method of predicting direction of spot price movements in the natural gas market for the month succeeding from market participants positions in the futures market cumby and modest cumby r e modest d m 1987 testing for market timing ability a framework for forecast evaluation journal of financial economics 19 169 189 provide the backdrop for analyzing the futures market positions of large hedgers and speculators to arrive at conclusions of market price movements in the spot market this methodology is suggested as a means for municipalities entering the natural gas market to improve upon their ordering of quantities of gas for the ensuing months in order to take advantage of possibly foreseeable price trends

the populist road to market reform policy and electoral coalitions in mexico and argentina governing parties face two fundamental tasks they must pursue policies effectively and they must win elections their national coalitions therefore generally include two types of constituencies those that are important for policy making and those that make it possible to win elections in effect governing parties must bring together a policy coalition and an electoral coalition this distinction sheds light on how the transitional costs of major economic policy shifts can be made sustainable in electoral terms it also provides a starting point for analysis of how two of latin america s most important labor based parties the peronist party in argentina and the partido revolucionario institucional pri in mexico maintained electoral dominance while pursuing free market reforms that adversely affected key social constituencies peronism and the pri are conceived of as having encompassed historically two distinctive and regionally based subcoalitions a metropolitan coalition that gave support to the parties development strategies and a peripheral coalition that carried the burden of generating electoral majorities this framework permits a reconceptualization of the historic coalitional dynamics of peronism and the pri and sheds light on the current process of coalitional change and economic reform

the real exchange rate and macroeconomic performance in sub saharan africa abstract pooled time series and cross section data for 33 countries in sub saharan africa ssa confirm the negative relationship between the real exchange rate rer misalignment and economic performance economic growth imports exports saving and investment macroeconomic instability also slows growth and other indicators of performance higher levels of misalignment are accompanied by higher levels of macroeconomic instability both lower levels of rer misalignment and instability lead to better economic performance the edwards model of rer determination performs well for the region black market premia tend to show a greater degree of misalignment in rer than alternative measures

back rooms or ballot boxes candidate nomination in argentina how political parties select their candidates for public office profoundly affects the types of people who are elected as well as how these people behave in office this selection process also provides important insights on how parties function internally and on where political power is located within a country only a few comparative studies of nomination procedures exist and none explain why some parties at some points in time select candidates via direct primaries and others do not the authors analyze an original data set of 610 district level nomination processes for the biennial argentine chamber of deputies elections held between 1983 and 2001 they conclude that several specific institutional and partisan features have a prominent effect on the probability that a political party will choose its candidates at the ballot box direct primary rather than in a smoke filled back room elite arrangement

economic adjustment and exchange rates in developing countries in spite of the attention paid exchange rates in recent economic debates on developing countries relatively few studies have systematically analyzed in detail the various ramifications of exchange rate policy in these countries in this new volume from the national bureau of economic research leading economists use rigorous models to tackle various exchange rate issues while also illuminating policy implications that emerge from their analyses the volume divided into four main sections addresses the role of exchange rates in stabilization programs and the adjustment process the importance of exchange rate policy during liberalization reform in developing countries exchange rate problems relevant and unique to developing countries illustrated by case studies and the problems defining measuring and identifying determinants of real exchange rates authors of individual papers examine the relation between commercial policies and exchange rates the role of exchange rate policy in stabilization programs the effectiveness of devaluations as a policy tool and the interaction between exchange rate terms of trade an capital flow this research will not only prove crucial to our understanding of the role of exchange rates in developing countries but will clearly set the standard for future work in the field

structural determinants of real exchange rates and national price levels some empirical evidence contrary to the long held notion of purchasing power parity ppp economists have found systematic evidence that the general level of prices across countries at a point in time varies dramatically irving b kravis alan w heston and robert summers 1982 for example report that some countries national price levels are no more than one third the u s price level extensions of this work show that such departures from ppp have persisted for decades recently efforts have been made to explain systematically these persistent or structural departures from ppp pioneering work by kravis and robert e lipsey 1983 1987 1988 has demonstrated that a positive correlation between the price level and real per capita gross domestic product is robust across numerous cross sectional specifications for instance using data from kravis et al 1982 table 6 12 87 percent of the variation in national price levels pl of 21 countries in 1975 is explained by per capita gdp y and a constant

real exchange rate behavior and economic performance in ldcs in recent years policy discussions have included increasing references to real exchange rate rer stability and correct exchange rate alignment as crucial conditions to improve economic performance in less developed countries ldcs 1 evidence from latin american asian and african countries is often quoted to support the view that the link between rer behavior and economic performance is strong it is argued that while unstable rers inhibited export growth in some of latin america their stability was fundamental in promoting east asian expansion in many african countries on the other hand persistently misaligned local currencies harmed the development of agriculture reducing domestic food supply 2 but in spite of its importance no empirical work has been attempted either to test the relationship between rer behavior and performance indicators at a broad multicountry level or to investigate the sources of rer variability and misalignment in ldcs the theoretical literature on rer determinants has been recently surveyed by sebastian edwards 3 he distinguishes between equilibrium and disequilibrium rers and between external and domestic rer determinants although domestic policies are often said to account for significant rer variations empirical work has only concentrated on the effect of nominal devaluations4 or speculative crises arising from expansionary monetary policies in a system of fixed ex

arima models to predict next day electricity prices price forecasting is becoming increasingly relevant to producers and consumers in the new competitive electric power markets both for spot markets and long term contracts price forecasts are necessary to develop bidding strategies or negotiation skills in order to maximize benefit this paper provides a method to predict next day electricity prices based on the arima methodology arima techniques are used to analyze time series and in the past have been mainly used for load forecasting due to their accuracy and mathematical soundness a detailed explanation of the aforementioned arima models and results from mainland spain and californian markets are presented

real interest rate parity new measures and tests abstract international financial theory implies that for international comparisons the appropriate measure of the real interest rate is one defined in terms of traded goods prices alone new measures of the real interest rate are constructed using changes in price indexes for traded goods as deflators these new measures are tested for international real rate equality and the results are compared to those of similar tests using measures based on the change in the cpi and the wpi there are important differences between the traded goods real rate measures and those based on either the cpi or the wpi however in general the tests support the hypothesis that the real interest rate is approximately measured in terms of traded goods jel f30

real exchange rates ppp and the relative price of nontraded goods the purchasing power parity hypothesis ppp states that nominal exchange rates move with differences in relative prices between economies the theory has received considerable attention in the economic literature since cassell 6 and is the foundation of many long run theoretical hypotheses in international finance yet its empirical validity remains in question many tests of ppp focus on the stationarity of the real exchange rate the nominal exchange rate adjusted for changes in price levels between economies if domestic and foreign price levels and the nominal exchange rate are integrated then cointegration between these variables implies the existence of both a long run equilibrium relationship and ppp the residual the real exchange rate then follows a stationary process the paper uses the multivariate cointegration methodology of johansen 16 and johansen and juselius 17 18 to examine the source of real exchange rate nonstationarity is the nonstationarity due to shifts in the domestic and foreign price of nontradeables or productivity differentials between traded and nontraded sectors or is the nonstationarity a possible outcome of difficulties in intercountry comparisons of prices movements associated with construction of these price indices most research finds the real exchange rate follows a nonstationary process due to the presence of a unit root 8 12 1 9 19 27 however the existence of a variable trend in the real exchange rate does not imply the absence of a long run relationship between relative prices levels and nominal exchange rates for two reasons first a long run relationship between price levels and nominal exchange rates may exist but not the one for one relationship implicit in the calculation of real exchange rates due to measurement differences in the construction of price indices between economies second ppp violations may occur due to the presence of permanent productivity innovations which affect the relative price of nontradeables if these shocks are not represented by measurable variables a cointegrating relationship will not exist the paper constructs traded and nontraded gdp price indices and productivity rates for 14 oecd economies and tests 1 if the variable trend the nonstationary process in the real exchange rate is due to permanent innovations in relative price of domestic and foreign nontradeables 2 if long run ppp violations are due to permanent movements in the relative price of nontradeables 3 if the nonstationarity in the real exchange rate is due to permanent innovations in domestic and foreign productivity differentials between the traded and nontraded sectors 4 if the variable trend in the relative price of nontradeables is due to permanent innovations in productivity between sectors lastly the paper constructs a cointegrating error correction model

electricity market price forecasting based on weighted nearest neighbors techniques this paper presents a simple technique to forecast next day electricity market prices based on the weighted nearest neighbors methodology first it is explained how the relevant parameters defining the adopted model are obtained such parameters have to do with the window length of the time series and with the number of neighbors chosen for the prediction then results corresponding to the spanish electricity market during 2002 are presented and discussed finally the performance of the proposed method is compared with that of recently published techniques

a two tier matrix game approach for obtaining joint bidding strategies in ftr and energy markets transmission congestion results in revenue collected from the loads that often exceeds the payment made to the generators the financial transmission right ftr is an instrument that allows the independent system operator iso to redistribute the excess revenue congestion charge among the market participants generators and loads hold ftrs to hedge against congestion charges since the revenues from the ftr and energy markets are interdependent each generator and load must have a joint bidding strategy for ftr and energy markets to maximize its total payoff this paper presents a two tier matrix game model that allows the generators and loads to obtain joint bidding strategies the model also allows the isos and the market designers to assess the impact of various network configurations and rules on market performance e g market power the two tier model considers multiple participants multidimensional bid vectors network contingencies and varying demand we conducted a numerical validation of our model by analyzing the three node network studied by joskow and tirole 2000 additional numerical studies were conducted on a five node network to examine the impact of holding ftrs on the bidding strategies in the energy market and joint payoffs of the participants

a joint energy and transmission rights auction proposal and properties an auction based process is proposed that allows power market participants to acquire and reconfigure financial transmission rights the process simultaneously accommodates flowgate and point to point options and obligations along with energy production and consumption futures a sequence of auctions is held during which participants can buy and sell rights which are then settled in a day ahead or real time auction at which time all rights are cashed out by allowing flowgate and point to point obligations and options to be reconfigured and exchanged the market can decide what combination of financial rights are most useful to power generators consumers and traders rights can be specified not only for capacity of individual flowgates but also for more complex transmission constraints such as nomograms under certain conditions we prove that the auction is revenue adequate for the market operator in that payments to rights holders cannot exceed congestion revenues we present a linearized dc auction along with a numerical illustration

generation scheduling in a deregulated system the norwegian case the paper gives an overview of the deregulated electricity supply system in norway with emphasis on the generation scheduling approach procedures and tools for long medium and short term scheduling are described scheduling is carried out by each individual utility since scheduling is based on profit maximizing the spot market price is a very important factor this price is varying and uncertain however a part of the paper describes how to deal with this by considering the spot market price as an exogenously given stochastic variable it is shown how to extend the common water value computations so as to handle this case implications to the medium and short term scheduling are also discussed

forecasting next day electricity prices by time series models in the framework of competitive electricity markets power producers and consumers need accurate price forecasting tools price forecasts embody crucial information for producers and consumers when planning bidding strategies in order to maximize their benefits and utilities respectively this paper provides two highly accurate yet efficient price forecasting tools based on time series analysis dynamic regression and transfer function models these techniques are explained and checked against each other results and discussions from real world case studies based on the electricity markets of mainland spain and california are presented

external shocks purchasing power parity and the equilibrium real exchange rate two approaches are commonly used to determine the equilibrium real exchange rate in a country after external shocks purchasing power parity ppp calculations and the salter swan tradables nontradables model there are theoretical and empirical problems with both approaches and tensions between them in this article the authors resolve these theoretical and empirical difficulties by presenting a model which is a generalization of the salter swan model and which incorporates imperfect substitutes for both imports and exports within the framework of this model the definition of the real exchange rate is consistent both with that of the ppp approach and with that of the salter swan model suitably extended the model however is capable of capturing a richer set of phenomena including terms of trade shocks and changes in foreign capital inflows it also provides a practical way to estimate changes in the equilibrium real exchange rate requiring little more information than is required to do ppp calculations the results are consistent with those of multisector computable general equilibrum models which generalize the trade specification of the small model

electricity price short term forecasting using artificial neural networks this paper presents the system marginal price smp short term forecasting implementation using the artificial neural networks ann computing technique the described approach uses the three layered ann paradigm with backpropagation the retrospective smp real world data acquired from the deregulated victorian power system was used for training and testing the ann the results presented in this paper confirm considerable value of the ann based approach in forecasting the smp

the subnational politics of economic adjustment provincial politics and fiscal performance in argentina existing research has failed to address the impact of subnational politics on economic adjustment this article attempts to fill this gap by outlining theoretical reasons for anticipating policy divergences across levels of government and by offering three hypotheses to account for variation at the subnational level the authors explore these ideas on the basis of the argentine experience the study traces the impact of subnational policy on argentine economic adjustment and tests hypotheses about subnational policy variation on the basis of provincial fiscal data the authors findings underline the importance of subnational policy choice for national performance and suggest a revised understanding of the role of political competition in the economic adjustment process the authors find considerable evidence that interactions between party competition and the structure of the public sector shape provincial fiscal performance and thereby condition the capacity for economic adjustment at the national level

measuring exchange rate misalignment inflation differentials and domestic relative prices abstract empirical studies of exchange rate misalignment generally use crosscountry differences in overall inflation as proxy measures for a country s real exchange rate rer this paper shows that using such differential inflation proxies introduces two systematic biases in model results understatement of rer movements and a spurious trend towards depreciation these biases can be corrected only with disaggregated data on domestic relative prices of tradable and nontradable products using a standard model with disaggregated data for zimbabwe it is found that proxy based results understate misalignment by almost 25 and exaggerate depreciation by 4 per year

risk constrained bidding strategy with stochastic unit commitment this paper develops optimal bidding strategies based on hourly unit commitment in a generation company genco that participates in energy and ancillary services markets the price based unit commitment problem with uncertain market prices is modeled as a stochastic mixed integer linear program the market price uncertainty is modeled using the scenario approach monte carlo simulation is applied to generate scenarios scenario reduction techniques are applied to reduce the size of the stochastic price based unit commitment problem and postprocessing is applied based on marginal cost of committed units to refine bidding curves the financial risk associated with market price uncertainty is modeled using expected downside risk which is incorporated explicitly as a constraint in the problem accordingly the proposed method provides a closed loop solution to devising specific strategies for risk based bidding in a genco illustrative examples show the impact of market price uncertainty on genco s hourly commitment schedule and discuss the way gencos could decrease financial risks by managing expected payoffs

optimal response of a thermal unit to an electricity spot market this paper addresses the optimal response of a thermal unit to an electricity spot market the objective is to maximize the unit profit from selling both energy and spinning reserve in the spot market the paper proposes a 0 1 mixed integer linear programming approach that allows a rigorous modeling of i nonconvex and nondifferentiable operating costs ii exponential start up costs iii available spinning reserve taking into account ramp rate restrictions and iv minimum up and down time constraints this approach overcomes the modeling limitations of dynamic programming approaches and is computationally efficient results from realistic case studies are reported

real exchange rate misalignment and agricultural export performance in developing countries the influence of fluctuating currency values on agricultural trade has been acknowledged especially since the demise of the bretton woods system of fixed exchange rates following g e schuh s pioneering articles linking exchange rates to country performance in the global agricultural market several attempts were made to quantify the effects of nominal and real exchange rate movements on agricultural trade recently another body of literature emerged aimed at quantifying the effects of exchange rate risk on trade 2 despite these studies inadequate attention has been directed toward analyses of underlying policies that directly influence real exchange rates and that indirectly affect trade performance specifically the issue of incorrect real exchange rate alignment has been ignored real exchange rate misalignment occurs in markets in which actual exchange rates are not allowed to adjust to changes in economic fundamentals unsustainable monetary fiscal and various trade and exchange control policies are its principal cause calculation of misaligned exchange rates is dependent on the ability to disentangle equilibrium from disequilibrium disturbances affecting movements in actual real exchange rates quantification represents a major challenge purchasing power parity ppp provides the simplest way to estimate misalignment however real exchange rate deviations from ppp often do not indicate incorrect alignment of the real exchange rate because the actual rate ought to vary in response to external or internal shocks that modify the equilibrium rate ideally misalignments are measured using real exchange rates that are permitted to vary in response to changed economic conditions the changing path of real equilibrium exchange rates is somewhat elusive and can be identified using a structural model