measuring systemic risk adjusted liquidity srl a model approach abstract little progress has been made so far in addressing in a comprehensive way the negative externalities caused by excessive maturity transformation and the implications for effective liquidity regulation of banks the srl model combines option pricing theory with market information and balance sheet data to generate probabilistic measure of systemic liquidity risk it enhances price based liquidity regulation by linking a bank s maturity mismatch impacting the stability of its funding with those characteristics of other banks subject to individual changes in risk profiles and common changes in market conditions impacting funding and market liquidity risk this approach can then be used i to quantify an individual institution s time varying contribution to expected losses from system wide liquidity shortfalls and ii to price insurance premia that provide incentives for banks to internalize the social cost of their individual funding decisions

pricing risk adjusted deposit insurance an option based model this paper presents a methodology for arriving at empirical estimates of deposit insurance premiums from market data by using isomorphic relationships betweeen equity and a call option and insurance and a put option the data utilizes the market value of equity to solve for the asset value and its volatility market perceptions of fdic bailout policies are explicitly modeled so as to eliminate the bias in inverted values of assets and their volatility sensitivity analyses are performed to show that rank orderings based on premiums are robust to changes in specification thus facilitating allocation of aggregate premium across banks while economists have long argued in favor of risk adjusted deposit insurance as both more equitable and more efficient than the current system of flatrate premiums various recent developments have further contributed to an increasing dissatisfaction with the current system first both the banking industry and the government seem to be tending to the view that deregulation of the banking industry would be necessary in order to meet more sophisticated future demands on the industry as well as desirable as a policy means of stimulating greater competition among banks moreover a sudden rise in the incidence of bank failures 1 and the vulnerability of the u s banks to the socalled international debt crisis have served to bring to the fore concern about the health of the banking industry in the absence of deposit insurance riskier banks will be able to attract deposits only at higher rates and these higher costs of funding serve as built in market regulated incentives to limit excessive risk taking by banks as introduction of deposit insurance makes deposits equally risk free across banks these incentives disappear and regulation and close supervision of the banking industry must necessarily replace them as deterrents to excessive risk taking thus when insurance is offered at a flat premium regulation is designed to ensure that the risk posed to the insurer both asset and financial risk is appropriately uniform

environmental drag evidence from norway abstract economic growth affects the environment negatively a polluted environment and other environmental constraints reduce economic output and the well being of consumers the cost to society of environmental constraints may be called the environmental drag the traditional economic analysis of growth neglects the environmental drag while this paper attempts to measure it empirically we employ a dynamic general equilibrium model of the norwegian economy extended to include some important environmental linkages which feed back to the productivity of labor and capital from damages to health materials and nature the environment also directly affects the consumers well being using this model we are able to estimate the environmental drag measured as reduced welfare from consumption and environmental services we present macroeconomic effects in terms of reduced production and consumption and calculate the overall welfare effects we find that the environmental constraints incorporated in the model probably have a modest effect on production over the next century the direct welfare loss from a degraded environmental quality however is significant a lower rate of technological growth and a lower discount rate both increase the drag

energy consumption real income and temporal causality results from a multi country study based on cointegration and error correction modelling techniques abstract unlike previous studies on the causal relationship between energy consumption and economic growth this paper illustrates how the finding of cointegration i e long term equilibrium relationship between these variables may be used in testing granger causality based on the most recent johansen s multivariate cointegration tests preceded by various unit root or non stationarity tests we test for cointegration between total energy consumption and real income of six asian economies india pakistan malaysia singapore indonesia and the philippines non rejection of cointegration between variables rules out granger non causality and imples at least one way of granger causality either unidirectional or bidirectionial secondly by using a dynamic vector error correction model we then analyse the direction of granger causation and hence the within sample granger exogeneity or endogeneity of each of the variables thirdly the relative strength of the causality is gauged through the dynamic variance decomposition technique by decomposing the total impact of an unanticipated shock to each of the variables beyond the sample period into proportions attributable to shocks in the other variables including its own in the bivariate system results based on these tools of methodology indicate that while all pair wise relationships shared common univariate integrational properties only relationships for three countries india pakistan and indonesia were cointegrated for these countries temporal causality results were mixed with unidirectional causality from energy to income for india exactly the reverse for indonesia and mutual causality for pakistan the vdcs were not inconsistent with these results and provided us with an additional insight as to the relatively more dominant direction of causation in pakistan simple bivariate vector autoregressive models for the three non cointegrated systems did not indicate any direction of causality significantly in either direction

environment and development is there a kuznets curve for co2 emissions this article re examines the relationship between growth in per capita income and environmental degradation using econometric techniques appropriate for smooth transition regressions with panel data this is a more intuitive and flexible methodology than the polynomial models widely used in the literature and it can reconcile some of the mixed results found previously the methodology is applied to carbon dioxide emissions from nonoecd countries over the period 1971 to 1997 although there is no evidence of environmental kuznets curve we find two regimes namely a low income regime where emissions accelerate with economic growth and a middle to high income regime associated with a deceleration in environmental degradation

how does energy consumption affect china s urbanization new evidence from dynamic threshold panel models abstract energy consumption may play different roles at different stages of urbanization and economic growth given china s rapid economic development and urbanization process this study tries to explore the possible nonlinear relationship between energy consumption and urbanization in china against the background of promoting new type urbanization the level of china s urbanization is evaluated comprehensively using the entropy method a newly developed dynamic threshold panel model is employed to examine the nexus of energy consumption and comprehensive urbanization with full consideration of heterogeneous characteristics the panel data vector autoregression or pvar model is also used to estimate the direct effects of various energy consumption patterns on the urbanization the empirical results indicate that the nexus of energy consumption and urbanization is indeed nonlinear and that energy consumption is conducive to promote china s urbanization at the current stage of development however the positive effect decreases when there is an increase in energy consumption intensity and energy consumption scale whereas the effect increases with the promotion of energy consumption structure

implied volatility functions empirical tests derman and kani 1994 dupire 1994 and rubinstein 1994 hypothesize that asset return volatility is a deterministic function of asset price and time and develop a deterministic volatility function dvf option valuation model that has the potential of fitting the observed cross section of option prices exactly using s p 500 options from june 1988 through december 1993 we examine the predictive and hedging performance of the dvf option valuation model and find it is no better than an ad hoc procedure that merely smooths black scholes 1973 implied volatilities across exercise prices and times to expiration

economic growth pollution and renewable resources abstract this paper first analyzes a model of economic growth with stock pollution allowing smooth substitution between emissions and reproducible capital when emissions are optimally controlled the steady state consumption is lower than without pollution control but the optimal steady state equilibrium may not exist if the marginal productivity of capital is bounded the steady state is shown to be a local saddle point independent of the rate of discount if pollution is not controlled a competitive economy moves along a stable growth path toward a too heavily polluted steady state next a growth model in which pollution affects the growth of renewable resources is presented the conditions for the existence and saddle point property of the steady state are given and the consequences of nonoptimal externality taxes are discussed when renewable resources are included higher than optimal pollution may decrease steady state consumption contrary to the case where renewable resources are ignored

aggregate spending and the terms of trade is there a laursen metzler effect this paper investigates the spending and current account effects of terms of trade shifts in a model where households maximize utility over an infinite planning period in the framework developed here an economy specialized in production must experience a fall in aggregate spending and a current surplus as a result of an unanticipated permanent worsening in its terms of trade the paper s model thus provides a setting in which the current account deficit predicted by laursen and metzier harberger and others fails to materialize

economic indicators of resource scarcity a critical essay abstract the theoretical arguments of the conceptual and empirical literature on economic indicators of long run resource scarcity are logically flawed if resource allocators were informed of the nature of resource scarcity their behavior and the economic indicators it generates would reflect the scarcity but if they were so informed we could simply ask them if resources were scarce if they are not informed their behavior and economic indicators are as likely to indicate their ignorance as the reality unfortunately there is no way of knowing whether they are informed or not unless we already know whether resources are scarce

energy gdp relationship revisited an example from gcc countries using panel causality abstract this work investigates the causality relationship between gross domestic product gdp and energy consumption in the six countries of the gulf cooperation council gcc recently developed panel cointegration and causality techniques are used to uncover the direction of energy gdp causality in the gcc empirical results indicate a unidirectional causality running from gdp to energy consumption evidence shows no support for the hypothesis that energy consumption is the source of gdp growth in the gcc countries such results suggest that energy conservation policies may be adopted without much concern about their adverse effects on the growth of gcc economies

the impact of us economic variables on bank of canada policy direct and indirect responses abstract the impact of us economic variables on canadian monetary policy is assessed using quarterly data for 1963 88 canadian monetary base growth is regressed upon the least squares predictors of 11 us and canadian variables using a generalized least squares procedure that permits isolation of i direct responses by the monetary authority to its expectations of the us variables and ii indirect responses to past us influences that impact upon the current fitted values of the canadian variables the results reveal significance of both direct and indirect us influences on canadian policy across fixed and floating exchange rate regimes

the economic impact of medical migration an overview of the literature this paper provides an overview of the evidence and applied literature on medical migration the economic impacts of medical migration have been little researched causing a polarisation in the debate between its critics and its proponents the paucity of quantitative studies may be explained by the lack of comprehensive and consistent data investments in statistical resources on medical migration are therefore a major priority the available evidence suggests that particularly english speaking countries in sub saharan african countries and the caribbean with relatively few health workers and a high disease burden suffer most from the medical brain drain however the exodus of health workers is not the main cause of the health status crisis but rather a symptom of deeper underlying problems which often extend beyond the health sector towards the broader economic and political environment in such situations medical brain drain does pose challenges for human resource management and health service delivery the only effective and long term sustainable policy is one that addresses the underlying push and pull factors reforms have to be country led but may be supported via temporary migration schemes remittances enhancement of diaspora networks and financial aid for which a strong moral case exists

electricity consumption and economic growth in china abstract this paper applies the error correction model to examine the causal relationship between electricity consumption and real gdp for china during 1971 2000 our estimation results indicate that real gdp and electricity consumption for china are cointegrated and there is unidirectional granger causality running from electricity consumption to real gdp but not vice versa in order to overcome the constraints on electricity consumption the chinese government has to speed up the nation wide interconnection of power networks to upgrade urban and rural distribution grids and to accelerate rural electrification

reflections on northern rock the bank run that heralded the global financial crisis in september 2007 television viewers and newspaper readers around the world saw pictures of what looked like an old fashioned bank run that is depositors waiting in line outside the branch offices of a united kingdom bank called northern rock to withdraw their money the previous u k bank run before northern rock was in 1866 at overend gurney a london bank that overreached itself in the railway and docks boom of the 1860s bank runs were not uncommon in the united states up through the 1930s but they have been rare since the start of deposit insurance backed by the federal deposit insurance corporation in contrast deposit insurance in the united kingdom was a partial affair funded by the banking industry itself and insuring only a part of the deposits at the time of the run u k bank deposits were fully insured only up to 2 000 pounds and then only 90 percent of the deposits up to an upper limit of 35 000 pounds when faced with a run the incentive to withdraw one s deposits from a u k bank was therefore very strong for economists the run on northern rock at first seemed to offer a rare opportunity to study at close quarters all the elements involved in their theoretical models of bank runs the futility of public statements of reassurance the mutually reinforcing anxiety of depositors as well as the power of the media in galvanizing and channeling that anxiety through the power of television images however the storyline of the northern rock bank run does not fit the conventional narrative on september 13 2007 the bbc s evening television news broadcast first broke the news that northern rock had sought the bank of england s support the next morning the bank of england announced that it would provide emergency liquidity support it was only after that announcement that is after the

natural resource dependence a macroeconometric model for the united arab emirates this study constructs a macroeconometric model to analyse the problems of regions that exhibit dependence on nonrenewable resources e g oil the role of the oil sector in the uae and the extent to which it subsidizes the rest of the economy is evaluated the macroeconometric model constructed consists of four sectors has 25 equations and is evaluated and calibrated employing dynamic simulation techniques counter factual and policy experiments are carried out and the instruments targets approach is used to analyse the impact of the oil sector the article highlights the continued dependence of the uae economy on oil and the urgency to diversify the economy and securing more nonhydrocarbon sources of revenue

economic growth drag in the central china evidence from a panel analysis this article employs recently developed panel methods to test for unit roots cointegration and granger causality to justify and estimate the drag induced by resource constraint and environmental pollution for the central china the results of the panel cointegration test show that there is a stable long run relationship amongst total output capital labour land water and so2 when total output is the dependent variable the results of the causality test with error correction model ecm analysis suggest that the available water resource and environmental pollutant have no impacts on total output temporarily but in the long run there is a granger causality running from these variables to total output indicating the economic growth drag induced by the natural resource and environmental pollution can be further estimated given the stable cointegration and significant granger causality being the study shows that the drag on the total output reduces annual economic growth rate by about 1 1 percentage po

a closed form garch option valuation model this paper develops a closed form option valuation formula for a spot asset whose variance follows a garch p q process that can be correlated with the returns of the spot asset it provides the first readily computed option formula for a random volatility model that can be estimated and implemented solely on the basis of observables the single lag version of this model contains heston s 1993 stochastic volatility model as a continuous time limit empirical analysis on s p500 index options shows that the out of sample valuation errors from the single lag version of the garch model are substantially lower than the ad hoc black scholes model of dumas fleming and whaley 1998 that uses a separate implied volatility for each option to fit to the smirk smile in implied volatilities the garch model remains superior even though the parameters of the garch model are held constant and volatility is filtered from the history of asset prices while the ad hoc black scholes model is updated every period the improvement is largely due to the ability of the garch model to simultaneously capture the correlation of volatility with spot returns and the path dependence in volatility article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

energy consumption and economic growth assessing the evidence from greece abstract this paper attempts to shed light into the empirical relationship between energy consumption and economic growth for greece 1960 1996 employing the vector error correction model estimation the vector specification includes energy consumption real gdp and price developments the latter taken to represent a measure of economic efficiency the empirical evidence suggests that there is a long run relationship between the three variables supporting the endogeneity of energy consumption and real output these findings have important policy implications since the adoption of suitable structural policies aiming at improving economic efficiency can induce energy conservation without impeding economic growth

green throughput taxation environmental and economic consequences according to optimal taxation theory raw materials should be taxed to capture the embedded scarcity rent in their value to reduce both natural resource use and the corresponding emissions or the throughput in the economic system the best policy may be a tax on material inputs as a first approach to throughput taxation this paper considers a tax on intermediates in the framework of a dynamic computable general equilibrium model with environmental feedbacks to balance the budget payroll taxes are reduced as a result welfare indicators as material consumption and leisure time consumption are reduced while on the other hand all the environmental indicators improve

resource drag in an endogenous growth context a panel data based estimation with cross sectional dependences and structural breaks the article develops a resource drag model based on the endogenous growth theory and provides fresh empirical evidence to estimate the drags for china by using the recently developed panel model with both cross sectional dependences and structural breaks the results indicate that there exists a long run equilibrium relationship between gdp and its inputs and both the land and water resources have significantly positive impacts on gdp except from some provinces after allowing for cross sectional heterogeneities and structure breaks in addition the study employs the common correlated effects estimators to investigate the resource drags at both the pooled and individual levels the result shows that the aggregate drag reduces annual growth rate by about 0 016 percentage points in china as a whole while there exist significant differences in both these disaggregate and aggregate drags for the province groups suggesting there is a fair amount of geographic clustering for them

the causal relationship between electricity consumption and economic growth in the asean countries abstract this paper investigates the causal relationship between electricity consumption and economic growth among the association of south east asian nations asean 4 members namely indonesia malaysia singapore and thailand using modern time series techniques for the period 1971 2002 the results indicate that there is a bi directional causality between electricity consumption and economic growth in malaysia and singapore this means that an increase in electricity consumption directly affects economic growth and that economic growth also stimulates further electricity consumption in the two countries however uni directional causality runs from economic growth to electricity consumption in indonesia and thailand without any feedback effect thus electricity conservation policies can be initiated without deteriorating economic side effects in the two countries

energy consumption economic growth and prices a reassessment using panel vecm for developed and developing countries this paper reinvestigates the energy consumption gdp growth nexus in a panel error correction model using data on 20 net energy importers and exporters from 1971 to 2002 among the energy exporters there was bidirectional causality between economic growth and energy consumption in the developed countries in both the short and long run while in the developing countries energy consumption stimulates growth only in the short run the former result is also found for energy importers and the latter result exists only for the developed countries within this category in addition compared to the developing countries the developed countries elasticity response in terms of economic growth from an increase in energy consumption is larger although its income elasticity is lower and less than unitary lastly the implications for energy policy calling for a more holistic approach are discussed c 2006 elsevier ltd all rights reserved

a panel data heterogeneous bayesian estimation of environmental kuznets curves for co2 emissions this article investigates the environmental kuznets curves ekc for co2 emissions in a panel of 109 countries during the period 1959 to 2001 the length of the series makes the application of a heterogeneous estimator suitable from an econometric point of view the results based on the hierarchical bayes estimator show that different ekc dynamics are associated with the different sub samples of countries considered on average more industrialized countries show evidence of ekc in quadratic specifications which nevertheless are probably evolving into an n shape based on their cubic specification nevertheless it is worth noting that the eu and not the umbrella group led by us has been driving currently observed ekc like shapes the latter is associated to monotonic income co2 dynamics the eu shows a clear ekc shape evidence for less developed countries consistently shows that co2 emissions rise positively with income though there are some signs of an ekc analyses of future performance neverthe

money and politics in a small open economy a time series analysis indicates monetary growth and the gallup poll in canada are systematically related at electoral cycle periodicities 5 to 20 quarters under flexible exchange rates and demonstrates the absence of an electoral component in canadian monetary growth under fixed rates these results confirm empirically a widely accepted extension of the mundell fleming argument that monetary policy is effective only under flexible rates which to my knowledge has not before been directly investigated international constraints on the small open economy under fixed rates lead to the abandonment of monetary policy as an active instrument in electoral politics