elements for the development of public policies in the residential sector of mexico based in the energy reform and the energy transition law abstract mexico has entered in an important dynamic of structural changes in the energy area proof of this it is the energy reform 2013 and the energy transition law published the last december 24th 2015 thus it is important to carry out studies of the impacts of future politics in the consumption of the population so this study estimate an energy demand system using microdata collected from 97 817 households in a national households income and expenditure survey enigh acronyms in spanish encuesta nacional de ingresos y gastos de los hogares in the 20 years period from 1994 to 2014 the magnitudes of all the fuels are smaller than one indicating that electricity lpg gasoline and public transport are normal goods while lpg is the most inelastic energy source the geographic factor shows that households in the north of mexico tend to consume more gasoline whereas in the south of the country the lowest share of lpg expenditure is reported the rigorous evaluation of energy demanded in households will help policy makers to put forward more efficient reforms

the welfare effects of energy price changes due to energy market reform in mexico abstract despite being a large energy producer and exporter mexico may soon become a net total energy importer due to a decline in oil reserves and increasing domestic consumption to increase efficiency in the energy market mexican authorities approved a constitutional amendment aiming to open the state run energy markets to competition in 2013 the reform is expected to raise efficiency and to lower energy prices in the long run however it will take some time for the new institutional arrangements to settle and the reform objectives to materialize the removal of subsidies which is expected to take place after the reform will also raise prices particularly in the short run in this paper we analyze the effect of likely energy price changes due to energy market reform on household consumption and welfare in different income groups we estimate the quaids model using the nonlinear sure method and the mexican household budget surveys for the period 2002 2012 to obtain elasticities the results show great heterogeneity in elasticities across energy types and income groups specifically energy demand is elastic with respect to income but changes in prices have mixed effects among energy types the welfare effect of the price changes on low income households will be 9 times stronger than that on the mid income households and 18 times on and the high income households this warrants a compensation package to make the reform socially acceptable

fdicia after five years at year end 1991 congress enacted fundamental deposit insurance reform for banks and thrifts the fdic improvement act this reform followed the failure of more than 2 000 depository institutions in the 1980s many failed because the incentive incompatibility of the structure of federal government provided deposit insurance encouraged moral hazard behavior by banks and poor agent behavior by regulators insurance was put on a more incentive compatible basis providing for a graduated series of sanctions mimicking market discipline that first may and then must be applied by the regulators on floundering banks this article reviews these changes and evaluates early results

rationing can backfire a ban restricting each car from driving on a specified weekday is found to have increased total driving in mexico city because of the ban cars effectively represent driving permits and some households have bought an additional car and increased their driving greater use of old cars congestion effects and increased weekend driving may also have contributed to the disappointing results the ban has high welfare costs and does not deliver the intended benefits of reduced driving quite the contrary the experience provides an interesting lesson in applied welfare economics theory indicates that this is a costly way of reducing traffic and pollution but the finding that the strategy is counterproductive could be made only with applied quantitative analysis

federal financial guarantees and the occasional market pricing of default risk evidence from insured deposits abstract this paper develops a two date state preference model which demonstrates that investors valuation of third party guaranteed debt depends on the financial condition of the guarantor as the solvency ratio of the guarantor declines investors demand higher promised rates on the firm s debt securities and price the firm risk variables more sensitively the empirical results are derived from sample data of fslic guaranteed obligations from the late 1980s evidence shows differences in the market s perception of fsllc s insolvency between 1987 and 1988 the market response to a decline in the financial condition of the guarantor affected the value of insured cds raising cd rates in relation to the treasury curve and firm risk pricing of insured deposits emerged

exchange rate pass through and credit constraints abstract the macroeconomic evidence of the short term impact of exchange rates on exports and prices is notoriously weak this paper examines the microfoundations of this disconnect i study the response of firms export and price setting decisions to fluctuations in exchange rates and credit conditions using firm level survey data financially constrained firms pass through exchange rate changes to prices at almost twice the rate of unconstrained firms similarly their export volumes are about twice as sensitive to exchange rate fluctuations the effect of borrowing constraints is particularly strong during the recent financial crisis

order flows and the exchange rate disconnect puzzle abstract the aim of this paper is to establish the link between the high frequency dynamics of spot exchange rates and developments in the macroeconomy to do so i first present a theoretical model of exchange rate determination that bridges the gap between existing microstructure and traditional models the model examines how dispersed microeconomic information known to individual agents outside the foreign exchange market is aggregated and transmitted to dealers via transaction flows i e order flow and how the information is then embedded in the spot exchange rate i then report empirical evidence that strongly supports the presence of the link between the macroeconomy order flow and high frequency exchange rate returns implied by the model in fact my empirical results indicate that between 20 and 30 of the variance in excess currency returns over one and two month horizons can be linked back to developments in the macroeconomy this level of explanatory power is an order of magnitude higher than that found in traditional models even the newly developed monetary models incorporating central banks reaction functions moreover it provides a straightforward solution to the exchange rate disconnect puzzle namely the high frequency behavior of spot exchange rates reflects the flow of new information reaching dealers concerning the slowly evolving state of the macroeconomy rather than the effects of shocks that drive rapidly changing macroeconomic conditions

is demand for polluting goods manageable an econometric study of car ownership and use in mexico abstract our motivation for estimating a demand system for gasoline and cars is its strategic relevance to policy objectives such as pollution control if demand is responsive to pricing demand reductions for polluting goods will provide an important share of the pollution reductions otherwise cleaner technologies will have to do most of the job we estimate a model of gasoline demand and car ownership in mexico using a panel of annual observations by state key features that we introduce include instrumental variables on differenced data and the treatment of possible dynamics measurement errors in the data and unobserved individual state characteristics we use tests of serial correlation in the a residuals to model the dynamics properly the resulting demand system is quite responsive to pricing even in the short term 0 6 for the own price elasticity of gasoline but we emphasize a medium to long term perspective of 5 10 years as most relevant for policy five to ten year elasticity estimates are in the range of 1 25 to 1 13 applying these elasticity estimates to data on pollution control options for the vehicle fleet in mexico city the costs of reaching a target for pollution reductions would be 45 more expensive if one were not willing to use a demand management instrument such a gasoline tax in the control program

higher order expectations in asset pricing we examine formally keynes idea that higher order beliefs can drive a wedge between an asset price and its fundamental value based on expected future payoffs we call this the higher order wedge which depends on the difference between higher and first order expectations of future payoffs we analyze the determinants of this wedge and its impact on the equilibrium price in the context of a dynamic noisy rational expectations model we show that the wedge reduces asset price volatility and disconnects the price from the present value of future payoffs the impact of the higher order wedge on the equilibrium price can be quantitatively large

energy demand in the transportation sector of mexico abstract this paper report results of an analysis of the demand for energy in the mexican transport sectors focusing on the railroad air transport and motor vehicle modes the approach is an econometric one with emphasis placed on the structure for each mode for two of the modes a two stage approach is employed where in the first stage demands for services from the particular mode are modeled and in the second stage demand is treated as a derived demand from these transport services for the motor vehicle mode gasoline demand is considered as the product of gasoline consumption per vehicle times the total number of vehicles and then these components are related to economic and structural variables diesel demand of motor vehicles is modeled in a more reduced from approach the principal finding is that changes in income play a more important role in affecting energy demand than do changes in energy prices especially in the railroad and air transport sectors for the gasoline and diesel fuel demand in the monitor vehicle sector however price is of substantial importance

can information heterogeneity explain the exchange rate determination puzzle empirical evidence shows that most exchange rate volatility at short to medium horizons is related to order flow and not to macroeconomic variables we introduce symmetric information dispersion about future macroeconomic fundamentals in a dynamic rational expectations model in order to explain these stylized facts consistent with the evidence the model implies that a observed fundamentals account for little of exchange rate volatility in the short to medium run b over long horizons the exchange rate is closely related to observed fundamentals c exchange rate changes are a weak predictor of future fundamentals and d the exchange rate is closely related to order flow

commercially available order flow data and exchange rate movements caveat emptor research suggests that customer order flow should help predict exchange rates we make two contributions first we provide a review of the recent literature on order flow and exchange rate movements second we critically evaluate the practical value of customer order flow data that are commercially available to the wider market as well as the forecasting properties of inter dealer order flow in line with microstructure theory we find little evidence that the latter can forecast exchange rates but our results also cast considerable doubt on the practical value to market practitioners of commercially available customer order flow data

what defines news in foreign exchange markets abstract this paper examines whether the traditional sets of macro surprises that most of the literature considers are the only sorts of news that can explain exchange rate movements we examine the intra daily influence of a broad set of news reports including variables which are not typically considered fundamentals in the context of standard models of exchange rate determination and ask whether they too help predict exchange rate behavior we also examine whether news not only impacts exchange rates directly but also influences exchange rates via order flow signed trade volume our results indicate that along with the standard fundamentals both non fundamental news and order flow matter suggesting that future models of exchange rate determination ought to include all three types of explanatory variables

an analysis of gasoline demand elasticities at the national and local levels in mexico abstract the majority of evidence on gasoline demand elasticities is derived from models based on national data since the largest growth in population is now taking place in cities in the developing world it is important that we understand whether this national evidence is applicable to demand conditions at the local level the aim of this paper is to estimate and compare gasoline per vehicle demand elasticities at the national and local levels in mexico national elasticities with respect to price income vehicle stock and metro fares are estimated using both a time series cointegration model and a panel gmm model for mexican states estimates for mexico city are derived by modifying national estimates according to mode shares as suggested by graham and glaister 2006 and by estimating a panel within groups model with data aggregated by borough although all models agree on the sign of the elasticities the magnitudes differ greatly elasticities change over time and differ between the national and local levels with smaller price responses in mexico city in general price elasticities are smaller than those reported in the gasoline demand surveys a pattern previously found in developing countries the fact that income and vehicle stock elasticities increase over time may suggest that vehicles are being used more intensively in recent years and that mexico city residents are purchasing larger vehicles elasticities with respect to metro fares are negligible which suggests little substitution between modes finally the fact that fuel efficiency elasticities are smaller than vehicle stock elasticities suggests that vehicle stock size rather than its composition has a larger impact on gasoline consumption in mexico city

informational integration and fx trading abstract this paper addresses international financial integration in a new way we focus on informational integration specifically the importance of information conveyed by order flow in major currencies for pricing minor currencies we develop a multi currency model of portfolio allocation in the presence of dispersed information we then test the model s implications using four months of concurrent transaction data on nine currencies the model explains 45 to 78 of daily returns in all nine currencies moreover its prediction that order flow in individual markets should be relevant for determining prices in other markets is borne out

changing monetary policy rules learning and real exchange rate dynamics when the exchange rate is priced by uncovered interest parity and central banks set nominal interest rates according to a reaction function such as the taylor rule the real exchange rate will be determined by expected inflation and the output gap or the unemployment gap of the home and foreign countries this paper examines the implications of these taylor rule fundamentals for real exchange rate determination because the true parameters in central bank policy rules are unknown to the public and change over time the model is presented in the context of a least squares learning environment this simple learning model captures the volatility and the major swings in the real deutschemark euro dollar exchange rate from 1976 to 2007

taylor rules and the deutschmark dollar real exchange rate we explore the link between an interest rate rule for monetary policy and the behavior of the real exchange rate the interest rate rule in conjunction with some standard assumptions implies that the deviation of the real exchange rate from its steady state depends on the present value of a weighted sum of inflation and output gap differentials the weights are functions of the parameters of the interest rate rule an initial look at german data yields some support for the model

order flow and the monetary model of exchange rates evidence from a novel data set we propose an exchange rate model that is a hybrid of the conventional specification with monetary fundamentals and the evans lyons microstructure approach we estimate a model augmented with order flow variables using a unique data set almost 100 monthly observations on interdealer order flow on dollar euro and dollar yen the augmented macroeconomic or hybrid model exhibits greater in sample stability and out of sample forecasting improvement vis a vis the basic macroeconomic and random walk specifications

bank failures as poisson variates abstract the elasticity of bank failures with respect to a set of explanatory variables is estimated using a maximum likelihood poisson estimator the resulting estimates are compared with their ols counterparts

macroeconomic news order flows and exchange rates under rational expectations and efficient markets the news contained in public information announcements is directly impounded into prices with there being no role for trades in this process of information assimilation this paper directly tests this assertion using transaction level exchange rate data and a sample of scheduled macroeconomic announcements the main result of the paper is that even information that is publicly and simultaneously released to all market participants is largely impounded into prices via the key micro level price determinant order flow we quantify the role that order flow plays and find that between a half and two thirds of price relevant information is incorporated into prices via the trading process

effects of deregulation on failing thrift institutions the purpose of this paper is to test the hypothesis that much of the decline in the net worth of the failing saving and loan institutions was a result of deregulation variables are developed to represent major actions to deregulate sltime series analysis is developed to estimate the effects of financial deregulation on failing thrifts net worth the data are 1984 89 balance sheet adn income statement data for thrift institutions prior to the enactment of the 1989 legislation to solve the crisis the reuslts of the analysis indicate that deregulation of asset and deposit activities was not the cause of the financial distress of failing us thrift institutions the primary cause appears to be the increase in the federal deposit insurance limit to 100 000 and how attractive this legislative action made brokering deposits that became insured up to 100 000

conditioning carry trades less risk more return abstract prior studies show that extreme interest rate differentials irds and high foreign exchange rate fx volatility have substantial explanatory power for the validity of uip we show that these contemporaneous drivers also have predictive power by implementing a conditional currency carry trade ct strategy that excludes regimes for which uip is likely to hold conditioning high fx volatility only or on both fx volatility and extreme irds outperforms the base case unconditional ct strategy in virtually any of the settings analyzed conditioning on very large irds only shows mixed findings our strategy works best for smaller ct portfolios

discriminant characteristics of us banks acquired with or without federal assistance abstract an extensive literature review of statistical studies on merger acquisition and takeover activities in various sectors is presented it reveals a large number of efforts models and pitfalls to classify and predict acquired or bankrupt vs non acquired or healthy firms in this study we considered twenty endogenous bank variables in order to determine the most important characteristics that differentiate us bank mergers acquisitions with or without federal assistance we developed several logistic regression models with only three to five significant variables which classified correctly about 93 of the 299 actual 1987 1988 cases and 89 in the 56 case 1989 holdout sample

a meta analysis of the price elasticity of gasoline demand a sur approach abstract automobile gasoline demand can be expressed as a multiplicative function of fuel efficiency mileage per car and car ownership this implies a linear relationship between the price elasticity of total fuel demand and the price elasticities of fuel efficiency mileage per car and car ownership in this meta analytical study we aim to investigate and explain the variation in empirical estimates of the price elasticity of gasoline demand a methodological novelty is that we use the linear relationship between the elasticities to develop a meta analytical estimation approach based on a seemingly unrelated regression sur model with cross equation restrictions this approach enables us to combine observations of different elasticities and thus increase our sample size furthermore it allows for a more detailed interpretation of our meta regression results the empirical results of the study demonstrate that the sur approach leads to more precise results i e lower standard errors than a standard meta analytical approach we find that with mean short run and long run price elasticities of 0 34 and 0 84 respectively the demand for gasoline is not very price sensitive both in the short and the long run the impact of a change in the gasoline price on demand is mainly driven by responses in fuel efficiency and mileage per car and to a slightly lesser degree by changes in car ownership furthermore we find that study characteristics relating to the geographic area studied the year of the study the type of data used the time horizon and the functional specification of the demand equation have a significant impact on the estimated value of the price elasticity of gasoline demand

order flow information and spot rate dynamics abstract this paper examines why order flows are empirically important drivers of spot exchange rate dynamics we consider a decomposition for the depreciation rate that must hold in any model and show that order flows will appear as important proximate drivers when they convey significant incremental information about future interest rate differentials risk premiums and or long run exchange rate levels i e information that cannot be inferred from publicly observed variables we estimate the importance of these incremental information flows for the eurnok spot exchange rate using eight years of high quality disaggregated end user order flow data collected by the norges bank

rationing can backfire the day without a car in mexico city a ban restricting each car from driving on a specified weekday is found to have increased total driving in mexico city because of the ban cars effectively represent driving permits and some households have bought an additional car and increased their driving greater use of old cars congestion effects and increased weekend driving may also have contributed to the disappointing results the ban has high welfare costs and does not deliver the intended benefits of reduced driving quite the contrary the experience provides an interesting lesson in applied welfare economics theory indicates that this is a costly way of reducing traffic and pollution but the finding that the strategy is counterproductive could be made only with applied quantitative analysis in november 1989 the mexico city administration imposed a regulation banning each car from driving a specific day of the week called hoy no circula this one does not circulate today the day without a car regulation specifies that cars with license plate numbers ending with digits 0 or 1 do not drive on monday 2 or 3 do not drive on tuesday and so on restrictions do not apply on weekends the regulation applies to all cars except those of the fire department and thus to firms as well as households we use the term household for simplicity compliance is generally believed to be high the police are visible and fines are heavy the regulation has been both popular and controversial some people argue that it places a reasonable burden on car owners in order to alleviate congestion and pollution problems others argue that it is inefficient and unfair inefficient in the way most rationing devices are inefficient unfair because it is more easily avoided or accommodated by some than by others finally some people are arguing that the regulation is counterproductive actually increasing the levels of congestion and pollution because many households have purchased additional cars to circumvent the ban this article analyzes the policy pragmatically section i shows how the results of rationing can be compared with those that would be obtained using market

managing interest rate risk in banking institutions abstract this paper develops and employs a multiperiod goal programming model to examine the normative effects of changing interest rates on the rearrangements of depository bank balance sheets and associated profits a two stage state preference framework allows a dynamic interpretation of the model s prescribed decisions as well as a natural incorporation of profit sensitivity to interest rate risk the model includes on and off the balance sheet decision variables experimental results indicate that constraining the latter decision can seriously curtail the bank s ability to achieve its profit objectives

an evaluation of the economic effects of higher energy prices in mexico abstract the analysis of this study examines the impact of an increase in the prices of gasoline and electricity on the mexican economy the analytical approach used consists of a general equilibrium model composed of 13 producing sectors 14 consuming sectors 4 household categories classified by income and one government the effects of the recently implemented increase in the price of gasoline and electricity of 26 2 on prices and quantities are examined the results are revealing for example the consequences of an increase in the prices of gasoline and electricity would be a decrease in output by all producing sectors of about 0 31 a fall in the consumption of goods and services by about 0 56 a reduction in total utility by 1 29 and higher revenue for the government of 0 31 when subjected to a sensitivity analysis the results are reasonably robust with regard to the assumption of the values of the substitution elasticities

the contribution of economic fundamentals to movements in exchange rates starting from the asset pricing approach of engel and west we examine the degree to which fundamentals can explain exchange rate fluctuations we show that it is not possible to obtain sharp inferences about the relative contribution of fundamentals using only data on observed monetary fundamentals money minus output differentials across countries and exchange rates we use additional data on interest rate and price differentials along with the implications of the monetary model of exchange rates to decompose exchange rate fluctuations in general we find that money demand shifts along with observed monetary fundamentals are an important contributor to exchange rate fluctuations

demand for oil products in the gcc countries abstract the purpose of this study is to estimate the price and income elasticities of oil products demand in the gcc countries annual data spanning the period 1970 1991 were fitted to a partial adjustment model to obtain the estimates the main finding of the study is that both price and income are relatively inelastic in the short run and there has been a great variation in these elasticities among fuels and cross country

how urbanization affects energy use in developing countries abstract this paper identifies mechanisms whereby urbanization affects energy consumption industrialization and urbanization accompany each other during economic development but urbanization exerts a number of independent influences on energy use it permits economies of scale in production but requires more transportation food must be transported to urbanized populations and relatively smaller agricultural populations must modernize entailing considerable increases in agricultural energy use in cities a number of production activities which were domestically provided in rural areas using human or animal energy shift to sources outside the household using modern energy sources the largest single source of change in energy use is personal transportation passenger transport in cities is heavily weighted towards fuel using modes particularly as incomes increase to assess the overall impact a regression analysis of 59 developing countries for 1980 is conducted holding constant per capita income and the extent of industrialization the elasticity of energy consumption per capita and per dollar of gdp is between 0 35 and 0 48

a presumptive pigovian tax complementing regulation to mimic an emissions fee if regulations are used to make cars and fuels cleaner should gasoline taxes be used to manage demand for trips that pollute anaysis of a well composed program for mexico city indicates that the emission reductions would cost 24 percent more if a tax on gasoline was not introduced a simple analytical framework is developed to analyze the use of abatement requirements to make cars cleaner and a gasoline tax to economize on the use of cars the two instruments should be combined to mimic the incentives that would have beeen provided by an emissions fee thus cleaner cars and fewer trips are analogous to competing suppliers of emission reductions the planner should buy from both so that marginal costs are equal applying that rule the marginal cost of emission reductions is simply the gasoline tax rate divided by emissions per liter