productive energy use and economic growth energy physical and human capital relationships abstract ecological and biophysical economists and historians of economics consider that availability of energy inputs has played a key role in driving economic growth in industrialized and emerging economies nevertheless being very sensitive to structural characteristics or stages of economic development the strength of this link differs among countries this study analyzes the role of energy in economic growth from a geographical standpoint by estimating an aggregate translog production function with human and physical capital and productive energy use as production factors within a growth framework panel data of 38 major countries for the period from 1995 to 2007 were used the strength of the link between energy and growth is analyzed for the whole sample and the following relevant country groups oecd bric nafta east asian east european and eu15 countries obtained results show that the calculated productivity elasticities with respect to energy use are positive for all country groups bric countries have higher elasticities around 0 37 and eu15 countries have lower elasticities around 0 12 weak substitutability relationships between energy and capital are observed for all groups except for bric and east european countries which show complementarity relationships

the impact of minimum trading units on stock value and price volatility we study how minimum trading unit changes on the tel aviv stock exchange impact a stock s trading activity price volatility and value the value effects are consistent with merton s 1987 model i e an increase in the investor base trading volume and a decrease in price noisiness affect stock value positively our results extend amihud mendelson and uno s 1999 tests of merton by demonstrating a clear relation between price noisiness changes and stock value changes and by showing that the response to a minimum trading unit decrease becomes less favorable and arguably even negative in the thinnest trading stocks

perfect foresight and equilibrium selection in symmetric potential games the equilibrium selection approach of matsui and matsuyama j econ theory65 1995 415 434 which is based on rational players who maximize their discounted future payoff is analyzed for symmetric two player games with a potential function it is shown that the maximizer of the potential function is the unique state that is absorbing and globally accessible for small discount rates journal of economic literatureclassification number c72

perfect equilibria in a trade liberalization game the credibility of temporary protection is examined in a simple infinite horizon perfect information game of timing in which the domestic government uses the threat of future liberalization to induce the domestic firm to invest all pure strategy subgame perfect equilibria are cyclical and surprisingly one of them implements optimal temporary protection however this equilibrium fails to pass another credibility criterion called renegotiation proof the game has a unique stationary subgame perfect equilibrium in mixed strategies copyright 1990 by american economic association

eductive stability in real business cycle models we reexamine issues of coordination in the standard rbc model is the unique rational expectations equilibrium attainable by rational agents who contemplate the possibility of small deviations from equilibrium surprisingly we nd that coordination cannot be expected even with strong common knowledge assumptions rational agents anticipating small but persistent deviations are led to take actions that eventually contradict the common knowledge assumption this impossibility theorem for eductive learning is not fully overcome when adaptive learning is incorporated into the framework

adaptive economic growth this paper develops an evolutionary theory of adaptive growth understood as a product of structural change and economic self transformation based upon processes that are closely connected with but not reducible to the growth of knowledge the dominant connecting theme is enterprise the innovative variations it generates and the multiple connections between investment innovation demand and structural transformation in the market process the paper explores the dependence of macroeconomic productivity growth on the diversity of technical progress functions and income elasticities of demand at the industry level and the resolution of this diversity into patterns of economic change through market processes it is shown how industry growth rates are constrained by higher order processes of emergence that convert an ensemble of industry growth rates into an aggregate rate of growth the growth of productivity output and employment are determined mutually and endogenously and their values depend on the variation in the primary causal influences in the system

borrowing constraints human capital accumulation and growth abstract borrowing constraints increase aggregate savings and therefore may increase growth this paper argues however that by reducing human capital accumulation borrowing constraints also have negative effects on growth these effects are discussed in an overlapping generations model with endogenous growth empirical evidence for oecd and developing countries lend support to the main predictions of the model

a simple model of sectoral adjustment despite the significance of limited labour mobility across sectors few attempts have been made to produce dynamic models of sectoral adjustment which are consistent with perfect foresight and yet flexible enough to allow for a variety of dynamic experiments this paper proposes a simple perfect foresight model of two sector economies in which aggregate sectoral movement of labour takes place through the process of demographic change the model is tractable enough that one can easily examine the effects of intertemporally complicated relative price shocks both exogenous and endogenous under a variety of assumptions on technology

an expository note on individual risk without aggregate uncertainty abstract in economies where agents bear some risk the analysis would often be facilitated by the assumption that the risks are i i d and disappear in the aggregate a formal appeal to the law of large numbers requires the consideration of a sequence of finite economies in an economy with a continuum of agents there are countable families of sets for which it is impossible for a law of large numbers to be valid with countably many agents and a finitely additive measure independence is compatible with the law of large numbers

industrialization under perfect foresight a world economy with a continuum of countries abstract a dynamic model of international trade with a continuum of countries is presented the terms of trade path each country takes as given are endogenous in the model countries differ by the rate of time preference and have populations of overlapping generations of labor industrialization is modeled as the reallocation of labor to the sector with external increasing returns the process of which is gradual due to a demographic constraint in a perfect foresight equilibrium countries with lower time preference industrialize and autarky policy is not effective for industrialization orbits may exist for countries with positive time preference journal of economic literature classification numbers d90 f10 f43 o14 o40

the international crash of october 1987 causality tests the paper analyzes lead lag relationships for six major stock market indexes new york s p 500 tokyo nikkei london ft 30 hong kong hang seng singapore straits times and australia all ordinaries for time periods before during and after the october 1987 market crash unidirectional and bidirectional causality tests are conducted by means of the granger methodology practically no lead lag relationships are found for the pre crash and post crash periods however important feedback relationships and unidirectional causality are detected for the month of the crash there is also an increase in contemporaneous causality during and after the month of the crash in general our findings suggest that the october 1987 market crash probably was an international crisis of the equity markets and that it might have begun simultaneously in all the national stock markets

tariff design with varying degrees of commitment abstract this paper provides a novel perspective on the dynamics of infant industry protection trade policies are analyzed when the industrial sector generates positive externalities in production and there are adjustment costs to changing production between sectors if the government is able to precommit to its future tariff schedule the welfare maximizing policy is to maintain a positive tariff forever even after the steady state is reached however if no precommitment is possible the only time consistent policy is zero tariff always the case with precommitment for a limited period of time is also analyzed

default premiums in commodity markets theory and evidence we model the effect of nonperformance risk on forward and futures pricing and look for evidence of nonperformance risk in precious metals futures prices from the hunt brothers episode changes in default premiums are measured and related to the sequence of events in the metals markets during this period results suggest first that ex ante costs of nonperformance can be a significant priced factor in commodity markets and second that the arrival of new information is often associated with changes in these costs the evidence has implications for both theoretical and empirical research on commodity markets organized commodity markets offer traders an efficient medium in which to execute their hedging and speculative strategies in particular the markets have developed mechanisms that reduce the costs of nonperformance which would be substantial in the absence of an organized exchange devices such as margin requirements position limits daily marking to market price limit moves and the clearinghouse reduce the expected costs of distress and default in commodity markets while organized exchanges greatly reduce expected costs of nonperformance they do not eliminate such costs throughout the history of organized futures trading there have been many instances of markets collapsing or coming to the brink of collapse after a period of unusual trading activity the most prominent example in recent times is the near collapse of the new

global analysis of an expectations augmented evolutionary dynamics we consider a deterministic evolutionary model where players form expectations about future play players are not fully rational and have expectations that change over time in response to current payoffs and feedback from the past we provide a complete characterization of the qualitative dynamics so induced for a two strategy population game and relate our findings to standard evolutionary dynamics and equilibrium selection when agents have rational forward looking expectations

oil and gas markets in the uk evidence from a cointegrating approach the paper examines the relationship between uk wholesale gas prices and the brent oil price over the period 1996 2003 in order to investigate whether oil and gas prices decoupled during this period as orthodox gas market liberalisation theory suggests tests for unit roots and cointegration are carried out and it is discovered that a long run equilibrium relationship between uk gas and oil prices exists moreover this relationship pre dates the opening of the uk mainland europe interconnector following a recursive methodology hansen h and johansen s 1999 some tests for parameter constancy in cointegrated var models econometrics journal 2 306 333 it was found that the cointegrating relationship is present throughout the sample period however the long run solutions seem to be more volatile evidence is provided that the short run relationship is linear and impulse response functions are used to examine the effects that a shock in oil would have on gas these findings do not support the assumption that gas prices and oil prices decouple

capital income taxation and long run growth new perspectives abstract we study the effects of capital income taxation on long run growth in an endogenous growth framework with two distinguishing features endogenous population and international capital mobility endogenizing population growth introduces a new channel for taxes to affect economic growth and enables us to discriminate the effects of taxes on total versus per capita income growth allowing for capital mobility in the open economy we show how the effects of taxes on population growth and income growth across countries will vary in specific ways depending on the international income tax regimes and the relative preference bias of people towards the quantity and quality of their children the numerical results based on our calibrated model for the g 7 nations also indicate that although the effects of liberalizing capital flows on long run growth may not be very sizable the growth effects of changes in capital income tax rates can be tremendously magnified by cross border capital flows and cross border spillovers of policy effects

an empirical test of the infant industry argument the basic infant industry argument maintains that the cost of a new activity is initially high it does not pay any individual to enter an infant industry at free trade prices if developed the industry will permit a reasonable return on initial losses and a temporary period of protection is required this paper has attempted two things to develop an empirical test for the validity of the infant industry argument and to use that test on turkish data the test is simple and straightforward input per unit of output must fall more rapidly in more protected industries if there is to be any rationale for infant industry protection in the turkish case there was no such tendency over the period covered the fact that protected turkish industries did not experience rapid increases in output per unit of input is sufficient to prove that protection was not warranted it does not however prove that there were no infant industries the trade regime might have provided the wrong incentives and under an alternative structure output per unit of input might have grown more rapidly in some or possibly all turkish industries in conclusion protection did not elicit the sort of growth in output per unit on which infant industry proponents base their claim for protection

uniqueness and indeterminacy on the dynamics of endogenous growth abstract in this paper we study the dynamics of endogenous growth both in the model of lucas and in a generalization that incorporates a labor leisure choice we characterize the regions of the parameter space that give rise to unique equilibria as well as the regions that yield a continuum of equilibria with positive growth rates we find that such multiple equilibria exist for empirically very plausible parameters in particular when the lucas model is modified to incorporate endogenous labor journal of economic literature numbers e00 e3 o40

european market integration for gas volume flexibility and political risk this is a copy of an article originally published by elsevier in energy economics see http www sciencedirect com science journal 03014215 2002 elsevier science b v

growth effects of flat rate taxes recent estimates of the potential growth effects of tax reform vary wildly ranging from zero to eight percentage points using an endogenous growth model we assess which model features and parameter values are important for determining the quantitative impact of tax reform we find that the critical parameters are factor shares depreciation rates the elasticity of intertemporal substitution and the elasticity of labor supply the elasticities of substitution in production on the other hand are relatively unimportant the quantitative estimates in several recent papers are compared with each other and with some of the evidence from u s experience we find that robert lucas s conclusion that tax reform would have little or no effect on the u s growth rate is theoretically robust and consistent with the evidence

growth and the international transmission of business cycles two country single good real business cycle models predict that the cross country correlation of output is smaller than the cross country correlations of consumption and productivity in contrast to the evidence in historical samples the objective of this paper is to reproduce the observed empirical evidence in a two country real business cycle model with endogenous growth central features of the model include a nonmarket sector and international externalities in production the model generates realistic cross country correlations for output consumption and productivity with standard parameter values copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

analysis of a two sector model of endogenous growth with capital income taxation this paper addresses a two sector model of endogenous growth in which one sector produces final goods and the other produces new human capital both sectors employ human as well as physical capital under constant returns to scale technologies unlike existing studies of this type of model that have mostly concentrated on steady state analysis or on numerical simulations of calibrated models this paper presents an analytical argument concerning the dynamic behavior of the growth path and the effects of capital income taxation in and out of the steady growth equilibrium it is demonstrated that the dynamic behavior of the economy and some policy effects depend heavily upon the magnitude of factor intensity used in each production sector copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the asian financial crisis the role of derivative securities trading and foreign investors in korea abstract this paper is part of a larger research program pertaining to the role of derivatives during financial crisis and also part of the research pertaining to the causes of the asian financial crisis the korean market is studied because of two reasons 1 it is an important example of the asian financial meltdown and 2 there is a detailed data set available of all transactions by different types of protagonists including foreign investors the results in this paper indicate that futures markets and trading by foreign investors played a key role during the korean stock market turbulence in 1997

tax rate uncertainty and the sensitivity of consumption to income in an overlapping generations model abstract a well documented feature of u s data is that the aggregate consumption is a smoother process than income an overlapping generations model with a time nonseparable utility function is developed to characterize the effect of income tax uncertainty on the degree of consumption smoothness the model predicts that an increased tax uncertainty combined with tax financed production externality makes the aggregate consumption smoother for a plausible range of intertemporal substitution in consumption a calibration experiment indicates that the observed long term smoothness of aggregate consumption is consistent with the model s predicted consumption process

discussion of anomalous stock returns around internet firms earnings announcements abstract trueman wong and zhang twz investigate an apparent anomaly in the pricing of internet firms around their earnings announcements which they attribute to price pressure the discussion addresses three concerns the paper is unusual in choosing an event earnings announcements that does not appear to have an obvious non information related reason for triggering unjustified changes in demand for the firm s shares relatedly there are limitations to the tests made of the price pressure hypothesis finally the discussion elaborates on twz s brief mention of the difficulties with implementing a profitable trading strategy based on the stock return pattern they document

income convergence within and between countries we study how trade changes the rate of income convergence within and between countries in a model of endogenous growth an externality in the production of human capital implies that inequality slows down growth under autarky eventually incomes converge raising the growth rate trade accelerates slows down growth and the rate of income convergence in the poor rich country in the long run trade ensures that countries grow at the same rate and that the ratio of their incomes tends to 1 trade pattern reversals are possible since the initially wealthy country may be overtaken by the poor country the purpose of this paper is to study how trade affects the pattern of income convergence within countries and between countries in an endogenous growth model moreover we analyze the related issue of how income inequality alters the effects of trade we use a dynamic 2 x 2 factor proportions model with endogenous growth to examine income convergence the factors of production are unskilled labor and human capital growth proceeds through the accumulation of human capital by agents who are differentiated by their stocks of human capital agents live a single period during which they spend resources in their descendants education the expenditure in a descendant s education enters the utility function of each agent in our model the accumulation of human capital is the result of both formal and informal processes the formal process corresponds to schooling and depends on parental expenditure in education the informal process of producing human capital corresponds to the education agents receive in their homes and through social interaction with neighbors and schoolmates in the informal process the first effect depends on the education of the parents while the second corresponds to an externality acting through the average level of human capital in society we begin our study by examining income convergence in a closed economy as the society s stock of human capital increases the relative price of the equitatively distributed factor unskilled labor goes up which tends to reduce long term inequality on the other hand rich agents spend a higher proportion of their income in education tending to raise inequality we derive a sufficient condition for the former effect to outweigh the latter effect that is for inequality to disappear in the

bandwagon effects and long run technology choice abstract we introduce a class of bandwagon games which generalizes the notion of network externalities when there are more than two competing technologies and various degrees of partial compatibilities among them we then apply the stochastic evolutionary approach to this class of games we determine the conditions under which a globally pairwise risk dominant technology is the long run equilibrium lre we also show the conditions under which one technology takes over another technology by directly switching consumers from the latter to the former also called direct domination parametric examples illustrate the properties of the technology which is the lre journal of economic literature classification numbers c72 c73

one market stocks futures and options during october 1987 we provide new evidence regarding the degree of integration among markets for stocks futures and options prior to and during the october 1987 market crash where previous analyses have resulted in recommendations for the implementation of circuit breakers the coordination of margin requirements across markets and changes in regulatory jurisdiction our analysis indicates that delinkage between markets during the crash was primarily caused by an antiquated mechanism for processing stock market orders the results suggest that market integration may be better served by efficient order execution than by further restricting markets

the robustness of equilibria to incomplete information a number of papers have shown that a strict nash equilibrium action profile of a game may never be played if there is a small amount of incomplete information see for example carlsson and van damme 1993a we present a general approach to analyzing the robustness of equilibria to a small amount of incomplete information a nash equilibrium of a complete information game is said to be robust to incomplete information if every incomplete information game with payoffs almost always given by the complete information game has an equilibrium which generates behavior close to the nash equilibrium we show that many games with strict equilibria have no robust equilibrium and examine why we get such different results from existing refinements if a game has a unique correlated equilibrium it is robust a natural many player many action generalization of risk dominance is a sufficient condition for robustness

arbitrage nontrading and stale prices october 1987 this article explains a puzzle created by the standard and poor s 500 cash and futures prices during the crash of october 1987 the cash index appears to be a moving average of the futures but nontrading in constituent stocks explains only the initial period of delayed openings however execution of stale limit buy orders given the high volume and nyse market mechanisms at the time resulted in extraordinary levels of stock prices that were not caused by nontrading the model is supported in aggregate s p data and transactions data for individual stocks copyright 1992 by university of chicago press

economic growth and the structure of long term development this volume collects some of the papers presented at the 82nd round table conference of the international economic association that was organised in collaboration with fondazione eni enrico mattei the book considers different approaches to the analysis of economic growth and it is organised in five parts par i is devoted to empirical evidence part ii contains six papers which present a series of models based on different approaches but with special emphasis on endogenous growth and on schumpeterian models of growth and fluctuations part iii of the book is devoted to the impact of international trade on economic development part iv examines the effects of economic development on the natural environment the final part of the book part v contains the concluding evaluations contributors p aghion r aversi d ben david g bertola o castellino f donati g dosi w easterly s fabiani c freeman r goodwin j helliwell e helpman p howitt r king m landesmann r levine s lombardini k g maler w d nordhaus l l pasinetti s rebelo a sen l soete r m solow m syrquin b verspagen s zervos

rationalizable strategic behavior the notion of equilibrium proposed by nash 19 has come to play a dominant role in economic applications of noncooperative games while analyses of nash equilibria have unquestionably contributed to our understanding of economic behavior it would be unreasonably optimistic to maintain that nash solved the problem of noncooperative strategic choice there is a small literature beginning with ellsberg 6 and a much larger oral tradition which argues that nash behavior is neither a necessary consequence of rationality nor a reasonable empirical proposition in this paper i take the view that although there may be various reasons why an agent might select a nash strategy the notion of an equilibrium has little intrinsic appeal within a strategic context when an agent reaches a decision in ignorance of the strategies adopted by other players rationality consists of making a choice which is justifiable by an internally consistent system of beliefs rather than one which is optimal post hoc this point of view is not original indeed most serious justifications of the nash hypothesis embrace such an approach arguing that agents will expect the game to yield a nash outcome and consequently will choose their equilibrium strategies nevertheless when we think in terms of maximizing utility subject to expectations rather than realizations it becomes clear that the nash hypothesis far from being a consequence of rationality arises from certain restrictions on agents expectations which may or may not be plausible depending upon the game being played we are then quite naturally led to ask are there any restrictions of individuals expectations and hence choices which are required by rationality alone rather than by subjective plausibility this paper is concerned with defining justifying characterizing and refining a criterion for rational strategic choice which i label rationalizability

critical survey endogenous growth theory a critical assessment a critical assessment is made of endogenous growth theory from the perspective of recent developments within economics as a discipline these include its increasing mathematical formalisation its focus upon microfoundations the casual use of econometrics to test models and the incorporation of factors that have traditionally been outside mainstream economics it is found that the theory focuses upon market imperfections and technological progress in a variety of ways and reconstructs their impact upon the macroeconomy as a growth rather than as a level effect whilst the growth rate is endogenised this leads to the problem of multiple equilibria and extremely complex dynamics the generalisation from exogenous growth theory is however associated with even more extreme assumptions and analytical distance from the socioeconomic processes of growth itself copyright 2000 by oxford university press

total factor productivity vs realism revisited the case of the south korean steel industry this paper presents key features of the development of the south korean steel industry through the critical examination of an article by truett and truett despite their claim to exhibit realism by use of a translog cost function their methodology has strong affinities with the methods of measuring total factor productivity growth which have long been known as invalid but continue to be applied not least to the experience of east asian countries it will be argued that the theoretical and empirical flaws involved with these methods invalidate their results and corresponding policy implications above all by showing that the assumptions for their calculation do not hold in terms of the economic conditions of the industry the paper points to a different understanding of realism than that conceived by and for their study copyright 2005 oxford university press

equilibrium dynamics in two sector models of endogenous growth abstract this paper considers two extensions of the uzawa lucas framework in our first extension physical capital is included as an input of the educational sector in our second extension leisure considerations are assumed to play a positive role in agents welfare the case with physical capital in the production of education features under standard conditions a unique steady state and thus the dynamics are qualitatively similar to those of the original uzawa lucas framework in our second model with leisure there could be a multiplicity of steady states with different rates of growth what determines here the chosen rate of growth is the initial relative amount of physical and human capital our results therefore illustrate that in a world without externalities there could coexist different long term growth rates

the problem of population and growth a review of the literature from malthus to contemporary models of endogenous population and endogenous growth abstract this paper deals with the evolution of the literature on the problem of population and growth from the classical period to the recent literature on endogenous growth and development the problem concerns two distinct issues 1 how to explain the observed covariation of the levels and rates of growth of per capita income and population size over time and space and 2 how to improve the human condition represented by these variables through an accommodating social policy the evolution of the literature we survey is reflected by the progressive treatment of key variables as endogenous rather than exogenous to the growth process it is also reflected by a shift from the historical concern about population explosion and its implications for growth to the more recent concern about the association between growth and population implosion in many developed countries

a rostovian model of endogenous growth and underdevelopment traps the paper presents a model which combines self sustained growth and underdevelopment traps into a common analytical framework we provide an analytical interpretations to rostow s observation that there is a decisive interval in the history of a society when growth becomes its normal condition and to the empirical evidence that some countries seem not to have achieved this stage yet the model exhibits aggregate non convexities and thresholds which separate a region where growth is solow type with convergence to a stationary steady state from a region where growth is romer type with endogenous self sustained growth in some critical stages of development there exist multiple equilibrium trajectories consistent with alternative sets of self fulfilling beliefs

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

have oil and gas prices got separated abstract this paper applies vector error correction models that show that oil and natural gas prices decoupled around 2009 before 2009 us and uk gas prices had a long term equilibrium with crude prices to which gas prices always reverted after exogenous shocks both us and uk gas prices adjusted to the crude oil price individually and departure from the equilibrium gas price on one continent resulted in a similar departure on the other after an exogenous shock the adjustment between us and uk gas prices took approximately 20 weeks on average and the convergence was mediated mainly by crude oil with a necessary condition that arbitrage across the atlantic was possible after 2009 however the uk gas price has remained integrated with oil price but the us gas price decoupled from crude oil price and the european gas price as the atlantic arbitrage has halted the oversupply from shale gas production has not been mitigated by north american export as there has been no liquefying and export capacity

trade with endogenous transportation costs the case of liquefied natural gas abstract this paper investigates the relationship between lng shipping costs and regional natural gas price spreads we use data on natural gas prices and shipping costs to analyze the distribution of trade benefits within the lng value chain when shipping costs are endogenous to price spread developments our empirical analysis suggests that for the 2006 2014 period the lng shipping sector has had an implied scarcity rent on lng shipping capacity of 0 14 mmbtu for the eu us spread 0 32 mmbtu for the asia eu spread and 0 42 mmbtu for the asia us spread we highlight in a counter factual analysis that this distributional effect is not economically negligible we investigate how including endogenous transportation costs affects the measured degree of price convergence between regional natural gas markets we find that price convergence is stronger when we control for variations in transportation costs rather than implicitly assuming fixed or exogenous costs

natural gas from shortages to abundance in the united states abstract the history of natural gas wellhead and pipeline regulation deregulation and regulatory reforms are discussed these reforms brought natural gas shortages and pipeline inefficiencies to an end they also created an economic platform that could support unanticipated developments in the supply and costs of domestic natural gas such unanticipated developments emerged in the last few years as several technological innovations came together to make it commercially attractive to development us shale gas deposits located deep in the earth how and why shale gas supplies will lead to dramatic changes in the united states energy future with appropriate environmental regulatory reforms are discussed

stock market structure and volatility the procedure for opening stocks on the nyse appears to affect price volatility an analytical framework for assessing the magnitude of the structurally induced volatility is presented the ratio of variance of open to open returns to closeto close returns is shown to be consistently greater than one for nyse common stocks during the period 1982 through 1986 tbe greater volatility at the open is not attributable to the way in which public information is released since both the opento open return and the close to close return span the same period of time instead the greater volatility appears to be attributable to private information revealed in trading and to temporaryprice deviations induced by specialist and other traders the implied cost of immediacy at the open is significantly higher than at the close other empirical evidence in this article documents the volume of trading at the open the time delays between the exchange opening and the first transaction in a stock the difference in daytime volatility versus overnight volatility and the extent to which volatility is related to trading volume

infant industry tariff protection with pressure groups abstract this paper analyzes the increasing tariff protection in the spanish iron and steel industry over the first third of the 20th century learning effects are explicitly included to model a dynamic game of trade liberalization the government chooses the tariff level while firms decide how much to produce each period firms production decisions determine their future cost levels assuming that learning reduces only fixed costs the dynamic game may be solved in closed form so that the optimality and time consistency of the actual policy can be evaluated furthermore the model is used to measure the relative importance of producers and consumers on the government s equilibrium tariff strategy the model is calibrated for year 1913 and it is shown that the existence of important unexploited dynamic economies of scale may have justified high tariff levels at that time in addition the results also show that the spanish iron and steel producers behaved more competitively than what is commonly assumed and that the government s protection policy was not significantly conditioned by steel producers

p dominance and equilibrium selection under perfect foresight dynamics this paper studies equilibrium selection based on a class of perfect foresight dynamics and relates it to the notion of p dominance a continuum of rational players are repeatedly and randomly matched to play a symmetric n n game there are frictions opportunities to revise actions follow independent poisson processes the dynamics has stationary states each of which corresponds to a nash equilibrium of the static game a strict nash equilibrium is linearly stable under the perfect foresight dynamics if independently of the current action distribution there exists a consistent belief that any player necessarily plays the nash equilibrium action at every revision opportunity it is shown that a strict nash equilibrium is linearly stable under the perfect foresight dynamics with a small degree of friction if and only if it is the p dominant equilibrium with p 1 2 it is also shown that if a strict nash equilibrium is the p dominant equilibrium with p 1 2 then it is uniquely absorbing and globally accessible for a small friction but not vice versa set valued stability concepts are introduced and their existence is shown journal of economic literature classication numbers c72 c73

measuring true stock index value in the presence of infrequent trading based on the beveridge nelson 1981 decomposition of an arima process i present a measure of true stock index value that is not directly observable due to infrequent trading of stocks the technique is illustrated with daily observations of the russell 2000 index this new measure might well prove useful in studies of lead lag relationships between index derivatives and spot market and futures basis measurements

endogenous growth and intermediation in an archipelago economy a general equilibrium model based on the parable of an economy of many islands shows the market imperfections in the intermediation activity affect economic growth and possibly prevent take off into sustained growth the inhabitants of different islands accumulate heterogeneous assets and transportation type intermediation allows for better allocation of the productive resources the development process is accompanied by a reduction in intermediation costs which induces firms to adopt more efficient techniques and sustains economic growth a laissez faire economy suffers from two distortions the existence of market imperfections and a thick market externality

policy designs in a dynamic model of infant industry protection abstract this paper takes the neoclassical infant industry model allows agents to respond to future expectations and reveals previously unexplained relationships between protection and outcome policy which projects to protect the industry until international competitiveness may not necessarily succeed consistent to the mixed empirical evaluations to guarantee success protection has to last longer however for success to be an equilibrium protection can last shorter decline after take off is also an equilibrium when adjustment speed is bounded increasing the protection rate is not isomorphic to decreasing its duration in policy design adjustment speed critical industry scale and policy duration are all relevant

social stability and equilibrium in the field of noncooperative game theory nash equilibrium nash 1951 has played a central role as a solution concept in bold strokes one may discern two major interpretations of nash equilibrium in the context of rational players the first which is close to the eductive interpretation of binmore 1987 1988 and the complete information interpretation of kaneko 1987 assumes that the game is played exactly once if it is a repeated game the repetition occurs once and the players have sufficient knowledge and ability to analyze the game in a rational manner sometimes it is assumed that all players have consistent hierarchies of beliefs where the game and their priors are common knowledge bayesian interpretation such as proposed by aumann 1987 advanced this idea to the level that the players have a common prior from this point of view however nash equilibrium seems far from being satisfactory

price limit performance evidence from the tokyo stock exchange price limit advocates claim that price limits decrease stock price volatility counter overreaction and do not interfere with trading activity conversely price limit critics claim that price limits cause higher volatility levels on subsequent days volatility spillover hypothesis prevent prices from efficiently reaching their equilibrium level delayed price discovery hypothesis and interfere with trading due to limitations imposed by price limits trading interference hypothesis empirical research does not provide conclusive support for either positions we examine the tokyo stock exchange price limit system to test these hypotheses our evidence supports all three hypotheses suggesting that price limits may be ineffective

stock market crashes and the performance of circuit breakers empirical evidence this study examines the behavior of a small stock market with circuit breakers and with a one hour preauction order imbalance disclosure during the october 1987 crash the crash and its aftershocks lasted for a week and selling pressure was concentrated in higher beta larger capitalization and lower leverage firm stocks circuit breakers when implemented reduced the next day opening order imbalance and the initial price loss however they had no effect on the long run response some price overreaction and reversal phenomena also are documented

public spending endogenous growth and endogenous fluctuations abstract this article studies indeterminacy and endogenous growth in a simple one sector model of capital accumulation endowed with inelastic labor supply in which the presence of public goods creates positive externalities both in the production and the consumption sectors because of increasing returns in the utility function the economy exhibits not only perpetual growth but also indeterminacy and therefore endogenous stochastic growth fluctuations the possibility of sunspot equilibrium growth paths is shown to be consistent with plausible parameter values journal of economic literatureclassification numbers e32 o41 h40

an axiomatic theory of a risk dominance measure for bipolar games with linear incentives bipolar games are normal form games with two pure strategies for each player and with two strict equilibrium points without common equilibrium strategies a normal form game has linear incentives if for each player the difference between the payoffs for any two pure strategies depends linearly on the probabilities in the mixed strategies used by the other players a measure of risk dominance between two strict equilibrium points of a bipolar game with linear incentives is characterized by 11 axioms journal of economic literature classification number c72

order imbalance liquidity and market returns traditionally volume has provided the link between trading activity and returns we focus on a hitherto unexplored but intuitive measure of trading activity the aggregate daily order imbalance on the new york stock exchange signed order imbalances increase decrease following market declines rises which reveals that investors are contrarians on aggregate order imbalances in either direction either excess buy or sell orders reduce liquidity market wide returns are strongly affected by contemporaneous and lagged order imbalances market wide returns reverse themselves after high negative imbalance large negative return days the magnitude of this reversal is partially predictable from the level of the imbalance and return even after controlling for aggregate market volume and liquidity market returns are affected by order imbalance

increasing returns dynamic stability and international trade abstract a simple two country two good model in which economies of scale form the basis of international trade is presented it is shown that the larger country exports the good characterized by increasing returns and imports the good subject to constant returns a key feature of the paper is a comprehensive stability analysis it turns out that a normal output price response is necessary for d stability furthermore the marshall lerner condition must be satisfied in terms of the short run import demand elasticities for local dynamic stability finally if international factor mobility is permitted cross hauling of specific factors may be observed

international market integration for natural gas a cointegration analysis of prices in europe north america and japan this paper investigates the degree of integration of natural gas markets in europe north america and japan in the time period between the early 1990s and 2004 the relationship between international gas market prices and their relation to the oil price are explored through principal components analysis and johansen likelihood based cointegration procedure both of them show a high level of natural gas market integration within europe between the european and japanese markets as well as within the north american market at the same time the obtained results suggest that the european respectively japanese and the north american markets were not integrated

rational expectations business cycles in search equilibrium we examine the rational expectations equilibrium paths of the model of search and barter in diamond s aggregate demand management in search equilibrium for some initial positions there are two equilibrium paths converging to different steady states with the high activity path pareto dominating the low activity path with some parameters there is also a continuum of equilibrium paths converging to another steady state moreover there can be cycles that are equilibrium paths even though the environment is stationary

exploring the driving factors of global lng trade flows using gravity modelling abstract taking into account the attributes of the liquefied natural gas lng trade and the space time characteristics of trade flows this paper identifies the multiple dimensional factors that influenced the global lng trade between 2004 and 2015 following an analysis of the data via the application of gravity models the empirical results of this study indicate that these influencing factors possess both general and regional characteristics in contrast to general trade the lng trade is mainly affected by the economic magnitude of the demand side regionally pipeline natural gas has a significant substitute effect on the lng trade within the global model though not within the asian model additionally the lng trade in asia is more sensitive to the influence of import prices and research and development investment than in the global model our subsample analyses show that the results are robustness across different periods finally this paper discusses pertinent policy implications for the lng trade especially as related to asia

order imbalances and stock price movements on october 19 and 20 1987 on october 19 1987 nyse stocks in the s p index declined seven percentage points more than nyse stocks not in this index in the first hour of trading on october 20 the s p stocks virtually recovered to the level of the non s p stocks there is a strong relation between order imbalances and stock price movements both in analyses of time series and cross sections thus in addition to the breakdown in the linkage between future prices and the spot index on these two days there were also breakdowns in the linkage among nyse stocks

a microeconomic mechanism for economic growth this paper constructs a dynamic general equilibrium model in which economic growth is explained by the evolution of the division of labor the relationships among the accumulation of human capital the evolution of the division of labor endogenous comparative advantage trade dependence the market structure and economic growth are investigated

the limits of trade policy reform in developing countries trade reform is now raising some new issues this paper deals with three sets of questions first how can trade reform be sustained can governments convince business labor or consumers that trade reform will be lasting so as to forestall possible adverse reactions that would jeopardize the sustainability of the reform second what role should trade reform play when it is implemented in the context of macroeconomic instability are there potential conflicts between the standard desiderata for trade reform and the requirements of macro stability finally should we be worried about the consequences of trade reform in the imperfectly competitive market environments that characterize the developing economies

risk dominance and perfect foresight dynamics in n player games abstract in perfect foresight dynamics an action is linearly stable if expectation that people will always choose the action is self fulfilling a symmetric game is a pim game if an opponent s particular action maximizes the incentive of an action independently of the rest of the players this class includes supermodular games games with linear incentives and so forth we show that in pim games linear stability is equivalent to u dominance a generalization of risk dominance and that there is no path escaping a u dominant equilibrium existing results on n player coordination games games with linear incentives and two player games are obtained as corollaries

on endogenous growth with physical and human capital this paper presents a class of models in which agents may devote part of their nonleisure activities to going to school so as to increase the efficiency units of labor they supply to the firms and the wages they receive the interaction among the technology of human capital accumulation and agents preferences will determine endogenously the economy s rate of growth given a constant returns to scale technology for physical capital accumulation we characterize the set of steady states as a ray from the origin and show the global convergence of every off balanced path to some point on this ray further properties concerning the dynamic evolution of the state and control variables around the ray of steady states are also established our analysis is useful to understand the role played by the technologies of physical and human capital in the process of accumulation and to evaluate the impact of policies geared toward attaining higher levels of capital our results highlight the importance of human capital

economics imperialism and the new development economics as kuhnian paradigm shift abstract this paper addresses the evolving relationship between economics and other social sciences it sets the present intellectual scene as one in which economics imperialism is rampaging across other disciplines the designs of economics upon development studies are examined in terms of the kuhnian notion of paradigm shift thereby the conclusion is drawn of the potential prospect of open debate around the economy and development not least outside economics itself but there is danger of economics imperialism in the form of the post washington consensus foreclosing the analytical agenda at the expense of approaches based on the political economy of capitalism

optimal public investments in education and endogenous growth optimal public investments in human capital through subsidizing private education or providing public education are considered in an endogenous growth model with externalities subsidizing private education stimulates growth improves welfare and has no distributional effect while reducing income inequality as in the literature public education hinders the growth of the average income unless externalities are strong enough and reduces the welfare of the median agent unless initial income inequality is sufficiently high societies with high income inequality may provide public education and will replace it with subsidized private education in some future periods as income converges copyright 1996 by the editors of the scandinavian journal of economics

the october 1987 s p 500 stock futures basis five minute changes in the s p 500 index and futures contract are examined over a ten day period surrounding the october 1987 stock market crash since nonsynchronous trading problems are severe in these data new index estimators are derived and used the estimators use the complete transaction history of all 500 stocks nonsynchronous trading explains part of the large absolute futures cash basis observed during the crash the remainder may be due to disintegration of the two markets even after adjustment for nonsynchronous trading the index displays more autocorrelation than does the futures and the futures leads the index

time inconsistency of protectionist programs protectionist trade policies have long been advocated as second best instruments to achieve certain national objectives in situations where there is a market imperfection in essence protection provides time and resources for firms to undertake cost reducing investments recently there has been an emergence of new arguments to justify the implementation of a national industrial policy to encourage investment and to ensure the competitiveness of targeted industries also at the theoretical level a new argument known as strategic trade policy has emerged according to this argument protectionism gives domestic firms strategic advantage against foreign firms to capture a greater share of export markets where rents are not competed away actually the performance of protectionist programs has been grim industries have not adapted and protection has had to be renewed again and again arguments justifying protection have avoided this issue by implicitly assuming that authorities can credibly precommit to eliminate protection this is a very strong assumption in fact government actions are not exogenous but they are rather the result of an optimization process or they are best responses to political pressures as stressed in the public choice literature 2 therefore if authorities capitulate to protectionist pressures in the present they are unlikely to resist them in the future in the event that the targeted firm would not have adapted the inability of authorities to precommit to the unconditional elimination of protection generates a trade off for the firm if during the program the firm does not invest sufficiently in cost

dealer liquidity in an auction market evidence from the london stock exchange we analyse the trade characteristics and market conditions which determine the market share of a continuous auction trading system at the london stock exchange where a network of broker dealer firms is also available for trade we show that execution and information risks govern the choice of execution venue further we uncover strong commonality in the market share of the order book across stocks and find that variables proxying for market wide liquidity and informational risks also affect the choice of trading venue our results suggest that competing off book liquidity suppliers voluntarily perform at least some of the stabilisation functions normally assigned to designated market makers

macroeconomic structure endogenous technical change and growth this paper shows the relevance of the macroeconomic structure that governs short term changes in aggregate demand and income distribution in the determination of long term growth rates it develops a new growth model by introducing endogenous technical change into a keynesian marxist synthesis model of accumulation and distribution this model has multiple equilibria a high growth equilibrium that is stable if rising wage share leads to an increase in investment and real wages are somewhat rigid and a low growth equilibrium that is stable under opposite circumstances based on this result the paper discusses how institutions and history matter in long term growth copyright 1994 by oxford university press

endogenous fertility multiple growth paths and economic convergence abstract this paper extends the cass koopmans optimal growth model to allow for endogenous fertility choice it is shown that if agents choose their fertility rate then the net rate of return on capital marginal product of capital minus the population growth rate may not be monotonically decreasing in capital in this case multiple steady states and growth paths may emerge which can explain the persistent differentials in income between poor and rich countries as well as the existence of development miracles and disasters the paper provides also empirical evidence which supports the existence of multiple convergence groups and is consistent with the theoretical model

p dominance and perfect foresight dynamics abstract we investigate stability of p dominant equilibria under perfect foresight dynamics we show that a strict p dominant equilibrium with i p i 1 is globally accessible and absorbing in perfect foresight dynamics we also investigate robustness and extensions of this result we apply our proof method to games with u dominant equilibria and unanimity games

gas versus oil prices the impact of shale gas abstract what significance will developments in shale gas production have for european gas prices some commentators paint a gloomy picture of the future gas markets but most forecasts for the oil market are positive consequently a view appears to prevail that price trends will differ sharply between oil and gas markets this article looks at developments in us shale gas production and discusses their impact on the movement of european gas prices the relationship between oil and gas prices over time is also analysed

the saga of the first stock index futures contract benchmarks models and learning in the presence of imperfect or perturbed benchmarks pricing based on relative valuation or arbitrage can be affected adversely this study highlights persistent pricing irregularities in the kansas city value line kcvl stock index futures market this contract is especially interesting because the underlying benchmark underwent a midstream change in definition from a complex equally weighted geometric index to an equally weighted arithmetic index empirical analysis reveals that during a four year period the market displayed herd like behavior and priced the kcvl geometric contract using the simple but wrong cost of carry benchmark model a dramatic change occurs around the publication of the eytan harpaz 1986 model when the market turns efficient from the perspective of this new model the market appears to have succumbed initially to a bad information cascade primarily because arbitrage was difficult to understand and carry out under complex benchmarking the evidence provides empirical extension to the observational social learning paradigms of simon 1955 banerjee 1992 and bikhchandani hirshleifer and welch 1992 that lead to behavioral herding and information cascades

rationalizable foresight dynamics abstract this paper proposes and studies the rationalizable foresight dynamics a normal form game is repeatedly played in a random matching fashion by a continuum of agents who make decisions at stochastic points in time a rationalizable foresight path is a feasible path of action distribution along which each agent takes an action that maximizes his expected discounted payoff against another path which is in turn a rationalizable foresight path we consider a set valued stability concept under this dynamics and compare it with the corresponding concept under the perfect foresight dynamics

an approach to equilibrium selection abstract we consider equilibrium selection in 2 2 bimatrix both symmetric and asymetric games with two strict nash equilibria by embedding the static games in a dynamic random matching framework played by a continuum of anonymous agents unlike in evolutionary games the players are rational and maximize discounted payoffs but they are restricted to make a short run commitment when choosing actions this dynamic game with frictions has stationary states which correspond to the nash equilibria of the static game our selection is based on differential stability properties of the stationary states it is shown that for a small degree of friction a strict nash equilibrium becomes uniquely absorbing and globally accessible if and only if it is risk dominant harsanyi and selten a general theory of equilibrium selection in games mit press cambridge ma 1988 journal of economic literature classification numbers c72 and c73