equilibrium and government commitment abstract how should a government use the power to commit to ensure a desirable equilibrium outcome in this paper i show a misleading aspect of what has become a standard approach to this question and i propose an alternative i show that the complete description of an optimal indeed of any policy scheme requires outlining the consequences of paths that are often neglected the specification of policy along those paths is crucial in determining which schemes implement a unique equilibrium and which ones leave room for multiple equilibria that depend on the expectations of the private sector

who governs energy the challenges facing global energy governance this article conceptualizes the energy problems facing society from a global governance perspective it argues that a notion of global energy governance taken to mean international collective action efforts undertaken to manage and distribute energy resources and provide energy services offers a meaningful and useful framework for assessing energy related challenges the article begins by exploring the concepts of governance global governance and global energy governance it then examines some of the existing institutions in place to establish and carry out rules and norms governing global energy problems and describes the range of institutional design options available to policymakers it briefly traces the role of a selection of these institutions from inter governmental organizations to summit processes to multilateral development banks to global action networks in responding to energy issues and points out their strengths and weaknesses the article concludes by analyzing how the various approaches to global governance differ in their applicability to addressing the conundrums of global energy problems

optimal fiscal policy under multiple equilibria abstract we study optimal fiscal policy in an economy where i search frictions create a coordination problem and generate multiple pareto ranked equilibria and ii the government finances the provision of a public good by taxing market activity the government must choose the tax rate before it knows which equilibrium will obtain and therefore an important part of the problem is determining how the policy will affect the equilibrium selection process we show that when the equilibrium selection rule is based on the concept of risk dominance higher tax rates make coordination on the pareto superior outcome less likely as a result taking equilibrium selection effects into account leads to a lower optimal tax rate

credible public policy abstract credible public policy is defined in a way that incorporates competitive equilibrium behavior for households and subgame perfect nash equilibrium behavior for the government it is shown that the set of all equilibrium outcome paths for credible policies can be constructed by using arguments analogous to those of abreu 1988 for repeated games the results are then extended to systems with state variables simple models of monetary policy and capital taxation are studied by way of example

stacking low carbon policies on the renewable fuels standard economic and greenhouse gas implications this paper examines the economic and ghg implications of stacking a low carbon fuel standard lcfs with and without a carbon price policy on the renewable fuel standard rfs we compare the performance of various policy combinations for food and fuel prices fuel mix and fuel consumption we also analyze the economic costs and benefits of alternative policy combinations and their distributional effects for consumers and producers in the transportation and agricultural sector in the us using a dynamic multi market partial equilibrium model of the transportation and agricultural sectors we find that combining the rfs with an lcfs policy leads to a reduction in first generation biofuels and an increase in second generation biofuels compared to the rfs alone this policy combination also achieves greater reduction in ghg emissions even after considering offsetting market mediated effects imposition of a carbon price with the rfs and lcfs policy primarily induces fuel conservation and achieves larger ghg emissions reduction compared to the other policy scenarios all these policy combinations lead to higher net economic benefits for the transportation and agricultural sectors relative to the no policy baseline because they improve the terms of trade for us

sophisticated monetary policies in standard monetary policy approaches interest rate rules often produce indeterminacy a sophisticated policy approach does not sophisticated policies depend on the history of private actions government policies and exogenous events and can differ on and off the equilibrium path they can uniquely implement any desired competitive equilibrium when interest rates are used along the equilibrium path implementation requires regime switching these results are robust to imperfect information our results imply that the taylor principle is neither necessary nor sufficient for unique implementation they also provide a direction for empirical work on monetary policy rules and determinacy

the fiscal theory of the price level in a world of low interest rates abstract a central equation for the fiscal theory of the price level ftpl is the government budget constraint or government valuation equation which equates the real value of government debt to the present value of fiscal surpluses in the past decade the governments of most developed economies have paid very low interest rates and there are many other periods in the past in which this has been the case in this paper we revisit the implications of the ftpl in a world where the rate of return on government debt may be below the growth rate of the economy considering different sources for the low returns dynamic inefficiency the liquidity premium of government debt or its favorable risk profile this article is part of a special issue entitled fiscal and monetary policies

optimal taxation in models of endogenous growth we study the problem of optimal taxation in three infinite horizon representative agent endogenous growth models the first model is a convex model in which physical and human capital are perfectly symmetric our second model incorporates elastic labor supply through a lucas style technology analysis of these two models points out the danger of assuming that government expenditures are exogenous in our third model we include government expenditures as a productive input in capital formation showing that the limiting tax rate on capital is no longer zero in numerical simulations we find similar effects on growth and welfare in all three models

oil vulnerability index of oil importing countries abstract this paper assesses the relative oil vulnerability of 26 net oil importing countries for the year 2004 on the basis of various indicators the ratio of value of oil imports to gross domestic product gdp oil consumption per unit of gdp gdp per capita and oil share in total energy supply ratio of domestic reserves to oil consumption exposure to geopolitical oil market concentration risks as measured by net oil import dependence diversification of supply sources political risk in oil supplying countries and market liquidity the approach using the principal component technique has been adopted to combine these individual indicators into a composite index of oil vulnerability such an index captures the relative sensitivity of various economies towards developments of the international oil market with a higher index indicating higher vulnerability the results show that there are considerable differences in the values of individual indicators of oil vulnerability and overall oil vulnerability index among the countries both inter and intraregional

what is the cost of a renewable energy based approach to greenhouse gas mitigation energy policies for greenhouse gas ghg mitigation in the united states have set sector specific standards such as the renewable fuel standard rfs and the renewable portfolio standard rps for the transportation and the electricity sectors respectively this paper examines the welfare costs and effectiveness of ghg abatement with these policies and compares them with those under a carbon tax normalized to achieve the same level of abatement over the 2007 2030 period we show that the global welfare cost per ton of ghg abatement with the rfs and rps is 171 while with the carbon tax it is 7

a meta analytical evaluation of sustainable city initiatives the role of the city in environmental management is increasingly coming to the fore a central element in creating urban environmental sustainability is the adoption of appropriate energy policies since most environmental externalities in cities are directly or indirectly related to energy use the current practice demonstrates an overwhelming variety of initiatives and policies so that the actual success of such strategies in a cross sectional comparative perspective is hard to evaluate in this context this paper offers an application of meta analysis as this approach is an interesting analytical contribution towards a better understanding of the critical success factors of urban energy policies the paper starts with a general overview of the issue of urban sustainability and sets out the importance of energy policies at the urban level it continues by offering a methodological framework for the assessment of critical factors related to the performance of sustainable energy strategies using a dat

a game theoretic view of the fiscal theory of the price level the goal of this paper is to probe the validity of the fiscal theory of the price level by modelling explicitly the market structure in which households and the government make their decisions i describe the economy as a game and i am thus able to state precisely the consequences of actions that are out of the equilibrium path i show that there exist government strategies that lead to a version of the fiscal theory in which the price level is determined by fiscal variables alone these strategies are however more complex than the simple budgetary rules usually associated with the fiscal theory and the government budget constraint cannot be merely viewed as an equilibrium condition

general equilibrium electricity generation technologies and the cost of carbon abatement a structural sensitivity analysis abstract electricity generation is a major contributor to carbon dioxide emissions and abatement in this sector is a key determinant of economy wide regulation costs the complexity of an integrated representation of economic and electricity systems makes simplifying assumptions appealing but there is no evidence in the literature on how important the pitfalls may be the aim of this paper is to provide such evidence drawing on numerical simulations from a suite of partial and general equilibrium models that share common technological features and are calibrated to the same benchmark data we report two basic findings first general equilibrium inter sectoral effects of an economy wide carbon policy are large it follows that assessing abatement potentials and price changes in the electricity sector with a partial equilibrium marshallian demand can only provide a crude approximation of the complex demand side interactions second we provide evidence that widely used top down representations of electricity technologies produce fuel substitution patterns that are inconsistent with bottom up cost data this supports the view that the parametrization of substitution possibilities with highly aggregated production functions is difficult to validate empirically the overall picture that emerges is one of large quantitative and even qualitative differences highlighting the role of key structural assumptions in the interpretation of climate policy projections

unique equilibrium in a model of self fulfilling currency attacks even though self fulfilling currency attacks lead to multiple equilibria when fundamentals are common knowledge we demonstrate the uniqueness of equilibrium when speculators face a small amount of noise in their signals about the fundamentals this unique equilibrium depends not only on the fundamentals but also on financial variables such as the quantity of hot money in circulation and the costs of speculative trading in contrast to multiple equilibrium models our model allows analysis of policy proposals directed at curtailing currency attacks

optimal fiscal policy in a business cycle model this paper develops the quantitative implications of optimal fiscal policy in a business cycle model in a stationary equilibrium the ex ante tax rate on capital income is approximately zero there is an equivalence class of ex post capital income tax rates and bond policies that support a given allocation within this class the optimal ex post capital tax rates can range from close to independently and identically distributed to close to a random walk the tax rate on labor income fluctuates very little and inherits the persistence properties of the exogenous shocks thus there is no presumption that optimal labor tax rates follow a random walk most of the welfare gains realized by switching from a tax system like that of the united states to the ramsey system come from an initial period of high taxation on capital income

banking panics and policy responses we study how banking panics unfold in av ersion of the diamond and dybvig 1983 model with limited commitment as is well known the banking authority could eliminate the possibility of a run on the banking system by committing to suspend payments to depositors if a run were to start once a run is under way however the banking authority will choose to reschedule rather than suspend payments we construct equilibria in which depositors run on the banking system with positive probability and we show that an equilibrium bank run in this setting is necessarily partial with only some depositors participating we also show that a run naturally occurs in waves with each wave of withdrawals prompting a further policy response from the banking authority the number of waves that occur in equilibrium is stochastic and can be arbitrarily large

a comparative analysis of urban energy governance in four european cities abstract cities are at the forefront of efforts to combat climate change and in this paper we examine the influence of urban energy governance on these policy goals an innovative framework for quantifying the combined governance of cities and energy systems is presented before focusing on a detailed study of london paris berlin and copenhagen by applying an optimization model to assess the lowest cost technology pathways to achieve emission reduction targets the links between the governance of urban energy systems and the cost of achieving carbon targets are shown additionally a novel metric of scenario similarity is introduced in order to evaluate the difficulty of hypothesized energy system transitions the results indicate that these tools can be valuable in identifying similar cities for the sharing of best practice for performing comparative evaluations of energy transitions and for reinforcing the need to complement quantitative assessments with a more holistic appreciation of local context

understanding local co2 emissions reduction targets abstract local commitments on climate change are often spread by international associations and city networks the most recent initiative at the european level was the signing of the covenant of mayors the covenant of mayors provides information about several indicators related to the emissions reduction plans of those cities that have signed the covenant a cross sectional regression analysis is made between the planned emissions reductions and the basic indicators analysed results show that the predicted reductions are greater in more contaminated cities and with a greater energy use per capita however the effort of the contaminated cities is less than proportional energy efficiency is focused on the containment of electrical and h c consumption the planned reductions are greater in those cities which have a greater percentage of energy consumption in the transport sector no significant differences are seen between the emissions reductions planned by the northern and southern cities energy consumption per capita is smaller in the large cities with emissions also tending to be more reduced which suggests that urbanization can generate agglomeration benefits that are environmentally effective the greater consumption of renewables is seen in small municipalities

can deployment of renewable energy put downward pressure on natural gas prices abstract high and volatile natural gas prices have increasingly led to calls for investments in renewable energy one line of argument is that deployment of these resources may lead to reductions in the demand for and price of natural gas many recent us based modeling studies have demonstrated that this effect could provide significant consumer savings in this article we evaluate these studies and benchmark their findings against economic theory other modeling results and a limited empirical literature we find that many uncertainties remain regarding the absolute magnitude of this effect and that the reduction in natural gas prices may not represent an increase in aggregate economic wealth nonetheless we conclude that many of the studies of the impact of renewable energy on natural gas prices appear to have represented this effect within reason given current knowledge these studies specifically suggest that a 1 reduction in us natural gas demand could lead to long term average wellhead price reductions of 0 8 2 and that each megawatt hour of renewable energy may benefit natural gas consumers to the tune of at least 7 5 20

inflation targeting as a monetary policy rule the purpose of the paper is to survey and discuss in ation targeting in the context of monetary policy rules the paper provides a general conceptual discussion of monetary policy rules attempts to clarify the essential characteristics of in ation targeting compares in ation targeting to other monetary policy rules and draws some conclusions for the monetary policy of the european system of central banks jel classi cation e42 e52

forward guidance communication commitment or both abstract forward guidance has been suggested as a form of commitment odyssean by the policymaker or as a way of conveying information delphic i analyze the interaction between households and the central bank as a game in which the central bank sends messages without private information the set of equilibrium payoffs is independent of any announcements pure odyssean forward guidance is redundant with private information communication can have social value forward guidance is well suited to leverage preexisting credibility to communicate a central bank s private information about its own preferences or beliefs

food vs fuel the effect of biofuel policies the rise in food commodity prices since 2004 which reached record highs in 2008 has coincided with the tripling of corn ethanol production from 15 billion liters bl to 50 bl over the 2004 2010 period this has spurred the food vs fuel debate and raised questions about the extent to which biofuels have contributed to the increase in food crop prices estimates of the impact of observed levels of biofuel production differ widely across studies and lie between 20 and 60 hochman et al 2011 biofuel production in the united states us has surged as a result of government policies like the renewable fuel standard rfs volumetric ethanol excise tax credit veetc for blenders of ethanol and tariffs that restrict the imports of sugarcane ethanol the rfs authorized by the energy independence and security act eisa of 2007 has set ambitious targets of increasing biofuel production sixfold to 136 bl by 2022 with over 60 of it to be met by advanced biofuels produced using non corn starch based feedstocks a 0 12 liter veetc is provided to blenders of ethanol to reduce their costs of meeting the rfs while a tariff of 0 14 liter and an ad valorem tariff of 2 5 were enacted to prevent transfer of the tax credit to ethanol producers in brazil the current veetc and import tariff expired in 2011 with increasing federal debt and concerns about the impact of these policies on food and feed prices political support for the

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

endogenous price fluctuations in an optimizing model of a monetary economy this paper demonstrates that an optimizing model of a monetary economy can produce perfect foresight equilibria in which the price level fluctuates forever cyclically or chaotically fluctuating equilibria are more likely to exist when the rate of money supply growth is high furthermore the set of equilibrium prices may have a complicated topological structure which poses a more serious problem concerning the validity of comparative statics method than any sort of indeterminacy previously discussed in the literature copyright 1991 by the econometric society

balanced budget rules distortionary taxes and aggregate instability a traditional argument against a balanced budget fiscal policy rule is that it amplifies business cycles by stimulating aggregate demand during booms via tax cuts and higher public expenditures and by reducing demand during recessions through a corresponding fiscal contraction this paper suggests an additional source of instability that may arise from this type of fiscal policy rule it shows that within the standard neoclassical growth model a balanced budget rule can make expectations of higher tax rates self fulfilling if the fiscal authority relies heavily on changes in labor income taxes to eliminate short run fiscal imbalances calibrated versions of the model show that indeterminacy occurs for income tax rates that are empirically plausible for the u s economy and other group of seven countries

emerging in between the multi level governance of renewable energy in the english regions abstract analysis explains the emergence of a regional dimension to the multi level governance of renewable energy in england the case sits in a tense yet informative position between the two poles of ordered and messy multi level governance these tensions which are currently debilitating could be rendered more creative and fruitful if greater authority was devolved to the regions and if policy learning between the regions and the central government was institutionalised more deeply improved legitimacy and accountability mechanisms must accompany increased authority however english ambivalence over regionalisation generally means such changes are unlikely

when are agents negligible the authors examine the following paradox in a dynamic setting equilibria can be radically different in a model with a finite number of agents than in a model with a continuum of agents they present a simple strategic setting in which this paradox is a general phenomenon however the paradox disappears when there is noisy observation of the players actions and the aggregate level of noise does not disappear too rapidly as the number of players increases the authors give several economic examples in which this paradox has recently received attention durable goods monopoly corporate takeovers and time consistency of optimal government policy copyright 1995 by american economic association

sovereign default the role of expectations we study a variation of the standard model of sovereign default as in aguiar and gopinath 2006 or arellano 2008 and show that this variation is consistent with multiple interest rate equilibria some of those equilibria correspond to the ones identi ed by calvo 1988 where default is likely because rates are high and rates are high because default is likely the model is used to simulate equilibrium movements in sovereign bond spreads that resemble sovereign debt crises it is also used to discuss lending policies similar to the ones announced by the european central bank in 2012

evaluating renewable portfolio standards and carbon cap scenarios in the u s electric sector this report examines the impact of renewable portfolio standards rps and cap and trade policy options on the u s electricity sector the analysis uses the national renewable energy laboratory s regional energy deployment system reeds model that simulates the least cost expansion of electricity generation capacity and transmission in the u s to examine the impact of a variety of emissions caps and rps scenarios both individually and combined the generation mix carbon emissions and electricity price are examined for various policy combinations simulated in the modeling

ruling out divergent speculative bubbles abstract the growth in the empirical literature on testing for divergent in mean speculative bubbles indicates that existing theoretical arguments for ruling out such price paths are not sufficiently compelling here we strengthen the case for ruling out explosive or implosive bubbles a priori by filling in two gaps first we demonstrate why divergent stochastic bubbles arising from purely extrinsic uncertainty as in blanchard 1979 cannot be equilibria in a monetary optimizing model second we show why existing arguments for ruling out implosive price bubbles are insufficient in some cases and we provide stronger arguments

indeterminacy and increasing returns abstract we investigate properties of the one sector growth model with increasing returns under two organizational structures capable of reconciling the existence of aggregate increasing returns with competitive behavior by firms the first involves input externalities the second involves monopolistic competition we show for parameters in close accord with recent literature on real business cycles that the model displays an indeterminate steady state that can be exploited to generate a model of business fluctuations driven by self fulfilling beliefs in our first class of models growth is generated by exogenous increases in factor productivity in the second class the marginal product of capital is large enough for endogenous growth journal of economic literature classification numbers e00 e3 o40

second best biofuel policies and the welfare effects of quantity mandates and subsidies abstract the quest for biorenewable energy sources is held to justify a number of government interventions including support policies for biofuels such as those responsible for the recent rapid growth of us ethanol production this article provides an analytical assessment of such policies we construct a general equilibrium open economy model that captures the rationale typically invoked to justify government intervention in this setting to alleviate the environmental impact of energy consumption and to decrease us energy dependence on foreign sources the model is used to study both the positive and normative implications of alternative policy instruments including the subsidies and mandates specified by the 2007 energy independence and security act from a positive perspective we find that biofuels mandates are equivalent to a combination of fuel taxes and biofuels subsidies that are revenue neutral from a welfare perspective we show that biofuels mandates dominate biofuels subsidies and that combining fuel taxes with mandates would be welfare enhancing

chaos sunspots and automatic stabilizers abstract we consider a real business cycle model with an externality in production depending on parameter values the model has sunspot equilibria cyclical and chaotic equilibria and equilibria with deterministic or stochastic regime switching we study the implications of this model environment for automatic stabilizer tax systems stabilization is desirable because the efficient allocations are characterized by constant employment and output growth we identify an automatic stabilizer income tax subsidy schedule with two properties i it specifies the tax rate to be an increasing function of aggregate employment and ii earnings are subsidized when aggregate employment is at its efficient level the first feature eliminates inefficient fluctuating equilibria while the second induces agents to internalize the externality

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

expectation traps and discretion abstract we develop a dynamic model with optimizing private agents and a benevolent optimizing monetary authority that cannot commit to future policies we characterize the set of sustainable equilibria and discuss the implications for institutional reform we show that there are equilibria in which the monetary authority pursues inflationary policies because that is what private agents expect we call such equilibria expectation traps alternative institutional arrangements for the conduct of monetary policy which impose limited forms of commitment on the policymaker can eliminate expectation traps journal of economic literatureclassification numbers e31 e42 e50 e51 e58

sustainable energy projects and the community mapping single building use of microgeneration technologies in london microgeneration technologies offer the potential for distributed energy supply and consumption resulting in reduced reliance on centralised generation adoption of microgeneration for use in community settings is usually understood as having a beneficial contribution to sustainable development this is particularly relevant in urban environments which present specific challenges relating to the heterogeneity of building and land use small scale installations in buildings also appear to offer technological flexibility at the human level necessary for local participation in shaping the direction of sustainable development this paper reports on a project concerned with identifying on site energy generation projects in greater london a database was compiled comprising renewable and energy efficient microgeneration installations in multi occupancy buildings the relationships between each project and its associated organisations are mapped as a social network which illustrates the heterogeneity of technologies and actors involved as well as the flows of funding and expertise the structure of the resulting networks indicates a lack of participation by social or not for profit groups who are traditionally identified as community level actors the findings indicate that large institutional actors on the supply side may become regarded as renewable energy experts hence there is a need to consider how the concept of community level actors in urban microgeneration projects is applicable to local government and commercial organisations

the next generation of urban maccs reassessing the cost effectiveness of urban mitigation options by integrating a systemic approach and social costs abstract many cities are implementing policies and climate action plans yet local climate policies suffer from a lack of scientific understanding and evaluation methods able to support the definition of efficient mitigation strategies the purpose of this paper is to build on classical approaches in the energy policy field that exist at the national and international level to propose an urban maccs methodology able to fulfill this lack and inform local debates the methodology is an extension of static expert based maccs it combines a land use transport integrated model and an abatement cost methodology that integrates co benefits and takes into account the spatial and systemic dimensions of cities the methodology is implemented for the transportation sector of a mid sized european city grenoble france our results present the cost effectiveness and political feasibility of several proposed measures we find that the inclusion of co benefits can profoundly change the cost benefit assessment of transport mitigation options moreover we underline the key parameters determining the cost effectiveness ranking of mitigation options these urban maccs aim to serve as a bridge between urban planning and mitigation policies and can thus contribute to strengthen and align sustainable and climate change agendas at the local level

london and beyond taking a closer look at urban energy policy this paper considers the field of urban energy policy a neglected yet important topic cities account for approximately two thirds of global primary energy consumption creating significant benefits and costs as a result there has been growing interest in the contribution of cities to global energy policy issues such as climate change but a number of significant questions remain e g how do energy policy processes differ between national and urban scales and how can cities contribute most effectively to global policy goals we present the results of interviews with key stakeholders in london to illustrate some unique features of the urban energy policy cycle we then take a wider view proposing a research agenda with three key goals describing the global variety of urban energy consumption and policy understanding the resulting diversity in responsibility vulnerability and capacity and developing shared procedures and solutions tackling these questions is vital if cities are to contribute fully to current energy policy efforts

on the optimal taxation of capital income abstract we show that in models in which labor services are supplied jointly with human capital the chamley and judd result on zero capital income taxation in the limit extends to labor taxes as long as accumulation technologies are constant returns to scale moreover for a class of widely used preferences consumption taxes are zero in the limit as well however we show by the construction of two examples that these results no longer hold for certains types of restrictions on tax rates or if there are profits generated journal of economic literatureclassification numbers e62 h21

the perils of taylor rules abstract since john taylor s 1993 carnegie rochester conf ser publ policy39 195 214 seminal paper a large literature has argued that active interest rate feedback rules that is rules that respond to increases in inflation with a more than one for one increase in the nominal interest rate are stabilizing in this paper we argue that once the zero bound on nominal interest rates is taken into account active interest rate feedback rules can easily lead to unexpected consequences specifically we show that even if the steady state at which monetary policy is active is locally the unique equilibrium typically there exist an infinite number of equilibrium trajectories originating arbitrarily close to that steady state that converge to a liquidity trap that is a steady state in which the nominal interest rate is near zero and inflation is possibly negative journal of economic literature classification numbers e52 e31 e63

the mexican peso crisis sudden death or death foretold abstract we argue that allowing for the possibility of a self fulfilling panic helps to understand several features of the recent mexican crisis self fulfilling expectations became decisive in generating a panic only after the government ran down gross reserves and ran up short term dollar debt we present a simple model to explain how and why multiple equilibria can occur for some levels of reserves or debt but not for others lastly we argue that the imperfect credibility of mexican exchange rate policy made it advisable to follow more contractionary fiscal and monetary policies in 1994 our model formalizes the reasons why this is so

capturing spatial effects technology interactions and uncertainty in urban energy and carbon models retrofitting newcastle as a case study abstract local authorities often rely upon urban energy and carbon modelling tools to develop mitigation policies and strategies that will deliver reductions in greenhouse gas emissions in this paper the uk example of newcastle upon tyne is used to critique current practice noting that important features of urban energy systems are often omitted by bottom up tools including interactions between technologies spatial disaggregation of demand and the ability to pursue over arching policy goals like cost minimization an alternative optimization based approach is then described and applied to the newcastle case at the scale of both the whole city and the south heaton district and using monte carlo techniques to address policy uncertainty the results show that this new method can help policy makers draw more robust policy conclusions sensitive to spatial variations in energy demand and capturing the interactions between developments in the national energy system and local policy options further work should focus on improving our understanding of local building stocks and energy demands so as to better assess the potential of new technologies and policies

monetary fiscal interactions with endogenous liquidity frictions i develop a tractable macro model with endogenous asset liquidity to understand monetary fiscal interactions with liquidity frictions agents face idiosyncratic investment risks and meet financial intermediaries in competitive search markets asset liquidity is determined by the search friction and the cost of operating the financial intermediaries and it drives the financing constraints of entrepreneurs those who have investment projects and their ability to invest in contrast to private assets government bonds are fully liquid and can be accumulated in anticipation of future opportunities to invest a higher level of real government debt enhances the liquidity of entrepreneurs portfolios and raises investment however the issuance of debt also raises the cost of financing government expenditures a higher level of distortionary taxation and or a higher real interest rate a long run optimal supply of government debt emerges i also show that a proper mix of monetary and fiscal policies can avoid a deep financial recession

biomass production from the u s forest and agriculture sectors in support of a renewable electricity standard production of renewable energy from biomass has been promoted as means to improve greenhouse gas balance in energy production improve energy security and provide jobs and income however uncertainties remain as to how the agriculture and forest sectors might jointly respond to increased demand for bioelectricity feedstocks and the potential environmental consequences of increased biomass production we use an economic model to examine how the agriculture and forest sectors might combine to respond to increased demands for bioelectricity under simulated future nationallevel renewable electricity standards both sectors are projected to contribute biomass although energy crops like switchgrass produced on agriculture land are projected to be the primary feedstocks at the highest targets for bioelectricity production we project increased conversion of forest to agriculture land in support of agriculture biomass production although land conversion takes place in response to renewable electricity mandates we project only minor increases in forest and agriculture emissions similarly crop prices were projected to generally be stable in the face of increased bioelectricity demand and displacement of traditional agriculture crops

public debt in economies with heterogeneous agents abstract we study public debt in competitive equilibria in which a government chooses transfers and taxes optimally and in addition decides how thoroughly to enforce debt contracts if the government enforces perfectly asset inequality is determined in an optimum competitive equilibrium but the level of government debt is not welfare increases if private debt contracts are not enforced borrowing frictions let the government gather monopoly rents that come from issuing public debt without facing competing private borrowers regardless of whether the government chooses to enforce private debt contracts the level of initial government debt does not affect an optimal allocation

sunspot equilibria rational bubbles in a model of money in the utility function abstract sunspot equilibria are constructed in brock s 1975 model of money in the utility function serial correlations of real balances and the nominal interest rate in these equilibria can be either positive or negative the example here suggests that local sunspots are more likely to exist when the agent s discount rate is small and that serial correlations in local sunspots when they exist are inversely related to the rate of money growth it is also shown that stationary sunspots may exist even when equilibrium cycles do not

wec energy policy scenarios to 2050 abstract at the world energy congress held in sydney in september 2004 the world energy council wec decided in a follow up to the scenario work global energy perspectives last produced in 1998 to draw up new global energy scenarios for the period up to the year 2050 three fundamental changes were resolved compared with previous work policy scenarios were to be worked out bottom up based on the specific knowledge of the wec members from the various world regions second plausible basic assumptions were to be made for the scenarios to gear them to the wec s sustainability goals of accessibility availability and acceptability the three as finally the scenarios were to have a sufficiently long time horizon and contain clear recommendations for political measures designed to reach the outcomes aimed at by 2050

cost effectiveness of renewable electricity policies we analyze policies to promote renewable sources of electricity a portfolio standard rps raises electricity prices and primarily reduces gas fired generation a knee of the cost curve exists between 15 and 20 goals for 2020 in our central case and higher natural gas prices lower the cost of greater reliance on renewables a renewable energy production tax credit lowers electricity price at the expense of taxpayers which limits its effectiveness in reducing carbon emissions and it is less cost effective at increasing renewables than a portfolio standard neither policy is as cost effective as a cap and trade policy for achieving carbon emission reductions

government policy and the probability of coordination failures this paper introduces an approach to the study of optimal government policy in economies characterized by a coordination problem and multiple equilibria such models are often criticized as not being useful for policy analysis because they fail to assign a unique prediction to each possible policy choice we employ a selection mechanism that assigns ex ante a probability to each equilibrium indicating how likely it is to obtain we show how such a mechanism can be derived as the natural result of an adaptive learning process this approach leads to a well defined optimal policy problem and has important implications for the conduct of government policy we illustrate these implications using a simple model of technology adoption under network externalities

modeling agricultural supply response using mathematical programming and crop mixes mathematical programming models are widely used in agricultural sector analysis however the lack of micro level data as well as computational requirements necessitate the aggregation of individual producers into representative units when working at the sectoral level this usually leads to unrealistic extreme specialization in supply responses in 1982 mccarl introduced the historical crop mixes approach to avoid extreme specialization we extend this approach by generating additional synthetic crop mixes using supply response elasticities and systematically varied commodity prices in addition to avoiding extreme specialization this approach provides flexibility when future supply responses can be vastly different from past responses an application to u s biofuel policy analysis is presented

the perils of nominal targets a monetary authority can be committed to pursuing an inflation price level or nominal gdp target yet systematically fail to achieve the prescribed goal constrained by the zero lower bound on the policy rate the monetary authority is unable to implement its objectives when private sector expectations stray far enough from the target low inflation expectations become self fulfilling resulting in an additional markov equilibrium in which the monetary authority falls short of the nominal target average output is below its efficient level and the policy rate is typically low introducing a stabilization goal for long term nominal rates can implement a unique markov equilibrium without fully compromising stabilization policy

optimality of the friedman rule in economies with distorting taxes abstract we find conditions for the friedman rule to be optimal in three standard monetary models our main contribution is to shed light on two issues in the literature first the conventional view maintains that when money is a final good its services should be taxed moreover if money demand is interest inelastic its services should be taxed heavily we show that this view is incorrect second there is an ongoing controversy about whether the optimality of the friedman rule is connected to the intermediate goods result from public finance we resolve this controversy by showing a deep connection between these results

downstream regulation of co2 emissions in california s electricity sector this paper examines the implications of alternative forms of cap and trade regulations on the california electricity market specific focus is given to the implementation of a downstream form of regulation known as the first deliverer policy under this policy importers i e first deliverers of electricity into california are responsible for the emissions associated with the power plants from which the power originated even if those plants are physically located outside of california we find that absent strict non economic barriers to changing import patterns such policies are extremely vulnerable to reshuffling of import resources the net impact implies that the first deliverer policies will be only marginally more effective than a conventional source based regulation

a three dimensional model of residential energy consumer archetypes for local energy policy design in the uk this paper reviews major studies in three traditional lines of research in residential energy consumption in the uk i e economic infrastructure behaviour and load profiling based on the review the paper proposes a three dimensional model for archetyping residential energy consumers in the uk by considering property energy efficiency levels the greenness of household behaviour of using energy and the duration of property daytime occupancy with the proposed model eight archetypes of residential energy consumers in the uk have been identified they are pioneer greens follower greens concerned greens home stayers unconscientious wasters regular wasters daytime wasters and disengaged wasters using a case study these archetypes of residential energy consumers demonstrate the robustness of the 3 d model in aiding local energy policy intervention design in the uk

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

speculative runs on interest rate pegs abstract we analyze a new class of equilibria that emerges when a central bank conducts monetary policy by setting an interest rate as an arbitrary function of its available information and letting the private sector set the quantity traded these equilibria involve a run on the central bank s interest target whereby money grows fast private agents borrow as much as possible against the central bank and the shadow interest rate is different from the policy target we argue that these equilibria represent a particular danger when banks hold large excess reserves such as is the case following periods of quantitative easing our analysis suggests that successfully managing the exit strategy requires additional tools beyond setting interest rate targets and paying interest on reserves in particular freezing excess reserves or fiscal policy intervention may be needed to fend off adverse expectations

an experiment for urban energy autonomy in seoul the one less nuclear power plant policy abstract this study examines an experiment in energy self sufficiency in seoul republic of korea through a particular energy policy called the one less nuclear power plant olnpp policy we define an urban energy experiment as a purposive intervention for energy transition from an energy system based on nuclear and fossil fuels to one based on renewable energy and energy demand management we suggest three findings first we find that the themes of our theoretical framework policy backgrounds governance and policy contents have played important roles for seoul s energy experiments aimed at urban energy autonomy in particular political leadership based on the mayor s previous experiences contributed significantly to the formation and implementation of this policy second the olnpp policy adds a social or moral dimension to urban energy policies the norm change from an environmental and economic focus to a focus on the combination of social environmental and economic considerations is a unique contribution of the olnpp policy to urban experiments in energy transition third we find that experiments through purposive interventions serve as a means for facilitating urban energy governance where the actors involved can communicate and enhance their new ideas and practices

uk local authority engagement with the energy service company esco model key characteristics benefits limitations and considerations abstract this paper explores how some uk local authorities las have opted to engage with the energy service company esco model in a bid to enhance their influence over local energy system change and help them to deliver on their political public good objectives three common approaches to la esco model engagement are outlined including the 1 la owned arm s length model 2 private sector owned concession agreement model and 3 community owned and run model the la s decision to establish its own esco or alternatively enter into a partnership with another predominantly depends on its willingness to expose itself to risk the level of strategic control it desires and the resources it has at its disposal however the business case is contingent on the extent to which the national policy and regulatory framework facilitates and obligates las to play an active energy governance role stronger alignment of local and national energy agendas through communication and coordination between different governance actors could help to remove critical barriers to la esco engagement and their wider energy governance activities

the signaling effect of raising inflation abstract this paper argues that central bankers should temporarily raise inflation when anticipating liquidity traps to ensure the credibility of otherwise time inconsistent forward guidance policies as stable inflation in normal times either stems from central bankers desire to maintain credibility or from aversion to inflation the private sector is unable to infer the central banker s willingness to follow through on promises from observing stable inflation jeopardizing the efficiency of forward guidance policy we show that this signaling motive can justify temporary deviations of inflation from target well above 2 but also that the low inflation volatility during the great moderation was insufficient to ensure fully efficient forward guidance when needed

alternative transportation fuel standards welfare effects and climate benefits this paper develops an integrated model of the fuel and agricultural sectors to analyze the welfare and greenhouse gas emission ghg effects of the existing renewable fuel standard rfs a low carbon fuel standard lcfs and a carbon price policy the conceptual framework shows that these policies differ in the incentives they create for the consumption and mix of different types of biofuels and in their effects on food and fuel prices and ghg emissions we also simulate the welfare and ghg effects of these three policies which are normalized to achieve the same level of us ghg emissions by promoting greater production of food crop based biofuels the rfs is found to lead to a larger reduction in fossil fuel use but also a larger increase in food prices and a smaller reduction in global ghg emissions compared to the lcfs and carbon tax all three policies increase us social welfare compared to a no biofuel baseline scenario due to improved terms of trade even when environmental benefits are excluded global social welfare increases with a carbon tax but decreases with the rfs and lcfs due to the efficiency costs imposed by these policies even after including the benefits of mitigating ghg emissions

is it is or is it ain t my obligation regional debt in a fiscal federation this article studies the repayment of regional debt in a multiregion economy with a central authority who pays the obligation issued by a region with commitment the central government will use its economy wide taxation power in support of its objective to smooth distortionary taxes and consumption across regions absent commitment this tool of the central government may be exploited to induce it to bail out regional government deficits we characterize the conditions under which bailouts occur and their welfare implications in particular we show when the gains from a federation may outweigh the welfare costs of a bailout we use these insights to comment on actual fiscal relations in three quite different federations the united states the european union and argentina