arch and bilinearity as competing models for nonlinear dependence in this article we consider whether the wide acceptance of autoregressive conditional heteroscedasticity arch models may be at the expense of other nonlinear processes such as bilinear models we first propose a joint test for arch and bilinearity a nonnested test is then suggested to determine whether nonlinear dependence should be attributed to arch or bilinearity the tests are then applied to three series when generalized arch garch models are taken as the null hypothesis we fail to reject it for all the data series when bilinearity is taken as the null however it is rejected in two cases moreover an out of sample forecasting exercise shows that the garch model is superior the results therefore indicate a strong preference for the garch model

real sectoral spillovers a dynamic factor analysis of the great recession abstract dynamic factor methods are used to identify the impact of common and idiosyncratic shocks on sixteen u s nonfarm business sectors this paper then studies changes in the transmission of these shocks across sectors during the great recession and evaluates the cross sectoral spillovers the great recession is found to be largely a time of heightened impact of common shocks which accounts for 3 4 of aggregate volatility and large spillovers of negative finance related shocks in addition prior to the recession aggregate fluctuations are mainly driven by sector specific shocks in contrast with findings from previous studies

does crude oil price play an important role in explaining stock return behavior abstract employing the ms arji gjr garch x model in which the parameters for the jump process the asymmetric garch effect and the impacts of oil price shocks are regime dependent this paper analyzes the impact of crude oil price shock on stock return dynamics empirical results reveal three interesting findings first incorporating the asymmetric garch effect and the oil price shock can substantially improve fitting ability second the garch and jump components show very different behaviors during turbulent and stable periods third the effects of current and past oil price shocks differ the conditional mean mean of jump size and variance of jump size immediately respond to a current oil price shock a one period lagged oil price shock no matter whether positive or negative can affect the transition probability that the stock market will remain conditional in the next period moreover the effects of lagged positive and negative shocks on transition probabilities are very different

regional house price dynamics and voting behavior in the fomc i introduction interest rate decisions by the federal open market committee fomc are not always made unanimously different individual views about the appropriate monetary policy stance may lead to the result that members cast dissenting interest rate votes in fomc meetings that is they opt for a higher or lower interest rate than proposed by the chairman of the fomc several studies find that fomc members have different views about the appropriate monetary policy when casting interest rate votes belden 1989 chappell and mcgregor 2000 chappell mcgregor and vermilyea 2005 2008 2012 gildea 1990 1992 havrilesky and gildea 1991 1995 havrilesky and schweitzer 1990 meade and sheets 2005 meade 2010 tootell 1991 1996 an important source of such dissenting votes may be the regional bias of the fomc member which is constituted by its regional affiliation several studies have examined the impact of the regional unemployment rate on the interest rate votes of fomc members while gildea 1992 meade and sheets 2005 and chappell mcgregor and vermilyea 2008 find that a higher regional unemployment rate relative to the national rate increases decreases fomc members preference for monetary easing tightening tootell 1991 finds no significant evidence 1 in this article we analyze whether fomc members align their interest rate voting behavior with house price developments of the federal reserve district they represent in addition to the regional unemployment rate studied so far in this way we can test whether regional house prices and or regional unemployment rates have a significant impact on the voting behavior of fomc members and we examine whether there are systematic differences between regional bank presidents and board members various studies have examined the link between monetary policy and asset price developments according to gilchrist and leahy 2002 there are some good reasons why central banks should align their monetary policies with asset prices first the consumer price index cpi or gross domestic product gdp deflator are incomplete measures since they only signal information on the prices of goods consumed today whereas a more complete measure would also signal future cost of living such as the information contained in asset prices alchian and klein 1973 second asset prices may be useful in forecasting inflation goodhart and hofmann 2000 third asset prices may directly affect real economic activity and inflation since for example wealthier consumers spend more which may affect price developments carroll otsuka and slacalek 2011 whether central banks should react to asset prices is however debated in the literature the traditional view is that central banks should only react to asset prices to the extent that they feed back into the conventional monetary policy goals inflation and output bernanke and gertler 1999 2001 on the contrary cecchetti et al 2000 conclude that it may be reasonable for central banks to react to asset prices in particular house prices in order to avoid the buildup of asset price bubbles as the burst of asset price bubbles may lead to financial crises reinhart and rogoff 2009 leaning against the buildup of extreme asset price changes may therefore be a reasonable choice for central banks as a part of their mission to manage systemic risk allen and carletti 2009 bordo and jeanne 2002 another rationale that central banks should take asset prices particularly house prices into account is that house prices have been shown to be suitable early warning indicators for the outbreak of the recent financial crisis kemme and roy 2012 several empirical papers analyze the impact of asset prices on interest rate setting rigobon and sack 2003 and dupor and conley 2004 find evidence that fomc interest rate decisions are influenced by equity prices on the contrary fuhrer and tootell 2008 find that fomc interest rate decisions are not a direct response to equity price movements and are an indirect response only to the extent that equity prices helped forecast the conventional monetary policy goals

detecting multiple breaks in financial market volatility dynamics the paper evaluates the performance of several recently proposed tests for structural breaks in the conditional variance dynamics of asset returns the tests apply to the class of arch and sv type processes as well as data driven volatility estimators using high frequency data in addition to testing for the presence of breaks the statistics identify the number and location of multiple breaks we study the size and power of the new tests for detecting breaks in the conditional variance under various realistic univariate heteroscedastic models change point hypotheses and sampling schemes the paper concludes with an empirical analysis using data from the stock and fx markets for which we find multiple breaks associated with the asian and russian financial crises these events resulted in changes in the dynamics of volatility of asset returns in the samples prior and post the breaks copyright 2002 john wiley sons ltd

uncertainty across volatility regimes we propose a nonrecursive identification scheme for uncertainty shocks that exploits breaks in the volatility of macroeconomic variables and is novel in the literature on uncertainty this approach allows us to simultaneously address two major questions in the empirical literature is uncertainty a cause or effect of decline in economic activity does the relationship between uncertainty and economic activity change across macroeconomic regimes results based on a small scale vector autoregression with us monthly data suggest that i uncertainty is an exogenous source of decline of economic activity and ii the effects of uncertainty shocks amplify in periods of economic and financial turmoil

the wealth effect and diamond risk structure of financial regulation the objective of this article was to evaluate the effect of announcements of financial regulation on risk and return in the vietnamese equity market the techniques used for the purpose of analysing risk and return include event study and non parametric tests as well as asset pricing models supplemented with interaction variables and a variety of arch like specifications such as garch tarch egarch and parch we find evidence for the wealth effect the presence of delayed response and a risk shifting behaviour in the form of diamond risk structure our results show that abnormal returns are present around the announcements of operating rules and other stock market regulations abnormal returns can also be obtained after considering legal documents such as circulars and decisions

outliers and garch models in financial data abstract we propose to extend the additive outlier ao identification procedure developed by franses and ghijsels franses p h ghijsels h 1999 additive outliers garch and forecasting volatility international journal of forecasting 15 1 9 to take into account the innovative outliers ios in a garch model we apply it to three daily stock market indexes and examine the effects of outliers on the diagnostics of normality

breaks and outliers when modelling the volatility of the u s stock market this study analyses volatility persistence of the u s stock market after taking into account the role of breaks and outliers by employing a wavelet based algorithm it identifies several outliers which are comfortably associated with major events such as the black monday and the asian crisis there is also evidence of clustering of breaks and a substantial variation in the properties of the identified segments

measuring the effects of regulation with stock price data this article examines the usefulness of stock returns in measuring the effects of regulation when the dates on which market expectations change are not known and standard sources e g the wall street journal are used to choose announcement dates twenty major changes in regulatory constraint since 1887 are considered tests using either monthly or daily data are found to have surprisingly little ability to detect the effects of regulation the evidence shows that formal regulatory announcements are generally anticipated in cases where it is unclear when expectations change

understanding the macroeconomic impact of illiquidity shocks in the united states in this paper we empirically investigate the role of stock market illiquidity shocks stemming from amihud s illiquidity measure in explaining u s macroeconomic fluctuations from 1973 to 2018 we find that the impact of illiquidity shocks on economic activity is substantial and historical decomposition analysis shows that cumulative illiquidity shocks were an essential contributor to the prolonged economic slump of the great recession moreover our identified illiquidity shocks represent a distinct source of macroeconomic instability this suggests that illiquidity shocks measured by the stock price impacts may contain more information than other types of shocks in recent studies such as financial shocks and uncertainty shocks jel c32 e32

regulating technological change the strategic reactions of utility companies towards subsidy policies in the german spanish and uk electricity markets abstract this paper focuses on how incumbent electric utilities strategically react to subsidy schemes supporting renewable energy technologies in the uk germany and spain firms coordinate the development of their technological capabilities and their political activities to shape their regulatory environment analysing the diffusion of wind power in these countries we show that the different ways in which firms coordinate their technological and political strategies lead to very different market outcomes both for the firms market share and the size of the overall market although incumbents are usually seen as being resistant to change in energy systems we show that spanish utilities proactively drive the diffusion of wind power we speculate about the relation between the ownership structure of the energy system and its inertia with respect to the integration of new technologies we derive novel policy implications that explicitly take into account the strategic actions of incumbent firms shaping the technological and regulatory system

do central banks react to house prices we estimate the federal reserve s the bank of england s and the bank of japan s responses to house prices we show that generalized method of moments estimates of a taylor rule augmented with house prices are biased and dispersed we then use full information methods and estimate the policy rule together with a var for the nonpolicy variables these estimates are also biased we propose an alternative approach and estimate a dynamic stochastic general equilibrium model embedded with a monetary rule with a direct response to house prices we find that house prices played a separate role in the reaction functions of these central banks

how does the stock market react to the announcement of green policies abstract we investigate the impact of 19 announcements of environmental regulation on the equities listed on the australian stock exchange over the period 2005 2011 using a well established event study methodology we assess whether these announcements are value constructive or destructive for equity investors additionally we estimate the change in systematic risk following the announcements our results show that the australian market was particularly sensitive to the carbon pollution reduction scheme cprs announcement a cumulative abnormal return of 31 was recorded in the alternative energy sector after australia submitted its target range to the copenhagen accord we observe that a move towards a greener nation has a mixed effect on abnormal returns with apparent sector by sector differences green policies appear to affect the long term systematic risk of industries leading to the diamond risk phenomenon

stock market conditions and monetary policy in a dsge model for the u s abstract this paper investigates the interactions between stock market fluctuations and monetary policy within a dsge model for the u s economy first we design a framework in which fluctuations in households financial wealth are allowed but not necessarily required to exert an impact on current consumption this is due to the interaction in the financial markets of long time traders holding wealth accumulated over time with newcomers holding no wealth at all importantly we introduce nominal wage stickiness to induce pro cyclicality in real dividends additional nominal and real frictions are modeled to capture the pervasive macroeconomic persistence of the observables employed to estimate our model we fit our model to post wwii u s data and report three main results first the data strongly support a significant role of stock prices in affecting real activity and the business cycle second our estimates also identify a significant and counteractive response of the fed to stock price fluctuations third we derive from our model a microfounded measure of financial slack the stock price gap which we then contrast to alternative ones currently used in empirical studies to assess the properties of the latter to capture the dynamic and cyclical implications of our dsge model the behavior of our stock price gap is consistent with the episodes of stock market booms and busts occurred in the post wwii as reported by independent analyses and closely correlates with the current financial meltdown typically employed proxies of financial slack such as detrended log indexes or growth rates show limited capabilities of capturing the implications of our model consistent index of financial stress cyclical properties of the model as well as counterfactuals regarding shocks to our measure of financial slackness and monetary policy shocks are also proposed

do central banks react to the stock market the case of the bundesbank abstract in this paper we ask whether the bundesbank prior to the european central bank taking responsibility for monetary policy in 1999 reacted systematically to stock price movements in contrast to the results for the us our empirical findings show a generally weak relationship between german stock returns and short term interest rates at the daily and the monthly frequency the results are extremely robust to alternative model specifications the evidence is inconsistent with the hypothesis of a systematic reaction of the bundesbank to german stock prices however we do find that as in the us the bundesbank may have reacted to the stock market crash of 1987 by loosening monetary policy

the enactment of socio technical transition pathways a reformulated typology and a comparative multi level analysis of the german and uk low carbon electricity transitions 1990 2014 abstract this paper aims to make two contributions to the sustainability transitions literature in particular the geels and schot 2007 res policy 36 3 399 transition pathways typology first it reformulates and differentiates the typology through the lens of endogenous enactment identifying the main patterns for actors formal institutions and technologies second it suggests that transitions may shift between pathways depending on struggles over technology deployment and institutions both contributions are demonstrated with a comparative analysis of unfolding low carbon electricity transitions in germany and the uk between 1990 2014 the analysis shows that germany is on a substitution pathway enacted by new entrants deploying small scale renewable electricity technologies rets while the uk is on a transformation pathway enacted by incumbent actors deploying large scale rets further analysis shows that the german transition has recently shifted from a stretch and transform substitution pathway to a fit and conform pathway because of a fightback from utilities and altered institutions it also shows that the uk transition moved from moderate to substantial incumbent reorientation as government policies became stronger recent policy changes however substantially downscaled uk renewables support which is likely to shift the transition back to weaker reorientation

euro area government bonds fragmentation and contagion during the sovereign debt crisis abstract the paper analyzes the integration of euro area sovereign bond markets during the european sovereign debt crisis it tests for contagion i e an intensification in the transmission of shocks across countries fragmentation a reduction in spillovers and flight to quality patterns exploiting the heteroskedasticity of intraday changes in bond yields for identification the paper finds that euro area government bond markets were well integrated prior to the crisis but saw a substantial fragmentation from 2010 onward flight to quality was present at the height of the crisis but has largely dissipated after the european central bank s ecb s announcement of its outright monetary transactions omt program in 2012 at the same time italy and spain became more interdependent after the omt announcement providing our only evidence of contagion this suggests that countries have been effectively ring fenced and italy and spain benefited from the joint reduction in yields following the omt announcement

the governance of sustainable socio technical transitions a quasi evolutionary model of socio technical transitions is described in which regimes face selection pressures continuously differentiated transition contexts determine the form and direction of regime change in response to these pressures the articulation of pressures and the degree to which responses are coordinated and based on resources available within the regime define the transition context four alternative contexts are described endogenous renewal re orientation of trajectories emergent transformation and purposive transitions agency and power in the governance of regime transformation are analysed power to affect change depends on regime membership the distribution of resources for change and expectations

bounded influence estimator for garch models evidence from foreign exchange rates previous research indicates that the maximum likelihood estimates of generalized autoregressive conditional heteroscedasticity garch models on foreign exchange rates under various distributional assumptions are sensitive to the presence of outliers the advantage of the proposed bounded influence estimator bie is that it limits the influence of a small subset of data and is asymptotically normal the bie provides more consistent and robust estimates than maximum likelihood estimator mle and semi parametric estimator both of which tend to underestimate volatility persistence due to outliers it is thus robust to outliers and model misspecification results of bie estimates of garch models on the exchange rate series of five major currencies indicate that bie offers an efficient mechanism for down weighting outlying observations and is a competitive alternative to mle

business models as drivers of the low carbon power system transition a multi level perspective abstract decarbonising the electrical power system holds a critical role in climate change mitigation recent developments in technology are helping change the current centralized paradigm into one of integrated distributed clean energy resources in spite of these developments radical transformation is not occurring at a speed to effectively meet environmental targets mostly due to the incumbent carbon lock in trajectory we argue that business model bm innovation dynamics are key drivers in accelerating the low carbon power system transition often operating irrespective of the underlying technology we combine bm theory with the multi level perspective on sociotechnical transitions to present a useful framework to analyze this potential transition this paper presents the application of this framework characterizing relevant bm dynamics of niche and regime business actors and supporting these with illustrative examples particularly we find that new actors in the distributed energy business are achieving market scale by offering financially innovative bms that do not require upfront costs from customers higher penetrations of renewable energy sources in liberalized electricity markets are destabilizing the historical bm of large centralized utilities through erosion of wholesale prices furthermore a shift towards distributed and dynamic energy resources further challenges incumbents and might bring opportunities for bms focused on active customer participation and social value creation as these tendencies are expected to accelerate we find analyses of bms will have important relevance for future power system transition research

stock market reaction to fed funds rate surprises state dependence and the financial crisis this paper examines the response of us stock returns to federal funds rate ffr surprises between 1989 and 2012 focusing on the impact of the recent financial crisis we find that outside the crisis period stock prices increased as a response to unexpected ffr cuts state dependence is identified with stocks exhibiting larger increases when interest rate easing coincided with recessions bear markets and tightening credit conditions however an important structural shift occurred during the crisis changing the stocks response to ffr shocks and the nature of state dependence throughout the crisis period stocks did not react positively to unexpected ffr cuts which were interpreted as signals of worsening future economic conditions this triggered a rebalancing of investment portfolios away from falling equities and towards safe haven assets our results highlight the severity of the crisis and the ineffectiveness of conventional monetary policy close to the zero lower bound

identification of financial factors in economic fluctuations we estimate demand supply monetary investment and nancial shocks in a var identified with a minimum set of sign restrictions on us data we find that financial shocks are major drivers of fluctuations in output stock prices and investment but have a limited effect on inflation in a second step we disentangle shocks originating in the housing sector shocks originating in credit markets and uncertainty shocks in the extended set upfinancial shocks are even more important and a leading role is played by housing shocks that have large and persistent effects on output

learning monetary policy and asset prices this working paper should not be reported as representing the view s of the imf the views expressed in this working paper are those of the author s and do not necessarily represent those of the imf or imf policy working papers describe research in progress by the author s and are published to elicit comments and to further debate

transmission of government default risk in the eurozone abstract this paper analyzes the reasons behind the rising ten year government bond spreads in the eurozone during the recent euro debt crisis we develop a structural vector autoregressive model that allows us to test whether the upsurges in the spreads reflect breaks in the instantaneous shock propagation mechanisms between the spreads contagion changing dynamical effects or changing country specific risk factors especially a new approach to test the stability of the instantaneous shock propagation mechanisms is introduced our results show that although contagion appears as the single most important reason for the increasing spreads there are notable differences between the countries for example and ireland spain and italy see statistically significant increases in their country specific risk factors

deregulation contestability and airline acquisitions abstract we test whether airline consolidations generate monopoly profits by examining returns to listed carriers around horizontal airline acquisition bids and evaluating effects of industry concentration on share price reactions under civil aeronautics board cab regulation returns to targets bidders and rival carriers are positive functions of changes in concentration implied by bids changes in concentration after deregulation have no positive effect on carrier returns these results support jordan s 1970 1972 hypothesis that cab activities fostered carrier collusion there is no evidence of monopoly gains from carrier consolidations after deregulation

stochastic trends and economic fluctuations are business cycles mainly the result of permanent shocks to productivity this paper uses a long run restriction implied by a large class of real business cycle models identifying permanent productivity shocks as shocks to the common stochastic trend in output consumption and investment to provide new evidence on this question econometric tests indicate that this common stochastic trend cointegration implication is consistent with postwar u s data however in systems with nominal variables the estimates of this common stochastic trend indicate that permanent productivity shocks typically explain less than half of the business cycle variability in output consumption and investment copyright 1991 by american economic association

explaining the role of incumbent utilities in sustainable energy transitions a case study of the smart grid development in china abstract smart grids sgs have been widely recognized as an enabling technology for delivering sustainable energy transitions such transitions have given rise to more complex government utility consumer relationships however these stakeholder relationships remain largely under researched this paper critically examines and explains the role of incumbent utilities in sustainable energy transitions using sg developments in china as a case study we have three major findings first china has developed an incumbent led model for deploying sgs second two incumbents the major state owned grid companies act as enablers of sg deployment they are strategic first movers and infrastructure builders of sgs they have also developed five types of networks as they increasingly reach out to other state actors businesses and electricity consumers thirdly these two grid companies also act as a fundamental block to structural changes in socio technical regimes disincentives to these large existing grid companies coupled with excessive reliance on them to provide public goods have resulted in major weaknesses in china s incumbent led model our findings have clear policy implications innovation in regulating incumbents is needed in order to provide sufficient regulatory incentives for advancing sg developments in china

the informational content of prices when policy makers react to financial markets abstract when can policy makers use policy relevant information from financial market prices and how does policy affect price informativeness i analyze a novel setting with noise where a policy maker tries to infer information about a state variable from prices to improve policy decisions and policy in turn affects asset values i derive a necessary and sufficient condition for the possibility of information revelation in equilibrium which might not be possible if the policy reaction to prices punishes traders for revealing their information if the policy maker is uninformed then policy objectives do not change price informativeness but they do if the policy maker has independent information about the state i also analyze policy maker transparency and find that policy makers with objectives having a large impact on asset values should publish their information before trading to make prices more informative in other cases intransparency can be optimal

china s growing influence in southeast asia monetary policy and equity markets this study analyses the potential transmission of china s monetary policy shocks to equity markets in southeast asia impulse response functions indicate that the impact of a monetary expansion in china is significant and positive for four of the five southeast asian equity markets one explanation for this result is that monetary policy shocks in china lead to an increase in demand for goods and services in both china and abroad which then shows up in the foreign equity market the results in this paper provide evidence of china s influence in southeast asia and its financial markets the transmission effect is small and very short lived but can be expected to increase if the current trends of a deepening economic integration between china and southeast asia and a maturing chinese central bank continue

structural vector autoregressions checking identifying long run restrictions via heteroskedasticity long run restrictions have been used extensively for identify ing structural shocks in vector autoregressive var analysis such restric tions are typically just identifying but can be checked by utilizing changes in volatility this paper reviews and contrasts the volatility models that have been used for this purpose three main approaches have been used exoge nously generated changes in the unconditional residual covariance matrix changing volatility modelled by a markov switching mechanism and multi variate generalized autoregressive conditional heteroskedasticity garch models using changes in volatility for checking long run identifying restric tions in structural var analysis is illustrated by reconsidering models for identifying fundamental components of stock prices

the journey towards decarbonization exploring socio technical transitions in the electricity sector in the province of ontario 1885 2013 and potential low carbon pathways this article employs the multi level perspective on socio technical transitions to explore the historical evolution of the electricity regime in the province of ontario from 1885 2013 and to interpret the potential for future movement towards decarbonization with an emphasis on the political and social dimensions of transitions this analysis traces the key features influencing change within ontario s electricity system over the past century this paper uses multiple criteria the phase of electrification role of the electricity system in economic development structures of ownership market and regulation dominant technologies and the relative stability of arrangements to characterize distinct regime configurations and periods of instability which separate relatively stable system orientations lessons are drawn from the historical case with implications for future decarbonization in the province including the importance of 1 residual momentum 2 embedded guiding principles and 3 politico economic coalitions

large shocks small shocks and economic fluctuations outliers in macroeconomic time series summary we analyse fifteen post world war i1 us macroeconomic time series using a modified outlier identification procedure based on tsay 1988a large shocks appear to be present in all the series we examined furthermore there are three basic outlier patterns i outliers seem to be associated with business cycles 2 outliers are clustered together both over time and across series 3 there appears to be a dichotomy between outlier behaviour of real versus nominal series also after controlling for outliers much of the evidence of non linearity in many of the time series is eliminated

monetary policy and dividend growth in germany long run structural modelling versus bounds testing approach this study examines the long run relationship between monetary policy and dividend growth in germany for this purpose cointegration is tested for between both variables in the period 1974 to 2003 however problems related to spurious regression arise from the mixed order of integration of the series used from mutual causation between the variables and from the lack of a long run relationship among the variables of the model these problems are addressed by applying the bounds testing approach to cointegration in addition to a more standard long run structural modelling approach in principle both procedures are capable of dealing with the controversial issue of the exogeneity of monetary policy vis a vis dividend growth however the structural modelling approach still leaves a certain degree of uncertainty about the integration properties of the interest rate and the dividend growth hence one feels legitimized to refer to the bounds testing procedure and to conclude that in the longer term short t

the impact of terrorism on financial markets an empirical study the main focus of this paper is to previous termstudynext term empirically the previous termimpact of terrorismnext term on the behavior of stock bond and commodity previous termmarkets next term we consider terrorist events that took place in 25 countries over an 11 year time period and implement our analysis using different methods an event previous termstudynext term approach a non parametric methodology and a filtered garch evt approach in addition we compare the effect of terrorist attacks on previous termfinancial markets with the impactnext term of other extreme events such as previous termfinancialnext term crashes and natural catastrophes the results of our analysis show that a non parametric approach is the most appropriate method among the three for analyzing the previous termimpact of terrorism on financial markets next term we demonstrate the robustness of this method when interest rates equity previous termmarketnext term integration spillover and contemporaneous effects are controlled we show how the results of this approach can be used for investors portfolio diversification strategies against previous termterrorismnext term risk

adoption of green electricity by german small and medium sized enterprises smes a qualitative analysis abstract the german government aims at generating 80 percent of the country s electricity from renewable sources by 2050 in the german liberalized electricity market customers can support this target by purchasing green electricity ge i e electricity produced from renewable energy sources yet the demand for ge has remained low among small and medium sized enterprises smes which represent the country s biggest electricity customer group based on a review of the relevant literature this article investigates factors that determine smes decisions whether to adopt ge for this purpose thematic interviews with ge providers and representatives of smes are performed and qualitatively analyzed the results of the interview analysis form the basis for a conceptual framework that reflects the ge adoption decisions of german smes and lay the groundwork for future analysis in this area

arch models properties estimation and testing abstract the aim of this survey paper is to provide an account of some of the important developments in the autoregressive conditional heteroskedasticity arch model since its inception in a seminal paper by engle 1982 this model takes account of many observed properties of asset prices and therefore various interpretations can be attributed to it we start with the basic arch models and discuss their different interpretations arch models have been generalized in different directions to accommodate more and more features of the real world we provide a comprehensive treatment of many of the extensions of the original arch model next we discuss estimation and testing for arch models and note that these models lead to some interesting and unique problems there have been numerous applications and we mention some of these as we present different models the paper includes a glossary of the acronyms for the models we describe

mergers and the market concentration doctrine evidence from the capital market the last 3 decades of vigorous enforcement of u s antimerger laws is based on the market concentration doctrine one of the oldest and most controversial propositions in industrial economics this doctrine which is an implication of oligopoly models in the tradition of cournot 1838 1927 and nash 1950 holds that the level of industry concentration is a reliable index of the industry s market power the empirical implication is that a relatively high level of industry concentration which in the presence of entry barriers is believed to facilitate intraindustry collusion or dominant firm pricing should be associated with relatively large industrywide monopoly rents following bain 1951 numerous the market concentration doctrine predicts that a horizontal merger is more likely to have collusive anticompetitive effects the greater the merger induced change in industry concentration since a collusive anticompetitive merger generates an increase in the industry s quality adjusted product price or a decrease in factor prices it also follows from the doctrine that the mergerinduced expected benefits to the product market rivals of the merging firms should be an increasing function of the concentration change the empirical results of this paper which are based on the industry wealth effect of a large sample of horizontal mergers including cases found in violation of antimonopoly laws fail to support this prediction this conclusion is robust with respect to assumptions concerning the probability that a proposed merger will be prevented by the law enforcement agencies and it continues to hold after transforming the industry wealth effect into a hypothetical constant expected change in the industry s product price the results imply that the levels of concentration and market shares found in the department of justice s merger guidelines are unlikely to identify truly anticompetitive mergers i wish to thank paul asquith gregg jarrell rex thompson walter vandaele the participants of the economics workshop at the antitrust division of the u s department of justice and a referee of this journal for helpful comments earlier drafts were presented at the 1983 meetings of the european association for research in industrial economics and at the 1984 meetings of the western finance association financial support from the social sciences and humanities research council of canada grant no 494 83 0091 and the u s federal trade commission is also gratefully acknowledged 1 a closely related but somewhat less general prediction is that high levels of concentration should be associated with relatively high supracompetitive product prices although

measuring the impact of monetary policy on asset prices in turkey abstract little is known about the impact of monetary policy on asset prices in emerging markets this study applies the heteroscedasticity based gmm for financial markets in turkey the results suggest that event study estimates are biased for some asset returns

the validity of the event study approach evidence from the impact of the fed s monetary policy on us and foreign asset prices this paper documents the effects of changes in us monetary policy on asset prices in 51 countries to evaluate the validity of the event study approach we find that the event study estimates contain a significant bias however this bias is fairly small and the ordinary least squares approach tends to outperform in an expected squared error sense the heteroscedasticity based estimator for both small and large sample sizes hence in general the event study methodology should be preferred moreover we show that us monetary policy has been an important determinant of global financial markets

output growth and its volatility the gold standard through the great moderation this study examines the relationship between u s output growth and its volatility over the period 1876 i to 2012 ii we adjust the data for outliers and structural breaks we employ generalized autoregressive conditional heteroskedasticity garch and exponential garch egarch specifications normality and homoskedasticity appear only in the garch or egarch model that corrects for the outliers when including the break in the mean equation high volatility persistence remains after also accommodating the breaks in the variance equation the integrated garch effect proves spurious either for the symmetric or the asymmetric model finally our empirical results suggest that the finding of higher output growth volatility stimulating output growth and higher output growth reducing its volatility obtained from the symmetric garch in mean garch m model also proves spurious as a result of the emergence of an asymmetric effect our more appropriately specified asymmetric egarch m model suggests positive volatility in mean and level effects in the long period real gross national product series

financial factors and monetary policy determinacy and learnability of equilibrium abstract we contribute to the debate on whether central banks should respond to financial factors in monetary policy rules by evaluating equilibrium determinacy and e stability in the presence of a financial accelerator policies responding to lagged asset prices either reduce the region of determinacy or e stability in the parameter space however a response to current asset prices expands both regions of determinacy and e stability policy rules reacting to credit volume constrict the determinacy region most policies responding to credit spreads expand determinacy and e stability regions we favor the inclusion of current asset prices or credit spreads in monetary policy rules

financial and capital markets responses to changes in the central bank s target interest rate the case of japan we propose new proxy variables for monetary policy shocks in japan for the period from july 1989 to march 2001 and investigate the effects of changes in the policy target variable on stock prices and the term structure of interest rates we find that changes in the surprise component of the target variable significantly affect both intermediate term and long term interest rates a surprise decrease in the target rate of 1 leads on average to a 3 increase in stock prices the magnitudes of estimated reactions of financial variables are similar in japan and the us

augmenting the taylor rule monetary policy and the bond market i show that augmenting the taylor rule with bond yields observed at the start of the quarter significantly improves the in sample and out of sample fit moreover the augmented rule produces lower forecast errors than those of linear and non linear policy models

financial market segmentation stock market volatility and the role of monetary policy we explore the role of monetary policy in a world of segmented nancial markets where the agents who trade stocks encounter nancial income risk although the rest do not in such an economy we ask the question of how the monetary authority operates when it aims to maximize total welfare we nd that optimal monetary policy has the novel role of sharing the nancial market risk traders face among all agents in the economy this nding holds for any concave utility function and is not sensitive to the degree of market segmentation when risk is shared perfectly in this way consumption is equalized between the two groups and agents if given the choice would be indierent between participating or not in the nancial markets we also explore the implications that this policy has for the volatility of stock prices and of ination when compared to the policies of constant money supply ination targeting and nominal interest rate pegging we nd that optimal monetary policy is not necessarily associated either with minimal stock price volatility or with minimal ination volatility

globalization and monetary policy comovement international evidence abstract this paper empirically characterizes the comovement in monetary policy of five advanced economies in the period 1980 2009 i estimate a taylor rule for each country and use the residual of the taylor rules to estimate a dynamic latent factor model with common and europe specific factors i quantify the importance of the common factor in explaining comovement in the residual variation of monetary policy and show that the common factor is particularly important during a period of globalization 1988 2003 i estimate the dynamics of the importance of the common factor using rolling sub samples and show that trade openness increases the importance of the common factor in monetary policy in the us

monetary policy and asset prices a markov switching dsge approach summary this paper estimates a markov switching dynamic stochastic general equilibrium model by incorporating stock prices in monetary policy rules in order to identify the federal reserve s stance toward them based on the data from 1984 q1 to 2009 q2 i find that historical evidence of the policy reaction toward stock prices is weak except for the stock market bubble of the 1990s a counterfactual exercise shows that the rapid growth in stock prices during that period would have been significantly higher if monetary policy had been independent of the stock market however unconditional macroeconomic volatility increases with the degree of policy responsiveness toward stock prices copyright 2017 john wiley sons ltd

estimating garch volatility in the presence of outliers garch volatilities depend on the unconditional variance which is a non linear function of the parameters consequently they can have larger biases than estimated parameters using robust methods to estimate both parameters and volatilities is shown to outperform maximum likelihood procedures

wealth effects of regulatory reform abstract this paper investigates the effect of california s proposition 103 on the market value of publicly traded property and liability insurance companies the passage of this referendum on november 8 1988 moved california from a market oriented to a heavily regulated insurance pricing system during the period surrounding the election the average stock price of insurance companies doing business in california declined by 6 91 the decline is positively related to the proportion of a firm s premiums affected by the referendum and the proportion generated in other states where insurance regulation is likely to change and negatively related to the firm s profitability

regime switching and monetary policy measurement this paper applies regime switching methods to the problem of measuring monetary policy policy preferences and structural factors are specified parametrically as independent markov processes interaction between the structural and preference parameters in the policy rule serves to identify the two processes the estimates uncover policy episodes that are initiated by switches to dove regimes shown to granger cause both nber recessions and the romer dates these episodes imply real effects of monetary policy that are smaller than those found in previous studies

the impact of renewables on electricity prices in germany an estimation based on historic spot prices in the years 2011 2013 abstract germany s public opinion and media usually attribute increasing electricity prices to the high share of renewables in the german power system but average electricity prices at the european energy exchange dropped during the last years due to an excess of renewable energy this study uses historic market data in order to quantify the effect of renewables on prices historic demand and supply curves from 2011 to 2013 have been used to reconstruct electricity prices under the assumption that no wind and pv would be available the analysis reveals an astonishingly high increase of market prices up to 5 29 ct kwh due to a lack of non renewable power capacities in 2013 the available conventional capacity would not have been able to cover the demand during 269 hours the estimated maximum deficit of 5 6 gw is in good agreement to data published by the german grid operators the discussion of the origin of this deficit leads to the conclusion that the current situation has not been caused by renewables the liberalization of the european energy market established investment risks that hindered required investment a long time before the renewables boomed

does monetary policy have asymmetric effects on stock returns this paper investigates whether monetary policy has asymmetric effects on stock returns using markov switching models different measures of a monetary policy stance are adopted empirical evidence from monthly returns on the standard poor s 500 price index suggests that monetary policy has larger effects on stock returns in bear markets furthermore it is shown that a contractionary monetary policy leads to a higher probability of switching to the bear market regime

how to deal with negative power price spikes flexible voluntary curtailment agreements for large scale integration of wind for the large scale integration of electricity from renewable energy sources res e the german system seems to reach its limits in 2009 the electricity wholesale market experienced serious negative prices at times of high wind and low demand the feed in system in germany consists of a fixed feed in price a take off obligation and a res priority rule and in practice only very restrictive use of res e curtailment exactly the latter is the problem we argue that the overall performance of the system would improve seriously by lifting the restrictions on the use of voluntary curtailment agreements while retaining the priority rule as such since generators of res e can only improve under this system reform investment conditions improve leading to higher installed res e capacity this in turn implies that reduced wind output due to curtailment can actually be offset by higher wind output in all periods in which there is no problem

volatility persistence in crude oil markets financial market participants and policy makers can benefit from a better understanding of how shocks can affect volatility over time this study assesses the impact of structural changes and outliers on volatility persistence of three crude oil markets brent west texas intermediate wti and organization of petroleum exporting countries opec between january 2 1985 and june 17 2011 we identify outliers using a new semi parametric test based on conditional heteroscedasticity models these large shocks can be associated with particular event patterns such as the invasion of kuwait by iraq the operation desert storm the operation desert fox and the global financial crisis as well as opec announcements on production reduction or us announcements on crude inventories we show that outliers can bias i the estimates of the parameters of the equation governing volatility dynamics ii the regularity and non negativity conditions of garch type models garch igarch figarch and hygarch and iii the detection of structural breaks in volatility and thus the estimation of the persistence of the volatility therefore taking into account the outliers on the volatility modelling process may improve the understanding of volatility in crude oil markets

structural vector autoregressions with smooth transition in variances abstract in structural vector autoregressive analysis identifying the shocks of interest via heteroskedasticity has become a standard tool unfortunately the approaches currently used for modeling heteroskedasticity all have drawbacks for instance assuming known dates for variance changes is often unrealistic while more flexible models based on garch or markov switching residuals are difficult to handle from a statistical and computational point of view therefore we propose a model based on a smooth change in variance that is flexible as well as relatively easy to estimate and illustrate its use by analysis of the interaction between monetary policy and the stock market based on a five dimensional system of u s variables for the benchmark setup it is found that previously used conventional identification schemes in this context are rejected by the data if heteroskedasticity is allowed for we also illustrate the implications of using different transition variables and varying the sample period

the socio technical transition of distributed electricity storage into future networks system value and stakeholder views whole system models for the gb electricity system suggest that distributed electricity storage has the potential to significantly reduce the system integration cost for future system scenarios from a policy perspective this poses the question why this value should not be realised within existing market structures opinion among stakeholders is divided some believe that storage deployment constitutes a special case in need of policy support others insist that markets can provide the necessary platform to negotiate contracts which reward storage operators for the range of services they could provide this paper seeks to inform this debate with a process of stakeholder engagement using a perspective informed by socio technical transition literatures this approach allows the identification of tensions among actors in the electricity system and of possibilities for co evolution in the deployment of storage technologies during a transition towards a low carbon electricity system it also draws attention to policy related challenges of technology lock in and path dependency resulting from poor alignment of incumbent regimes with the requirements for distributed electricity storage

current challenges of germany s energy transition project and competing strategies of challengers and incumbents the case of direct marketing of electricity from renewable energy sources electricity generated by renewable energies res e already accounts for 25 of germany s electricity supply this has led to recent discussions for a better market integration of res e the paper examines how competing actors and their ideas on market integration developed new services for direct marketing according to their respective origins and tried to shape the regulatory framework the paper analyses this process and explains the current shape of the field of direct marketing medium sized structured actors who favoured res e integration via the conventional wholesale power markets and who formed early close coalitions with res e power producers at the same time have been most successful in terms of market shares moreover they have been very successful for different reasons in building up coalitions with governance units and influencing the field rules and routines based on those findings the paper will conclude with some policy advices for the future adjustment of the current regulative frameworks as long as there is no evidence of how res e can be integrated most effectively and efficiently policies should maintain a competition between different direct marketing strategies to find out which strategies serve the best in terms of achieving a successful energy transition

measuring the reaction of monetary policy to the stock market movements in the stock market can have a significant impact on the macroeconomy and are therefore likely to be an important factor in the determination of monetary policy however little is known about the magnitude of the federal reserve s reaction to the stock market in part because the simultaneous response of equity prices to interest rates makes it difficult to estimate this paper uses an identification technique based on the heteroskedasticity of stock market returns to measure the reaction of monetary policy to the stock market we find a significant policy response with a 5 percent rise fall in the s p 500 index increasing the likelihood of a 25 basis point tightening easing by about a half

international monetary policy surprise spillovers abstract this is the first paper to examine international monetary surprise spillovers and to estimate the response of security prices to monetary and nonmonetary surprises monetary surprises have a slope effect on the domestic yield curve short maturity yields adjust much more than longer maturity yields these results are similar to other studies the following results are new us monetary surprises spill over and affect australian yields and equity returns australian monetary surprises do not spill over to the us nonmonetary surprises are much more important than monetary policy surprises in explaining longer maturity yield changes and equity returns

eyes on the prize how did the fed respond to the stock market abstract since the stock market boom of the 1990s many have suggested the federal open market committee fomc has adopted an unannounced policy goal of supporting equity values this paper offers a new approach to disentangle the relationship between changes in equity values and monetary policy specifically the paper distinguishes the fomc s reaction to forecasts of traditional goal variables which may depend on equity prices from the fomc s independent reaction to changes in equity prices by using actual forward looking variables examined by the fomc before each action the greenbook forecasts the authors find little evidence to support the proposition that the fomc responds to stock values except as filtered through a forecast of accepted monetary policy goal variables

structural vector autoregressions with nonnormal residuals in structural vector autoregressive svar modeling sometimes the identifying restrictions are insufficient for a unique specification of all shocks in this paper it is pointed out that specific distributional assumptions can help in identifying the structural shocks in particular a mixture of normal distributions is considered as a possible model that can be used in this context our model setup enables us to test restrictions which are just identifying in a standard svar framework the results are illustrated using a u s macro data set and a system of u s and european interest rates

promoting the market and system integration of renewable energies through premium schemes a case study of the german market premium abstract with the share of renewable energies within the electricity sector rising improving their market and system integration is of increasing importance by offering plant operators a premium on top of the electricity market price premium schemes represent an option to increase the alignment of renewable electricity production with market signals and have been implemented by several eu member states this paper examines the case study of the german market premium scheme adopted in 2012 building on an evaluation of early experiences we discuss whether the market premium contributes to the aims of market and or system integration effectiveness and what potential efficiency gains and additional costs of administering integration are associated with it efficiency while exposing renewables to price risks is not the scheme s purpose it has successfully increased participation in direct marketing however risks of overcompensating producers for marketing and balancing costs are high and the benefits of gradually leading plant operators towards the market are questionable incentives for demand oriented production are established but they seem insufficient particularly in the case of intermittent renewable energy sources to conclude we provide an outlook on alternative designs of premium schemes and discuss whether they seem better suited for addressing the challenges ahead

telltale tails a new approach to estimating unique market information shares the trading of securities on multiple markets raises the question of each market s share in the discovery of the informationally efficient price we exploit salient distributional features of multivariate financial price processes to uniquely determine these contributions thereby resolving the main drawback of the widely used hasbrouck 1995 methodology which merely provides upper and lower bounds of a market s information share we show how tail dependence of price changes which may emerge as a result of differences in market design can be exploited to estimate unique information shares two empiricalapplications illustrate the practical use of the new methodology

house prices and stock prices different roles in the us monetary transmission mechanism we analyze the role of house prices and stock prices in the monetary policy transmission mechanism in the us using a structural vector autoregressive model if we allow the interest rate and asset prices to react simultaneously to news we find different roles for house prices and stock prices in the monetary transmission mechanism following a contractionary monetary policy shock stock prices fall immediately while the response in house prices is more gradual regarding the systematic response in monetary policy stock prices play a more important role than house prices as a consequence house prices contribute more than stock prices to fluctuations in gross domestic product and inflation

asset prices exchange rates and the current account this paper analyses the role of asset prices in comparison to other factors in particular exchange rates as a driver of the us trade balance it employs a bayesian structural var model that requires imposing only a minimum of economically meaningful sign restrictions we find that equity market shocks and housing price shocks have been major determinants of the us current account in the past accounting for up to 30 of the movements of the us trade balance at a horizon of 20 quarters by contrast shocks to the real exchange rate have been less relevant explaining about 9 and exerting a more temporary effect on the us trade balance our findings suggest that large exchange rate movements may not necessarily be the key element of an adjustment of today s large current account imbalances and that in particular relative global asset price changes could be a potent source of adjustment

testing for arch in the presence of additive outliers in this paper we investigate the properties of the lagrange multiplier lm test for autoregressive conditional heteroskedasticity arch and generalized arch garch in the presence of additive outliers ao s we show analytically that both the asymptotic size and power are adversely affected if ao s are neglected the test rejects the null hypothesis of homoskedasticity too often when it is in fact true while the test has difficulty detecting genuine garch effects several monte carlo experiments show that these phenomena occur in small samples as well we design and implement a robust test which has better size and power properties than the conventional test in the presence of ao s applications to the french industrial production series and weekly returns of the spanish peseta us dollar exchange rate reveal that sometimes apparent garch effects may be due to only a small number of outliers and conversely that genuine garch effects can be masked by outliers

monetary policy announcements and market interest rates response evidence from china abstract this paper examines the daily responses of market interest rates to three monetary policy announcements in china using the event study approach i find that the interest rate responses to announced changes in the regulated retail interest rate and the required reserve ratio are positive and significant at all maturities of interest rates but smaller at the long end of the yield curve by contrast market interest rates barely respond to the qualitative mpc announcements about the monetary policy stance these findings are robust to alternative econometric methods that correct for potential bias arising from violations of the identification assumption these findings suggest that the pbc should formulate its policy communication in a quantitative way

what does monetary policy do to long term interest rates at the zero lower bound this article uses a structural var with daily data to identify the effects of monetary policy shocks on various longer term interest rates since the federal funds rate has been stuck at the zero lower bound the var is identified using the assumption that monetary policy shocks are heteroskedastic monetary policy shocks have especially high variance on days of fomc meetings and certain speeches while there is otherwise nothing unusual about these days a complementary high frequency event study approach is also used i find that stimulative monetary policy shocks lower treasury and corporate bond yields but the effects die off fairly fast

large shocks in the volatility of the dow jones industrial average index 1928 2013 we determine the events that cause large shocks in volatility of the djia index over the period 1928 2013 using a new semi parametric test based on conditional heteroscedasticity models we find that these large shocks can be associated with particular events financial crashes elections wars monetary policies etc we show that some shocks are not identified as extraordinary movements by the investors due to their occurring during high volatility episodes especially the 1929 1934 1937 1938 and 2007 2011 periods

state dependent transmission of monetary policy in the euro area we estimate a logit mixture vector autoregressive model describing monetary policy transmission in the euro area over the period 1999 2015 in contrast to other classes of nonlinear vector autoregressive models regime affiliation is neither strictly binary nor binary with a transition period and based on multiple variables we show that monetary policy transmission in the euro area can be described as a mixture of two states in both states output and prices are found to decrease after contractionary monetary policy shocks however the effects of monetary policy are less enduring in the crisis state

precious metals oil and the exchange rate contemporaneous spillovers abstractwe investigate the contemporaneous spillovers among precious metals crude oil and the us exchange rate we contend that conventional reduced form vector autoregressive var models based on lead lag relations do not fully capture the interactions among these series as these models ignore the contemporaneous effects using a structural var model we identify these contemporaneous spillovers which are shown to be strong and asymmetric we further show that not taking into consideration the contemporaneous interactions among these assets leads to inaccurate findings and inevitably to inaccurate interpretations of the causal relations among them

how did the fed react to the 1990s stock market bubble evidence from an extended taylor rule how did the federal reserve bank react to the stock market bubble of the late 1990s at a symposium sponsored by the federal reserve bank of kansas city in jackson hole wyoming on august 30 2002 chairman alan greenspan remarked that economists do not currently have a way to measure a stock market bubble convincingly he also argued that in the absence of such a measure it was difficult for the fed to justify with some degree of certainty a preemptive tightening that would likely be necessary to neutralize such a bubble this paper extends the taylor rule methodology to include three measures of stock market overvaluation and confirms greenspan s statement that the fed did not neutralize the bubble however the extended taylor rule methodology also shows that the fed perhaps unintentionally by keeping the fed funds rate below those suggested by the taylor rule may have actually contributed to the growth of the bubble

a lagrange multiplier test for garch models abstract this paper extends the lagrange multiplier lm test to testing noise disturbances against garch disturbances in the linear regression model the resulting lm test for the garch alternative is identical to the lm test for an arch alternative