the collateral channel how real estate shocks affect corporate investment abstract what is the impact of real estate prices on corporate investment in the presence of financing frictions firms use pledgeable assets as collateral to finance new projects through this collateral channel shocks to the value of real estate can have a large impact on aggregate investment to compute the sensitivity of investment to collateral value we use local variations in real estate prices as shocks to the collateral value of firms that own real estate over the 1993 2007 period the representative us corporation invests 0 06 out of each 1 of collateral jel d22 g31 r30

new evidence of energy growth nexus from inclusive wealth abstract gross domestic product gdp has been inappropriately used as the main indicator for assessing the sustainability of economic development for a long time inclusive wealth iw offers a new approach to assess sustainability by comprehensively measuring the productive base of the economy that involves three types of capital assets of nations produced human and natural capital and aggregates them into a single measure of wealth this study proposes an alternative to the literature on the conventional energy growth nexus that widely uses gdp as a proxy of the growth this study aims to investigate the impact of energy consumption on wealth in the iw framework and forecast the growth of iw over the next three decades for this purpose this study uses both parametric and non parametric analyses on 104 countries for 1993 2014 our results indicate that there is a negative and significant impact of energy consumption on iw growth suggesting an unsustainable pattern of world energy consumption using a machine learning technique it is forecasted that increasing the efficiency of energy consumption leads to a higher growth in average per capita iw this study also suggests that a shift to renewables is a precondition for sustainable development

the accounting push and the policy pull balancing environment and economic decisions abstract the use of information in environmental and economic policy has been a theme for over 100 years but standards for integrating environmental and economic information were not adopted until 2012 through the system of environmental economic accounting seea for 20 years the technical push to develop accounts proceeded largely independently of the pull from the intended or likely end users of accounts consequently governments have little knowledge of the accounting or how it might be used we examine why public policy imperatives have not yet pulled environmental accounting into the mainstream and explain how accounting can help reshape government decision making as part of this a model showing the place of accounts in the information system and the policy cycle is presented along with a research agenda and principles for the decision centred design of accounts we conclude that a phased implementation of the accounts as well as additional research into their applications will be needed to build practical understanding and political acceptance of the accounts

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

valuing the attributes of renewable energy investments increasing the proportion of power derived from renewable energy sources is becoming an increasingly important part of many countries s strategies to achieve reductions in greenhouse gas emissions however renewable energy investments can often have external costs and benefits which need to be taken into account if socially optimal investments are to be made this paper attempts to estimate the magnitude of these external costs and benefits for the case of renewable technologies in scotland a country which has set particularly ambitious targets for expanding renewable energy the external effects we consider are those on landscape quality wildlife and air quality we also consider the welfare implications of different investment strategies for employment and electricity prices the methodology used to do this is the choice experiment technique renewable technologies considered include hydro on shore and off shore wind power and biomass welfare changes for different combinations of impacts associated with different investment strategies are estimated we also test for differences in preferences towards these impacts between urban and rural communities and between high and low income households

ecosystem service valuation for national accounting a reply to obst hein and edens 2016 while recent experimental frameworks for national ecosystem service accounting have shown substantial progress in our view some crucial methodological issues remain that deserve further consideration before setting final standards in response to the landmark work of obst et al environ resour econ 64 1 23 2016 doi 10 1007 s10640 015 9921 1 we provide arguments with regard to the suitability of particular valuation approaches generally we agree that respective valuation methods need to produce values that are consistent with national accounting standards such as representing exchange values however we disagree with their conclusions regarding specific valuation techniques firstly the circumstance that methods used for estimating shadow prices can also be used to derive consumer surplus does not justify the general exclusion of all shadow pricing methods for valuation of ecosystem services for national accounts especially for public ecosystem services secondly that preference based methods can also be used to assess welfare changes does not imply that cost based methods are generally better suited for ecosystem accounting to the contrary we see an essential need for preference information in accounting contexts thirdly that accounting standards use a written down replacement cost approach does not mean ecosystem accounting requires to employ a replacement cost approach to the contrary we argue that assessing ecosystem degradation through restoration costs would be in line with writing down depreciation but we also point to its limits

expectations capital gains and income i introduction this article argues that the distinction between expected and unexpected capital gains losses is fundamental to the measurement of income the way capital gains are treated can have a significant impact on major macroeconomic statistics such as national income and saving the balance of payments government income and saving and depreciation see gale and sabelhaus 1999 joisce and wright 2001 the recent sale of spectrum licenses is a case in point the spectrum a natural asset over which governments enforce property rights became unexpectedly valuable as a result of the development of mobile telephones in 2000 and 2001 some governments realized gains of 30 billion or more in a day by auctioning licenses to use sections of the spectrum see un statistics division 2000 the concept of income although widely used remains vague it is necessary to inquire why the concept of income is needed and what use it serves the main purpose of income is to provide guidance to households or other economic units including government on the rate at which they can afford to consume when there is uncertainty about future resources the more successfully measured income meets this requirement the greater its power as an explanatory variable for the analysis of consumer behavior the treatment of expected and unexpected capital gains in income measurement is a continuing source of controversy 1 even in a perfect foresight setting the concept of income is not straightforward hicks 1946 considered a number of definitions two in particular command support in the literature hicksian income no 1 is the maximum amount that can be consumed while maintaining wealth intact 2 hicksian income no 2 is the maximum sustainable level of consumption the general consensus that emerges from the literature is that with perfect foresight all capital gains are included in hicksian income no 1 however asheim 1996 shows that some capital gains are excluded from hicksian income no 2 when the interest rate varies over time both income concepts coincide when the interest rate is fixed when the perfect foresight assumption is relaxed a distinction must be drawn between expected and unexpected capital gains it is important that we move beyond a perfect foresight setting because the concept of income has been developed primarily to assist decision taking under uncertainty if income is meant to act as a budget constraint indicating the resources available for consumption each period the important question is how should a rational consumer react to unexpected capital gains this article develops a general theoretical framework for the measurement of hicksian income no 1 under uncertainty that is capable of handling all kinds of capital gains on all kinds of assets ranging from money market assets to mineral deposits 3 first the concept of income with perfect foresight is developed and analyzed in the following section uncertainty is introduced income depends on expectations of future receipts that are liable to be revised with the passage of time the time at which income in a particular period is measured is therefore crucial income can be measured at any time but attention has tended to focus on the beginning and end of the period hicks 1946 178 79 described income as measured at these times as ex ante and ex post income ex ante income as noted by eisner 1990 p 1180 is essentially the same as friedman s 1957 concept of permanent income ex post income as defined by hicks now usually described as haig simons income after two earlier proponents of the concept is a widely used objective measure familiar to most economists however it is conceptually flawed because it utilizes two different and generally inconsistent set of expectations those held at the beginning and end of the period we define a family of conceptually consistent income measures each based only on the expectations held at the time of measurement that we describe as generalized hicksian income

ecosystem wealth in the barents sea abstract we develop an inclusive wealth type index for natural capital in the barents sea that accounts for ecosystem services via trophic interactions we consider three key fish species in the barents sea under stochastic growth dynamics compared to evaluation at market prices the estimated wealth from the inclusive wealth approach is several times higher ecosystem wealth depends on the management scheme and we consider both business as usual bau and an optimized ecosystem based management scheme ebm while bau maintains wealth near its current level 5 increase in the long run ebm increases wealth with almost 20 in the short run and more than 25 in the long run realized shadow prices suggest that prey species stocks are undervalued when evaluated at market prices

the environment and emerging development issues development economics for the most part has failed to recognize renewable environmental resources as economic goods yet the lives of the poor in developing countries are intimately tied to the fate of their local common property resources soil fuel wood water and so on ignoring the loss of common property renewable resources via degradation centralization or privatization in calculations of net national product can mask the destruction of resources available to a country s poor behind the false appearance of a growing national economy this paper describes the difference between the problem of managing local common property resources in developing countries and the problem of protecting the global commons such as the atmosphere and oceans it outlines the calculations that would include the local commons in the national income accounting of capital assets and argues that the interests of those most dependent on the increasingly scarce local commons will be best served by placing control in their hands while the central government provides infrastructure and educational support to control the pollution of the global commons on the other hand the paper sketches a plan in which most countries would have a high incentive to participate a global allocation of limited tradable permits to discharge defined pollutants

national accounting and the valuation of ecosystem assets and their services there has long been interest in integrating the value of environmental stocks and flows into standard measures of economic activity and wealth in particular through the development of adjusted measures of gdp and extended measures of national wealth this paper examines how the valuation of ecosystem services and ecosystem assets can be undertaken in an integrated national accounting setting we clarify the relevant valuation principles most significantly the need to apply the concept of exchange values and explain why the integration of ecosystem services necessitates an extension of the standard production boundary used in economic measurement the main implications of an accounting approach are discussed including the need to distinguish benefits from services the need for valuation methods that exclude consumer surplus and the importance of aligning measures of income and degradation remaining challenges include the treatment of low or negative rents accounting for ecosystem disservices and the derivation of values for ecosystem assets meeting these challenges and advancing work in this area should be the joint focus of economists ecologists and accountants

measuring natural capital towards accounts for the uk and a basis for improved decision making the paper describes the ongoing project begun by the uk office for national statistics and the department for the environment food and rural affairs in 2011 to compile comprehensive natural capital accounts for the uk it describes the basis on which the accounts have been constructed discusses key issues which have arisen and presents the results to date it also sets out how restoration accounts for individual projects can not only facilitate conventional cost benefit analysis but also add to relevant material for decision makers more widely the paper describes how natural capital accounts can underpin well based decision making for example in implementation of the uk government s new 25 year plan for the environment in addition by providing information on one of the missing capitals such accounts can augment analysis of the behaviour of the economy generally

voracious transformation of a common natural resource into productive capital i analyze a power struggle where competing factions have private financial assets and deplete a common stock of natural resources with no private property rights i obtain a feedback nash equilibrium to the dynamic common pool problem and obtain political variants of the hotelling depletion rule and the hartwick saving rule resource prices and depletion occur too fast so substitution away from resources to capital occurs too fast and the saving rate is too high the power struggle boosts output but depresses sustainable consumption genuine saving is nevertheless zero in a fractionalized society world bank estimates may be too optimistic

money income prices and interest rates including data from the 1980s sharply weakens the postwar time series evidence indicating significant relationships between money however defined and nominal income or between money and either real income or prices separately focusing on data from 1970 onward destroys this evidence altogether evidence indicating cointegration of real income and real money balances with due allowance for the effect of interest rates also deteriorates when the sample extends through the 1980s a positive finding is that the spread between the commercial paper rate and the treasury bill rate consistently contains highly significant information about future movements in real income copyright 1992 by american economic association

financial market variables do not predict real activity further evidence christian e weber previous studies argue that financial variables do not help forecast u s output growth f statistics for excluding financial variables from output growth equations depend on the sample period and the inclusion of 1974 12 in the sample also an autoregressive model of output growth often provides better forecasts than models with lagged financial variables included i decompose output into permanent and cyclical components and ask whether financial variables help forecast either component in isolation the paper bill spread does improve in sample forecasts of cyclical output but no financial variable helps forecast either cyclical output or permanent output growth out of sample jel e52 c22 c53 i introduction the last decade has witnessed a dramatic increase in efforts to determine the link between monetary aggregates and interest rate variables and real economic activity although friedman and schwartz 1963 and sims 1972 argued that movements in monetary aggregates have historically been followed by movements in output in the same direction it was only in the mid 1980s that empirical research on the link between financial variables and real economic activity accelerated beginning with sims 1980 one of the key stylized facts that emerged from this research is that although monetary aggregates appear not to help forecast output various interest rate variables do hafer and kutan 1997 and thoma and gray 1998 summarize recent work in this area recently however thoma and gray 1998 henceforth t g have questioned this stylized fact using rolling regressions they show that f statistics for excluding lags of m2 or the paper bill spread or the federal funds rate from an autoregressive ar model of growth in industrial production are frequently insignificant for sample periods truncated prior to the mid 1970s also excluding december 1974 from longer samples generally renders lags of these financial variables jointly insignificant and eliminates the apparent superiority of the spread as a forecaster of output growth finally for most sample periods a simple ar model of growth in industrial production outperforms vector autoregressive var models which include m2 growth the spread or the fed funds rate in the sense that the ar model generally yields lower root mean squared forecast errors than the var models as t g note their findings imply that financial variables do not help forecast output growth either monetary policy is neutral or e conomists have yet to identify the variable s whose fluctuations represent changes in monetary policy like most other researchers t g specify their empirical models in first differences of all integrated unit root series while this approach is standard i have argued in weber 1999 that separate empirical models for the stationary component of output in levels and the first difference of the permanent component of output provide more and better information than a single model of observed output growth first tests for excluding financial variables from output growth equations are in fact tests for excluding these variables from models for growth in the permanent component of output they have nothing to do with the cyclical influence of financial variables second due to two sets of possibly invalid restrictions that they place on the separate processes for permanent and temporary output tests for excluding financial variables from traditional money output autoregressions are based on potentially biased estimators the appendix provides a formal statement and proof of these assertions based on a propo sition in weber 1999 thus recent evidence that money growth does not help forecast output growth may reflect biased estimates of the distributed lag coefficients rather than an actual failure of money growth to help forecast output growth these observations argue strongly for causality tests based directly on separate autoregressive distributed lag ardl models for permanent output growth and the cyclical component of output

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

deforestation and development in a small open economy abstract our economy faces world prices and starts with a large endowment of land in forest and a small endowment of land in agriculture clearing of forested land yields marketable timber and a unit of land for agriculture early the high price of agricultural land drives the clearing process later the profit from marketing timber from the cleared land drives the process dates of phase transitions are endogenous we also set out a submodel of perpetual cyclic clearing and reforesting and show that it when cyclical harvesting regrowing is optimal the extent of clearing can be relatively large

the net national product and exhaustible resources the effects of foreign trade abstract it is the widely held view that estimates of national income should be corrected for the value of the extracted exhaustible resource stock this correction implies the counter intuitive result that the national income of an oil producer is unaffected by its vast oil reserves in this paper we review the definition of national income and discuss its relation to national welfare we show that an extra income should be imputed to the resource owning country based on the exportable resource stock part of the net adjustment for resource use is made to the income of the resource using and not the resource producing country

oil development operating cost estimates 1955 1985 abstract few if any published oil production cost estimates can be verified as to method and basic data using us drilling costs and some assumptions explained in the text this paper estimates development operating costs in 41 oil producing nations from 1955 to 1985 from publicly available data on drilling estimation methods are described in detail so that anyone with access to better information on any item can substitute it to arrive at a better estimate

substitution between clean and dirty energy inputs a macroeconomic perspective in macroeconomic models the elasticity of substitution between clean and dirty energy inputs within the energy aggregate is a central parameter in assessing the necessary conditions for long run green growth using new sectoral data in a panel of 26 countries we formulate specifications of nested constant elasticity of substitution production functions that allow estimating this parameter for the first time we present evidence that it significantly exceeds unity a favorable condition for promoting green growth

incorporating resilience in the assessment of inclusive wealth an example from south east australia this paper explores the consequences of changes in a system s resilience on the sustainability of resource allocation decisions as measured by inclusive wealth iw arrow et al in environ resour econ 26 647 685 2003 we incorporate an estimate of resilience in iw by taking account of known or suspected thresholds that can lead to irreversible or practically irreversible changes in the productivity and value of assets and hence social welfare these thresholds allow us to identify policies or projects that may be leading to an increased risk of decline in capital stocks the wealth of the region such risks are not reflected through usual measures of current system performance e g agricultural production we use the goulburn broken catchment in south eastern australia as a case study to explore the significance and practicality of including resilience in inclusive wealth estimates

on the intergenerational allocation of natural resources it is known hartwick and others that under standard assumptions a society that invests in reproducible capital the competitive rents on its current extraction of exhaustible resources will enjoy a consumption stream constant in time it is shown here that this result can be interpreted as saying that an appropriately defined stock of capital including the initial endowment of resources is being maintained intact and that consumption can be interpreted as the interest on that patrimony this seems like a useful rule of thumb for policy

is there really a green paradox abstract in the absence of a co2 tax the anticipation of a cheaper renewable backstop increases current emissions of co2 since the date at which renewables are phased in is brought forward and more generally future emissions of co2 will decrease the effect on global warming is unclear green welfare falls if the backstop is relatively expensive and full exhaustion of fossil fuels is optimal but may increase if the backstop is sufficiently cheap relative to the cost of extracting the last drop of fossil fuels plus marginal global warming damages as then it is attractive to leave more fossil fuels unexploited and thus limit co2 emissions we establish these results by analyzing depletion of non renewable fossil fuels followed by a switch to a clean renewable backstop paying attention to timing of the switch and the amount of fossil fuels remaining unexploited we also discuss the potential for limit pricing when the non renewable resource is owned by a monopolist finally we show that if backstops are already used and more backstops become economically viable as the price of fossil fuels rises a lower cost of the backstop will either postpone fossil fuel exhaustion or leave more fossil fuel in situ thus boosting green welfare however if a market economy does not internalize global warming externalities and renewables have not kicked in yet full exhaustion of fossil fuel will occur in finite time and a backstop subsidy always curbs green welfare

backward and forward looking shadow prices in inclusive wealth accounting an example of renewable energy capital abstract attaching weights to the list of capital assets is crucial in inclusive wealth accounting and sustainability assessments these weights or shadow prices can be constructed in theory by looking prospectively at future social profits that the capital in question is expected to yield in practice however both backward and forward looking shadow prices are used this study confirms that these two approaches are theoretically equivalent under strong assumptions and reviews how and why the two approaches are taken the two approaches are then applied to renewable energy capital rec which has rarely been done in either produced or natural capital accounting and sustainability assessments renewable energy capital provides an ideal example with which to compare the two approaches as it is a class of produced capital that substitutes both produced and natural capital the numerical results of both approaches demonstrate that renewable energy capital starts to account for as large a share as natural capital does if not produced capital or inclusive wealth in those countries where natural capital is poorly endowed and investment in renewable energy capital has been witnessed

payments for ecosystem services as commodity fetishism abstract payments for ecosystem services pes economically reward resource managers for the provision of ecosystem services and are thus characterised by i an ecological function subject to trade ii the establishment of a standard unit of exchange iii and supply demand and intermediation flows between those who sell and buy ecosystem services this paper departs from the term commodity fetishism broadly understood as the masking of the social relationships underlying the process of production to illuminate three invisibilities in the commodification of ecosystem services firstly we argue that narrowing down the complexity of ecosystems to a single service has serious technical difficulties and ethical implications on the way we relate to and perceive nature secondly the commodification of ecosystem services denies the multiplicity of values which can be attributed to these services since it requires that a single exchange value is adopted for trading finally we suggest that the process of production exchange and consumption of ecosystem services is characterised by power asymmetries which may contribute to reproducing rather than addressing existing inequalities in the access to natural resources and services

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

simulated exchange values and ecosystem accounting theory and application to free access recreation abstract this paper discusses the simulated exchange value method a practical method to estimate values for goods and services currently outside of the market in a manner consistent with the market based figures considered in national accounts the method proposes to simulate in a partial equilibrium context the price that would occur if a good or service outside of the market such as free access recreation in forests were internalized the method takes into account the demand estimated using non market valuation techniques the supply and the market structure the discussion covers the case of a linear demand and the case in which the demand is estimated using discrete choice methods this paper applies the method to free access recreation in the forests of andalusia in the south of spain and compares the results to those obtained using hicksian variations

genuine savings and sustainability genuine savings gs has emerged as the leading economic indicator of sustainable economic development at the country level it derives from the literatures on weak sustainability wealth accounting and national income accounting we discuss the theoretical underpinnings of gs focusing on the relationship between changes in a nation s extended capital stock and the future path of consumption the indicator has entered widespread use propelled by the world bank s publications despite its varying performance as a predictor for future consumption notwithstanding the extensive body of literature reviewed promising future research avenues are identified

available capital utilized capital and shadow prices in inclusive wealth accounting abstract previously accounting for comprehensive or inclusive wealth has focused on the supply side of capital assets however human well being created by capital assets inherently depends on the demand side as well in particular if capital is not utilized at its full capacity then realized or actual human well being may be less affected by available capital than by effective or utilized capital in principle this notion is embodied in a shadow price which is defined as the marginal contribution of capital assets to social well being the shadow price becomes higher if the underlying resource allocation mechanism improves in practice one can account for such underutilization by adjusting shadow prices to reflect only the utilized quantity of the capital in question furthermore capital utilization has different nuanced implications for produced human and natural capital and its implications even vary across some classes of natural capital within this line of theoretical thought we provide empirical estimates of the changes in inclusive wealth and sustainability of selected developing countries in recent years by comparing available and utilized capital assets we find that sustainability assessments may be revised based on utilized capital due to among others human capital underemployment and non renewable natural capital accessibility

national accounts and environmental resources in the paper optimal growth theory is used to derive the appropriate definition of the net national product concept when there are environmental resources and environmental damage to take into account the basic conclusions are that conventional defined np should be corrected by deducting environmental damage and adding the value of the net change of all resources

capital theory and the measurement of sustainable development an indicator of weak sustainability the measurement of sustainable development is not without considerable difficulties yet this should not detract from the positive advances that can be made in this direction in this paper we present one form that a weak sustainability indicator can take derived from a simple but intuitive savings rule it incorporates the idea that the level of overall capital stock should be non decreasing although subject to qualification at this stage some interesting results emerge from the application of the rule to 18 countries

valuing a wind farm construction a contingent valuation study in greece abstract our analysis is based on data from a double bounded dichotomous choice contingent valuation study implemented to elicit public attitudes towards renewable energy generation and their willingness to pay for the construction of a wind farm in the area of messanagros in the island of rhodes greece results indicate that there are significant positive values deriving from the proposed project respondents report a mean willingness to pay a premium in their bi monthly electric bills of 8 86 for the sole purpose of the construction of the wind farm the estimated economic benefits to the local population are weighed against the investment cost in a cost benefit analysis to inform policy making and implications for eu energy policy are provided

the welfare economic theory of green national accounts this paper takes a critical look at the literature on green national accounts the problem studied is to find a linear index of economic variables that responds to perturbations in the same direction as social well being the thesis of a large literature that net national product which is a flow is that index in closed economies is shown in some interpretations to be simply false and in others to suffer from deep estimation problems it is argued that capital depreciation using shadow prices should certainly be included in national accounts but that the right welfare index is a comprehensive measure of wealth defined as the shadow value of an economy s stock of all capital assets it is shown that comprehensive wealth is usable as a criterion for policy evaluation as well as for determining sustainable economic development

comprehensive versus inclusive wealth accounting and the assessment of sustainable development an empirical comparison abstract this paper compares alternative wealth estimates reported by the world bank and in the inclusive wealth reports although theoretical limitations and shortcomings are widely acknowledged in the literature the extent to which the alternative approaches to wealth accounting matter empirically is not well known comparing the alternative data in levels shares growth rates and monetary sustainability indices derived from them major differences emerge between oecd and non oecd countries for the former the alternative wealth estimates seem complementary but only if a key assumption made in the derivation of inclusive wealth is violated for the latter the data seem much less useful for example depending on which data source is used for the group of low income countries the share of natural capital in total wealth is either 36 8 or 60 4 suggesting that extreme care must be taken if the composition of wealth were to be used to inform policy making neither wealth data set provides a definite guide to economic sustainability but a combination of indices derived from both might be useful in a holistic assessment of sustainability

cost comparisons for wind and thermal power generation abstract comparisons of generation costs between renewable and conventional generation technologies are a key input to energy policy discussions however there are many pitfalls around generation cost estimation even apparently reliable sources can quote widely differing figures this paper reviews methodologies and data sources to determine the main sources of uncertainty in the estimation of the costs of wind coal and natural gas generation based on illustrative cost calculations for the us denmark and india it finds that the cost elements most likely to confound generation cost calculations are fuel costs and particularly for renewable generation the cost of capital it explores the impact on calculated generation cost of alternative approaches to estimating these parameters the results should be of particular value to users of generation cost estimates who are concerned about the reliability of the information they have to work with

adjusting green nnp to measure sustainability weitzman provides a foundation for nnp as the stationary equivalent of a wealth maximizing path when there is a constant interest rate and no exogenous technological progress here the implications of weitzman s foundation are explored in a case encountered in resource models i e the case of non constant interest rates in a setting that allows for exogenous technological progress an expression for nnp is obtained that adjusts green nnp for anticipated capital gains and interest rate effects to produce a measure that indicates sustainability this result is important when measuring the relative sustainability of resource rich and resource poor countries i introduction how should net national product nnp be adjusted for the depletion of natural and environmental resources a prerequisite for examining this problem is to decide on an underlying notion of income at the personal level hicks 1946 defines income as the consumption that if kept constant would yield the same present value as a person s actual future receipts since market prices are not influenced by any single person this notion of income equals a person s maximal sustainable consumption at the national level national income can likewise be defined as the consumption that if kept constant would yield the same present value as the actual future consumption path unless the nation is a small open economy faced with given international prices this notion of national income will exceed

a contribution to the theory of welfare accounting a kind of unified theory is proposed as a dynamic generalization of the standard consumer surplus methodology for evaluating welfare changes the unified theory allows rigorous dynamic welfare comparisons to be inferred between any two economic situations from just knowing current incomes and observing a short run market demand schedule essentially the change in present discounted future utility is exactly captured by the formula difference in current income plus consumer surplus this well known formula is thereby shown to cover a far wider class of welfare comparisons than is customarily treated in the textbook static case

using conjoint analysis to quantify public preferences over the environmental impacts of wind farms an example from spain this paper focuses on the effect on people s utility of the potential environmental impacts of wind farm developments we report on research designed to provide insight into their preferences and we show how two alternative choice modelling techniques can be used to estimate them our results show that significant social costs in the form of environmental impacts can be associated with wind farm developments as relative environmental values are revealed by these methods it would be possible to develop wind farms in such a way that minimises the total social costs of the investment and which maximises its net benefits

quantifying the external cost of oil consumption within the context of sustainable development the concept of sustainability implies that the flow of services derived from the use of natural capital must be constant over time and should be obtained at a constant price for a depletable resource such as oil the future generations are highly impacted due to the consumption behavior of the current generation since the ultimate oil stock within the earth declines with cumulative consumption excessive consumption of oil now reduces the availability of oil for future needs moreover since oil reserves are normally extracted in the order of ascending cost and descending quality excessive consumption of relatively high quality cheap oil reserves by the current generation raises the cost at which future generations can meet their needs of oil and hence imposes an external cost on the future generations this study aims to quantify the external cost of consuming a barrel of oil within the context of sustainable development an option pricing model is developed to quantify this external cost assuming that the external cost of consuming a barrel of oil now equals the value of the option to get a barrel of oil in the future at the same current cost then the total cost of consuming a barrel of oil now that should be used in lifecycle costing to design more sustainable products is the summation of the oil price and the external cost

financial market variables do not predict real activity i introduction the past decade has seen an extensive empirical reassessment of the information content of financial market variables believed to be sensitive to monetary policy particularly provocative are papers suggesting that some interest rates and interest rate spreads contain more information about economic activity than monetary aggregates this paper reviews important methodological pitfalls in these studies we then show that none of the commonly employed indicators of monetary policy contain incremental information useful in forecasting real economic activity as measured by industrial production two conclusions are possible either monetary policy innovations have no significant real effects or we collectively have failed in our efforts to measure monetary policy the money income causality literature spawned by christopher sims in the 1970s has broadened in recent years to encompass a diverse set of measures of monetary policy more comprehensive and sophisticated empirical assessment strategies and a richer array of explanations for observed correlations between financial market variables and economic activity early contributors to this literature such as stock and watson 1989 friedman and kuttner 1992 and bernanke and blinder 1992 present evidence that particular interest rates and spreads not only dominate monetary aggregates as predictors of economic performance but are remarkably powerful predictors stock and watson 1989 and friedman and kuttner 1992 demonstrate that the spread between the interest rates on commercial paper and treasury bills is highly significant in explaining movements in real activity while bernanke and blinder 1992 made an equally convincing case for the federal funds rate these conclusions are qualified however in subsequent work both bernanke 1990 and stock and watson 1993 for example point out that the predictive power of the paper bill spread and interest rates more generally weakened during the second half of the 1980s and the early 1990s the results reported in these and related papers form the empirical core of the debate over the relative merits of various interest rates spreads and monetary aggregates as indicators of the stance of monetary policy subsequent empirical work has seen a shift from atheoretical to structural vector autoregressions strongin 1992 gordon and leeper 1994 and bernanke and mihov 1995 for example focus on more refined measures of monetary policy derived from explicit models of the reserve market and central bank operating procedures these papers address concerns that go beyond discriminating among variables on the basis of predictive power they grapple directly with the fundamentally difficult issue of identifying monetary policy shocks by positing and estimating structural models that take the form of identified vars the usefulness of these efforts as well as earlier efforts to measure monetary policy is in turn questioned by rudebusch 1996 who finds that the studies econometric results are fragile and at odds with other evidence on the nature of the fed s reaction function and monetary policy surprises the first part of our paper illustrates some of the methodological pitfalls common in the literature cited above and complements recent work by bernanke 1990 hess and porter 1993 thoma and gray 1995 rudebusch 1996 and emery 1996 we begin by demonstrating the advantages of rolling recursive regression techniques that directly and comprehensively address the question of sample sensitivity these techniques are used to illustrate the extreme sensitivity to sample period of the causality statistics and variance decompositions commonly used to assess the explanatory power of financial market variables indeed in the applications under review here such in sample measures of fit are sometimes heavily influenced by individual monthly observations

comparing augmented sustainability measures for scotland is there a mismatch we estimate and compare two empirical measures of the weak sustainability of an economy for the first time the change in augmented green net national product gnnp and the interest on augmented genuine savings gs yearly calculations are given for each measure for scotland during 1992 1999 augmentation means including using projections to 2020 changed production possibilities enabled by exogenous technical progress or changing oil prices the change in augmented gnnp and the interest on augmented gs are both always positive showing no sustainability problem for scotland then according to the assumptions underlying our weak sustainability calculations however the former greatly exceeds the latter even when macroeconomic fluctuations are taken into account this is a mismatch which poses an unresolved problem with the theory resolving it may require respecifying the utility functions used in mainstream growth theory

measuring ecological capital state of the art trends and challenges abstract it is essential to assess the value of nature as it provides various benefits for human economic development and well being it has been 20 years since two prominent publications came out in valuing nature new concepts and methods have emerged since then this study aimed to 1 investigate the relationship between the new proposed concept ecological capital and the existing two concepts natural capital and ecosystem services and 2 examine the research trends of ecological capital accounting publications from 1997 to 2017 bibliometric analysis was used to reveal the research trends the results showed that the total number of publications has rapidly increased since 1997 and this growth trend will be maintained in the future the most productive journal country institute and author were ecological economics usa chinese academy of sciences and dr verburg respectively ecosystem services and land were the most frequent types of ecological capital non economic evaluation approaches became less of a favorite over time and economic valuation methods were mostly applied in last five years the integration of different methods has attracted increasing academic attention the progress advantages and limitations of different methods were summarized in this study including seea ecological footprint exergy emergy lca and economic valuation approaches as well as newly developed modelling approaches the last part of this study presented three challenges in this academic field the need to 1 establish a standard framework 2 consider the transfer transport of ecological capital and 3 improve capabilities for decision making

permanent and transitory components in macroeconomic fluctuations fluctuations in real gnp have traditionally been viewed as transitory deviations from a deterministic time trend the purpose of this paper is to review some of the recent developments that have led to a new view of output fluctuations and then to provide some additional evidence using post war quarterly data it is hard to reject the view that real gnp is as persistent as a random walk with drift we also consider the hypothesis that the recent finding of persistence are due to the failure to distinguish the business cycle from other fluctuations in real gnp we use the measured unemployment rate to decompose output fluctuations we find no evidence for the view that business cycle fluctuations are more quickly trend reverting this abstract was borrowed from another version of this item

evaluating projects and assessing sustainable development in imperfect economies we are interested in three related questions 1 how should accounting prices be estimated 2 how should we evaluate policy change in an imperfect economy 3 how can we check whether intergenerational well being will be sustained along a projected economic programme we do not presume that the economy is convex nor do we assume that the government optimizes on behalf of its citizens we show that the same set of accounting prices should be used both for policy evaluation and for assessing whether or not intergenerational welfare along a given economic path will be sustained we also show that a comprehensive measure of wealth computed in terms of the accounting prices can be used as an index for problems 2 and 3 above the remainder of the paper is concerned with rules for estimating the accounting prices of several specific environmental natural resources transacted in a few well known economic institutions

product market competition and credit risk abstract this study theoretically and empirically investigates effects of product market competition on credit risk we first develop a real options based structural model in a homogeneous oligopoly and show that credit spreads are positively related to the number of firms in an industry the disparity of firm size in an industry is relevant to both product market competition and credit risk and we therefore extend the model to an asymmetric duopoly case in particular we demonstrate that credit spreads of relatively small large firms within an industry are positively negatively related to herfindahl hirschman index and the relative firm size in an industry is an important determinant of credit risk the models implications are empirically scrutinized by a reduced form hazard model and generally supported by performing out of sample analyses the results demonstrate that firm size together with the interaction terms between intra industry firm size dummies and competition intensity can effectively predict default

is cyclical real gnp really more persistent than the trend using an observed components decomposition to estimate permanent and temporary components of us real gnp campbell and mankiw 1987 found that the estimated temporary component displays greater persistence than the estimated permanent component this suggests that attempts to estimate separate permanent and temporary components in real gnp are unlikely to succeed this finding is re examined here using a longer real gnp series and a different decomposition which guarantees that the estimated temporary component will be stationary the resulting estimates of permanent and temporary output suggests that the temporary component displays no persistence and that the permanent component exhibits almost precisely the persistence of a random walk with drift cyclical real gnp is not more persistent than the trend

do rivals enhance your credit conditions abstract in a model where firms rely on bank financing to build capacity put up specialized productive assets as collateral and then compete a la cournot we introduce a probability of default we investigate how the number of competitors affects the equilibrium amount of bank credit and derive conditions under which an inverted u shaped relationship occurs on the one hand more competitors enhance the resale value of collateralized productive assets on the other hand more competitors shrink firms profits and the resulting income that can be pledged to banks we then extend the analysis to firms outside the cournot industry that are willing to buy productive assets in liquidation and show that the equilibrium bank credit becomes monotonically decreasing in the number of competitors

can renewable energy power the future fossil fuels face resource depletion supply security and climate change problems renewable energy re may offer the best prospects for their long term replacement however re sources differ in many important ways from fossil fuels particularly in that they are energy flows rather than stocks the most important re sources wind and solar energy are also intermittent necessitating major energy storage as these sources increase their share of total energy supply we show that estimates for the technical potential of re vary by two orders of magnitude and argue that values at the lower end of the range must be seriously considered both because their energy return on energy invested falls and environmental costs rise with cumulative output finally most future re output will be electric necessitating radical reconfiguration of existing grids to function with intermittent re

capital gains and net national product in open economies it is shown within a given framework that with the world economy following an egalitarian path the aggregate capital gains being positive is equivalent to the interest rate tending to decrease this result is of importance for the concept of net national product in open economies in particular with positive aggregate capital gains an open economy cannot sustain consuming the return on its capital stocks since some part of the return must be used to augment the country s national wealth it is established that a country s share of world wide sustainable consumption equals its share of worldwide wealth

the capital gains from trade are not enough evidence from the environmental accounts of venezuela and mexico abstract in principle a country cannot endure negative genuine savings for long periods of time without experiencing declining consumption nevertheless theoreticians envisage two alternatives to explain how an exporter of non renewable natural resources could experience permanent negative genuine savings and still ensure sustainability the first one alleges that the capital gains arising from the expected improvement in the terms of trade would suffice to compensate for the negative savings of the resource exporter the second alternative points at technological change as a way to avoid economic collapse this paper uses the data of venezuela and mexico to empirically test the first of these two hypotheses the results presented here prove that the terms of trade do not suffice to compensate the depletion of oil reserves in these two open economies

resource depletion and sustainability in small open economies abstract exogenous price changes affect the amount that a small country exporting natural resource commodities must invest to sustain its consumption level the necessary amount is given by the difference between hotelling rent and the discounted sum of future terms of trade effects capital gains the latter term is found to be large relative to the former in the case of petroleum depletion in indonesia this suggests that resource rich countries will need to invest more than previously expected to sustain their consumption levels if natural resource prices continue their long term historical decline

the cyclical component of u s economic activity quarterly data on industrial production and deflated gross national product in the united states from 1947 through 1985 are decomposed into independent nonstationary trend and stationary cycle components using kalman filtering and smoothing techniques estimates of the model parameters imply that at least half of the quarterly innovation in u s economic activity can be attributed to a stationary cyclical component that persists over periods of time as long as five years this finding is inconsistent with the hypothesis that most of the apparent variation in u s economic activity can be attributed to a nonstationary trend component

do liquidation values affect financial contracts evidence from commercial loan contracts and zoning regulation we examine the impact of asset liquidation value on debt contracting using a unique set of commercial property loan contracts we employ commercial zoning regulation to capture the flexibility of a property s permitted uses as a measure of an asset s redeployability or value in its next best use within a census tract more redeployable assets receive larger loans with longer maturities and durations lower interest rates and fewer creditors controlling for the property s type sale price and earnings to price ratio these results are consistent with incomplete contracting and transaction cost theories of liquidation value and financial structure

corruption and the political economy of resource based development a comparison of asia and sub saharan africa we model how the supply and demand for bribes affects resource use by an economy and the reinvestment of resource rents in other assets this requires adjusting the world bank s measure adjusted net savings for any rent dissipation due to corruption the impacts of corruption on long run changes and periodic growth in the adjusted net savings rate are estimated across african and asian economies from 1970 to 2003 corruption rather than resource dependency per se affects negatively the ability of african countries to reinvest resource rents in the short term but for asian countries corruption is less important than point resources corruption influences long run growth in adjusted net savings rates in all countries and is also the pathway through which this growth is affected by patterns of resource use trade and abundance

hartwick s rule in open economies to sustain constant consumption the hartwick rule prescribes reinvesting all resource rents in reproducible capital this paper shows that the rule does not apply to open economies since the underlying stationary technology assumption is violated when gains from trade are taken into account a correct analog to the hartwick rule for open economies is developed and applied to a model of capital accumulation and resource depletion la regle de hartwick dans les e conomies ouvertes pour maintenir la consommation constante la regle de hartwick prescrit qu il faut reinvestir toutes les rentes des ressources dans du capital reproductible ce me moire montre que la regle ne s applique pas dans le cas d economies ouvertes parce que le postulat d une technologie stationnaire n9est pas satisfait quand on tient compte des gains engendres par le commerce international l auteur developpe une version correcte pour les economies ouvertes dans 1 esprit de la regle de hartwick et l applique a un modele d accumulation de capital et d epuisement des ressources

more evidence on the money output relationship i introduction the empirical relationship between money and real output continues to produce conflicting evidence stock and watson 1989 using monthly u s data for the period 1960 85 report that while actual money growth m1 does not granger cause the growth of industrial production its detrended component does krol and ohanian 1990 internationalize stock and watson s study and find that both actual and detrended ml growth granger cause output growth in the u k but that neither series affects output growth in japan canada and germany friedman and kuttner 1992a 1992b 1993 question the role of money in explaining output behavior they report 1993 that even though the stock watson specification is used simply updating the sample through 1990 yields the result that detrended m1 growth no longer explains output growth friedman and kuttner also argue that the commercial paper rate or the spread between the three month treasury bill and the commercial paper rate provides a better gauge for output s reaction to monetary policy changes replacing the treasury bill rate used by stock and watson with the commercial paper rate or the spread friedman and kuttner find that m1 growth has no marginal explanatory power over output a feature of recent investigations of the money output link is the general use of a var specification based on the presumption that the series are difference stationary e g feldstein and stock 1994 several recent studies however have questioned this presumption due to the low power of unit root tests dejong et al 1992 dejong 1992 dejong and whiteman 1991a 1991b and rudebusch 1993 these studies suggest that it is difficult to distinguish between difference stationary as the null and trend stationary as the alternative hypothesis given the uncertainty about the existence of a unit root in economic time series we re examine the money output relation by specifically considering the affect of assuming that the series are trend stationary or difference stationary such an investigation is important to determine if permanent temporary changes in money and other series create permanent temporary shifts in real output for example if real output and money contain a unit root i e they are best represented by the difference stationary model permanent money shocks may produce permanent shifts in output put another way permanent money shocks may have a long run impact because they affect the stochastic trend component of output and thus change the output level for all future horizons on the other hand if output and other series are represented by a trend stationary model fluctuations around a trend level of these series are stationary mean reverting under this model a transitory money shock may only have a short run impact on output as it quickly returns to its trend level to analyze the sensitivity of results to different stationarity assumptions used we estimate two var systems one system uses the log levels of the variables along with a deterministic time trend the other uses the log difference of the series and excludes the trend term the first system represents the trend stationary specification and the second one represents the difference stationary specification there is some evidence that the money output link may be sensitive to the presence of a deterministic trend term e g eichenbaum and singleton 1986 stock and watson 1989 even so our study provides a direct comparison based on identical data sets of the effects that the two different stationarity specifications have on the money output results while testing the robustness of the money output connection is our main focus we also provide some different perspectives on the debate one is to use both long and short term data sets most studies limit the analysis to quarterly data from the post 1960 era we study the link between money interest rates and output using annual data over the extended period 1915 1993

the inclusive wealth index a critical appraisal abstract among recent high profile propositions to revise national accounts and to provide new indicators of sustainability and well being the inclusive wealth framework and the related inclusive wealth index iwi undoubtedly stand out as one of the most promising endeavours built up at the confluence of welfare development and sustainability economics the indicator has been designed to bring information about the wealth of nations and their sustainability in a comprehensive way the inclusive wealth framework is nevertheless fraught with limitations due to questionable theoretical assumptions gaps in data availability unrealistic assumptions about the future and inability to account for distributional issues we propose a non exhaustive critical appraisal of the index and its underlying framework we conclude that these limitations undermine its capacity to fulfil the requirements of a satisfactory sustainability indicator we argue that most problems lie in the substantial discrepancy between the inclusive ambition of the indicator and the scarce means to implement it whereas the interconnectedness of the various assets that constitute wealth as well as their complex evolution through time are acknowledged by the proponents of inclusive wealth the way the iwi is computed is rather a mere addition of layers of actuarial like monetary values for a not inclusive yet range of capital assets caution is thus warranted while using such an approach and shorter range alternatives to pursue similar goals are proposed

cost and income based measures of human capital human capital is increasingly believed to play an important role in the growth process however adequately measuring its stock remains controversial in this paper three general approaches to measurement are identified cost based income based and educational stock based this survey focuses on the first two approaches and provides a critical review of the theories and their applications to data from a range of countries particular emphasis is placed upon the work of jorgenson and fraumeni 1989 1992 and some new results for new zealand based upon their approach are also presented

from fossil fuels to renewables the role of electricity storage abstract electricity storage represents a solution to curb carbon emissions by enabling more use of intermittent renewable energy our goal is to empirically analyze the determinants of innovation in electricity storage and its role in fostering technological innovations in renewable and conventional electricity generation using a global firm level data set of electricity patents from 1963 to 2011 we find that better electricity storage promotes innovation not only in renewable energy but also in conventional technologies specifically our estimates show that an additional storage patent increases the probability to apply for patents in renewable energy and efficiency improving fossil fuel technologies two years from now by 1 09 and 0 65 respectively this implies that improved electricity storage technologies can boost the energy efficiency of conventional fossil fuel fired power plants as well as increase the use of renewable electricity thus the ability of electricity storage to curb carbon emissions depends on the competitiveness of renewable energy against conventional electricity generation and conventional power generation mix as storage increases fossil fuel efficiency and reduces ramping costs

small and medium size enterprises access to finance as a growth constraint abstract this paper presents recent research on access to finance by small and medium size enterprises smes smes form a large part of private sector in many developed and developing countries while cross country research sheds doubt on a causal link between smes and economic development there is substantial evidence that small firms face larger growth constraints and have less access to formal sources of external finance potentially explaining the lack of smes contribution to growth financial and institutional development helps alleviate smes growth constraints and increase their access to external finance and thus levels the playing field between firms of different sizes specific financing tools such as leasing and factoring can be useful in facilitating greater access to finance even in the absence of well developed institutions as can systems of credit information sharing and a more competitive banking structure

rural versus urban preferences for renewable energy developments development of renewable energy resources such as wind farms and hydro electric schemes are being promoted as a new method of expanding and diversifying employment in rural areas however such energy projects are associated with a range of environmental impacts which might be detrimental to other economic activities such as those based on nature tourism the authors use a choice experiment to quantify peoples preferences over environmental and employment impacts that may result from the deployment of renewable energy projects in rural areas of scotland focussing in particular on any differences between the preferences of urban and rural dwellers and on heterogeneity within these groups rural and urban households are shown to have different welfare gains which are dependent on the type of renewable energy technology and on the scale of project under consideration

how does industry affect firm financial structure we examine the importance of industry to firm level financial and real decisions we find that in addition to standard industry fixed effects financial structure also depends on a firm s position within its industry in competitive industries a firm s financial leverage depends on its natural hedge its proximity to the median industry capital labor ratio the actions of other firms in the industry and its status as entrant incumbent or exiting firm financial leverage is higher and less dispersed in concentrated industries where strategic debt interactions are also stronger but a firm s natural hedge is not significant our results show that financial structure technology and risk are jointly determined within industries these findings are consistent with recent industry equilibrium models of financial structure copyright 2005 oxford university press