taming macroeconomic instability monetary and macro prudential policy interactions in an agent based model abstract we develop an agent based model to study the macroeconomic impact of alternative macro prudential regulations and their possible interactions with different monetary policy rules the aim is to shed light on the most appropriate policy mix to achieve the resilience of the banking sector and foster macroeconomic stability simulation results show that a triple mandate taylor rule focused on output gap inflation and credit growth and a basel iii prudential regulation is the best policy mix to improve the stability of the banking sector and smooth output fluctuations moreover we consider the different levers of basel iii and their combinations we find that minimum capital requirements and counter cyclical capital buffers allow to achieve results close to the basel iii first best with a much more simplified regulatory framework finally the components of basel iii are non additive the inclusion of an additional lever does not always improve the performance of the macro prudential regulation

valuing the benefits of mobile mammographic screening units using the contingent valuation method the benefits of improving access to mammographic screening are estimated using a contingent valuation experiment conducted on 458 women in 19 rural australian towns the contingent valuation survey provides women with information on mammographic screening and uses a closed ended format to elicit their willingness to pay for a visit of a mobile mammographic screening unit single and double bounded versions of the discrete response contingent valuation method are employed in the estimation of willingness to pay the double bounded contingent valuation approach is shown to be biased due to respondents having a greater disposition to respond no when the bid amount in the follow up question is higher than the bid amount offered in the initial question several approaches to dealing with this bias are examined

structural contagion and vulnerability to unexpected liquidity shortfalls abstract this paper assumes that financial fluctuations are the result of the dynamic interaction between liquidity and solvency conditions of individual economic units the framework is an extention of sordi and vercelli 2012 designed as an heterogeneous agent model which proceeds through discrete time steps within a finite time horizon the interaction at the micro level between economic units monitors the spread of contagion and systemic risk producing interesting complex dynamics the model is analysed by means of numerical simulations and systemic risk modelling where local interaction of units is captured and analysed by the bilateral provision of liquidity among units the behaviour and evolution of economic units are studied for different parameter regimes in order to investigate the relation between units expectations liquidity regimes and contagion liquidity policy implications are briefly discussed

tipping points in macroeconomic agent based models abstract the aim of this work is to explore the possible types of phenomena that simple macroeconomic agent based models abms can reproduce we propose a methodology inspired by statistical physics that characterizes a model through its phase diagram in the space of parameters our first motivation is to understand the large macro economic fluctuations observed in the mark i abm devised by delli gatti and collaborators in this regard our major finding is the generic existence of a phase transition between a good economy where unemployment is low and a bad economy where unemployment is high we then introduce a simpler framework that allows us to show that this transition is robust against many modifications of the model and is generically induced by an asymmetry between the rate of hiring and the rate of firing of the firms the unemployment level remains small until a tipping point beyond which the economy suddenly collapses if the parameters are such that the system is close to this transition any small fluctuation is amplified as the system jumps between the two equilibria we have explored several natural extensions of the model one is to introduce a bankruptcy threshold limiting the firms maximum level of debt to sales ratio this leads to a rich phase diagram with in particular a region where acute endogenous crises occur during which the unemployment rate shoots up before the economy can recover we also introduce simple wage policies this leads to inflation in the good phase or deflation in the bad phase but leaves the overall phase diagram of the model essentially unchanged we have also explored the effect of simple monetary policies that attempt to contain rising unemployment and defang crises we end the paper with general comments on the usefulness of abms to model macroeconomic phenomena in particular in view of the time needed to reach a steady state that raises the issue of ergodicity in these models

distributional weights in cost benefit analysis should we forget about them many argue that it is socially inefficient to use distributional weights in cost benefit analysis and that doing so implies large inefficiency losses when distributional matters can be dealt with trough income taxation instead our results question this view by showing a large range of cases when distributional weights are second best optimal to use one example is when different provided goods affect tax revenues equally per dollar spent utility functions that are separable in the provided goods is sufficient for this most results hold for linear and non linear income taxes and whether they are optimal or not general policy implications are discussed

willingness to pay to reduce mortality risks evidence from a three country contingent valuation study valuing a change in the risk of death is a key input into the calculation of the benefits of environmental policies that save lives typically such risks are monetized using the value of a statistical life vsl since the majority of the lives saved by environmental policies are those of older persons there has been much recent debate about whether the vsl should be lower for the elderly to reflect their fewer remaining life years we conducted a contingent valuation survey in the uk italy and france designed to answer this question the survey was administered in these three countries following a standardized protocol our results suggest that the vsl is 1 022 million or 2 264 million depending on whether we use median or mean wtp the vsl is not significantly lower for older persons but is higher for persons who have been admitted to a hospital or emergency room for cardiovascular and respiratory problems income is positively and significantly associated with wtp the income elasticities of the wtp increase gradually with income levels and are between 0 15 and 0 5 for current income levels in eu countries we use the responses to the wtp questions to estimate the value of an extension in remaining life expectancy the value of a loss of one year s life expectancy is 54 000 or 163 000

accounting technologies and sustainability assessment models abstract within ecological economics there is recognition of the need for new approaches to decision making to support sustainable development initiatives there is an increasing acknowledgement of the limitations of cost benefit analysis approaches as a measure of the un sustainability of organizational activities these are viewed as particularly inappropriate within the participatory settings that sustainable development proponents seek to foster they also fail to deal with the highly contested nature of sustainable development discourse in contemporary pluralist democracies while advances have been made in the field of multi criteria decision making there is still a relative dearth of versatile models that accommodate monetization in a way that recognizes the limits of calculative technologies this article introduces readers to developments within the accounting discipline designed to support sustainable development decision making and evaluation in particular it proposes sustainability assessment models as a viable alternative to cost benefit analysis sustainability assessment models are based on an inter disciplinary approach that recognizes the need for accountings that facilitate more participatory forms of decision making and accountability as such they address many of the weaknesses in current approaches to cost benefit analysis the authors first experiences with sustainability assessment models were with bp and the united kingdom oil and gas sector where models were developed as a means of making previously external costs more central to organizational decision making later work has included exploration of a range of decision making situations in private and public sector organizations in both the united kingdom and new zealand this has involved more explicit attention to plural values and issues of participation dialogue and democracy

bubbles and volatility of stock prices effect of mimetic contagion the author discusses the effect of the mimetic contagion on the dynamics of stock prices each investor bids and or asks prices such that adjusts to his present value calculated from his incomplete information set and to the average price of others buyers and sellers mimetic contagion an original stochastic treatment based on the equation of motion of the probability density function is used to calculate the equations of the mean and variance of the market price as soon as the agents are mimetic and or have correlated present values then the moments of the market price are driven away from the fundamental ones copyright 1991 by royal economic society

study on benefit transfer in an international setting how to improve welfare estimates in the case of the countries income heterogeneity abstract the paper aims at investigating the validity of benefit transfer in the case of transfers between countries highly heterogeneous in income and demonstrates relative performance of different benefit transfer methods under these conditions lake water quality valuation studies were conducted in two countries in transition poland and the czech republic they reflected two earlier studies carried out in norway we examine how income elasticity of wtp varies with the levels of income and find support for applying the income elasticity of 1 to adjust transferred welfare estimates in case of high differences in income between countries in addition we show that using site specific measures of income outperforms transfers based on gpd per capita the accuracy of benefit transfer is compared using equivalence testing following the tosc two one sided convolutions test a new more informative way of reporting equivalence is proposed based on computing minimum tolerance level rather than specifying it a priori

debt deleveraging and the liquidity trap a fisher minsky koo approach in this paper we present a simple new keynesian style model of debt driven slumps that is situations in which an overhang of debt on the part of some agents who are forced into rapid deleveraging is depressing aggregate demand making some agents debt constrained is a surprisingly powerful assumption fisherian debt deflation the possibility of a liquidity trap the paradox of thrift a keynesiantype multiplier and a rationale for expansionary fiscal policy all emerge naturally from the model we argue that this approach sheds considerable light both on current economic difficulties and on historical episodes including japan s lost decade now in its 18th year and the great depression itself

bubbles crashes and endogenous expectations in experimental spot asset markets1 spot asset trading is studied in an environment in which all investors receive the same dividend from a known probability distribution at the end of each of t 15 or 30 trading periods fourteen of twenty two experiments exhibit price bubbles followed by crashes relative to intrinsic dividend value when traders are experienced this reduces but does not eliminate the probability of a bubble the regression of changes in mean price on lagged excess bids number of bids minus the number of offers in the previous period p pt a f b 1 o l supports the hypothesis that a e d the one period expected value of the dividend and that f 0 where excess bids is a surrogate measure of excess demand arising from homegrown capital gains losses expectations thus when bt 1 o goes to zero we have convergence to rational expectations in the sense of fama 1970 that arbitrage becomes unprofitable the observed bubble phenomenon can also be interpreted as a form of temporary myopia tirole 1982 from which agents learn that capital gains expectations are only temporarily sustainable ultimately inducing common expectations or priors tirole 1982 four of twenty six experiments all using experienced subjects yield outcomes that appear to the chart s eye to converge early to rational expectations although even in these cases we get 0 and small price fluctuations of a few cents that invite scalping

default and punishment in general equilibrium we extend the standard model of general equilibrium with incomplete markets to allow for default and punishment by thinking of assets as pools the equilibrating variables include expected delivery rates along with the usual prices of assets and commodities by reinterpreting the variables our model encompasses a broad range of adverse selection and signalling phenomena in a perfectly competitive general equilibrium framework perfect competition eliminates the need for lenders to compute how the size of their loan or the price they quote might affect default rates it also makes for a simple equilibrium refinement which we propose in order to rule out irrational pessimism about deliveries of untraded assets we show that refined equilibrium always exists in our model and that default in conjunction with refinement opens the door to a theory of endogenous assets the market chooses the promises default penalties and quantity constraints of actively traded assets

okun s law theoretical foundations and revised estimates okun s law has been accepted as an empirical regularity that predicts a 3 percentage point increase in output for every 1 point reduction in the unemployment rate but only because other facts such as weekly hours induced labor supply and productivity tend to rise as well when output gaps are estimated for the u s economy with a production function approach using two different data sets for potential output and nairu it is found that the marginal contribution of a 1 point reduction in unemployment is only about two thirds percent increase in output changes in weekly hours and capacity utilization have independent effects on the output gap copyright 1993 by mit press

flows of air pollution ill health and welfare we provide a theoretical framework for measuring welfare when pollution influences economic growth by impairing health and driving up defensive medical expenditures we demonstrate the usefulness of our framework in practice by applying it to data from swedish valuation studies designed according to the accounting principles suggested here we estimate that the negative health effects of nitrogen dioxide emissions amount to 0 6 of gdp in sweden we also show that a corrective pigouvian tax should internalize the direct disutility reduced labor productivity and increased healthcare expenditures caused by pollution according to our calculations harmful health impacts alone excluding ecosystem effects justify 65 of the current swedish tax on nitrogen dioxide

slow boom sudden crash abstract many asset markets exhibit slow booms and sudden crashes this pattern is explained by an endogenous flow of information in the model agents undertake more economic activity in good times than in bad economic activity generates public information about the state of the economy if the economic state changes when times are good and information is abundant asset prices adjust quickly and a sudden crash occurs when times are bad scarce information and high uncertainty slow agents reactions as the economy improves a gradual boom ensues data from u s and emerging credit markets support the theory

choosing a functional form for an international benefit transfer evidence from a nine country valuation experiment abstract this paper investigates the performance of common approaches in international benefit transfer using data from identical and simultaneous contingent valuation studies on marine water quality in nine european countries the environmental good is shared by the study countries but the countries differ substantially in their income levels and other characteristics we compare the performance of value transfers with or without income elasticity of willingness to pay adjustments and function transfers that include only core variables supported by economic theory our results point to a new source of uncertainty associated with function transfer choosing a particular functional form even if only theoretically relevant explanatory variables are used the theory offers no insights with respect to a functional relationship of the dependence e g linear log linear exponential polynomial we show that while different functional forms may offer improvements in model fit this does not necessarily translate to improvements in transfer errors or minimum tolerance levels in our case the value transfer with constant unit income elasticity adjustment corresponding to the log log functional relationship between willingness to pay and income performs the best including additional explanatory variables or using other functional forms worsens the quality of transfers overall our study questions the rationale for using more complicated function transfers in international benefit transfers as the relationships observed within a country or a group of countries does not necessarily translate to dependencies between countries

leverage induced systemic risk under basle ii and other credit risk policies abstract we use a simple agent based model of value investors in financial markets to test three credit regulation policies the first is the unregulated case which only imposes limits on maximum leverage the second is basle ii and the third is a hypothetical alternative in which banks perfectly hedge all of their leverage induced risk with options when compared to the unregulated case both basle ii and the perfect hedge policy reduce the risk of default when leverage is low but increase it when leverage is high this is because both regulation policies increase the amount of synchronized buying and selling needed to achieve deleveraging which can destabilize the market none of these policies are optimal for everyone risk neutral investors prefer the unregulated case with low maximum leverage banks prefer the perfect hedge policy and fund managers prefer the unregulated case with high maximum leverage no one prefers basle ii

testing choice experiment for benefit transfer with preference heterogeneity benefit transfer is a cost effective method for estimating the value of environmental goods that relies on information obtained in previous studies the multiattribute approach of choice experiments should provide advantages in terms of benefit transfer allowing differences in environmental improvements between sites as well as differences in socioeconomic and attitude characteristics between respondent populations this article investigates the capability of choice experiment method to be used in environmental benefit transfer when a random parameters approach is used to allow for preference heterogeneity we find that the inclusion of respondents taste heterogeneity reduces the magnitude of the transfer error

quantifying the concerns of dimon and buffett with data and computation abstract despite considerable efforts the determinants of firm growth and financial market volatility have not been definitively identified yet sets of stylized facts most notably power law distributions relating to firm size and market returns suggest both evolve as part of a complex system this scenario implies that a positive feedback loop between firms and investors exists and may be responsible for prejudicing the way management allocates their resources with firm and economic growth adversely affected further there are growing real world concerns that the management of publicly listed firms is becoming too concerned with the movement of their firm s share price which is adversely influencing resource allocation decisions a related concern is that agents in general within financial markets are placing a disproportionate focus on short term factors to investigate the ramifications of the proposed feedback loop on firm growth and market volatility this paper implements a novel agent based artificial stock market where management can consider the movements of their firm s endogenously determined share price when allocating resources between sales and margin growth the results highlight an inferior outcome regarding firm growth and various other financial metrics if management is overly concerned with share price movements the growth of the firms and market is also affected by the mixture of the investor classes initiated due to the divergent levels of volatility they create additionally the model presents insights into how and why the extent to which agents consider past outcomes in their decision making process becomes influential notably the model s results emulate an extensive set of global micro level firm data by providing significant insights on the effects of the stock market on management decision making and its ramifications for firm growth this paper provides crucial insights into the mechanisms responsible for inefficient behavior by market participants

reducing barriers in future benefit transfers needed improvements in primary study design and reporting abstract original research provides many social benefits including additions to our stock of knowledge benefit transfer is a formal process whereby our stock of knowledge rather than original research is used to inform decisions any shortcoming in this stock directly affects our ability to conduct valid and reliable benefit transfers this paper discusses three general criteria that are necessary for valid benefit transfers and how original research designs and reporting of results unnecessarily constrain the potential of benefit transfers we make several suggestions regarding how original research through improved design and reporting might increase the validity and reliability of benefit transfers we also recommend that repositories for original research surveys and data be developed to insure long term availability of study information

transferring environmental value estimates issues and alternatives abstract environmental value transfer needs to be understood in the context of scientific information use in general this provides a different perspective upon the reasons why benefit transfer in particular appears so controversial and raises concerns over the limited types of validity testing being undertaken by those supporting such applications as ecosystem services valuation another key issue which we emphasise is the unintentional challenge to standard economic theory raised by the models used to conduct value transfers existing value transfer practice reveals the need for a more inclusive approach if environmental values are to be addressed we argue that there are robust alternative means for including multiple environmental values in decision processes these cannot be dismissed out of hand and analysts should be expanding their understanding of the available approaches which include attitude and norm measures multi criteria analysis and participatory deliberative institutions

modeling macroeconomies as open ended dynamic systems of interacting agents uall models are wrong but some are useful g e p box 1979 macroeconomists seek to understand the structure and performance of economies at a national or regional level and the manner in which government policymakers attempt to influence this structure and performance over time such understanding would seem to require a systematic exploration of the intricate feedback loops connecting micro behaviors interaction patterns and macro regularities as observed in real world economies

is hypothetical bias a universal phenomenon a multinational investigation a concern with the contingent valuation method cvm is the finding that hypothetical and real statements of value often differ we test whether hypothetical bias broadly defined is independent of location by comparing real and hypothetical votes on a dichotomous choice referendum in china france indiana kansas and niger we find significant differences in hypothetical bias across locations and reject the hypothesis that hypothetical bias is independent of location as opposed to the typical finding reported in the literature subjects in niger significantly understated their willingness to pay in the hypothetical referendum

budgetary rigour with stimulus in lean times policy advices from an agent based model abstract the 2008 financial crisis and the subsequent global recession triggered a wide spread economic and political debate on the proper policy combination to deal with the crisis and to prevent similar ones in the future probably the main dispute has been around the use of fiscal instruments in order to foster growth while keeping public debt under control the european union for instance endorsed austerity measures for fiscal consolidation but has been sharply criticized by several scholars this paper aims at contributing to the current debate by presenting the outcomes of a computational study performed with the eurace agent based model we set up an experiment with two base policy scenarios i e stability and growth pact and fiscal compact incrementally enriching them with complementary policies which relax fiscal rigidity and introduce quantitative easing results show that budgetary rigour performs well if and only if some mechanisms of fiscal relaxation and monetary accommodation are considered during bad times thus confirming in a richer and more realistic model setting the fundamental tenet of keynesian economics about the importance of sustaining aggregate demand during recessions

financial in stability supervision and liquidity injections a dynamic general equilibrium approach we develop a dynamic stochastic general equilibrium model with an heterogeneous banking sector we introduce endogenous default probabilities for both firms and banks and allow for bank regulation and liquidity injection into the interbank market our aim is to understand the interactions between the banking sector and the rest of the economy as well as the importance of supervisory and monetary authorities to restore financial stability the model is calibrated against real us data and used for simulations we show that basel regulation reduces the steady state but improves the resilience of the economy to shocks and that moving from basel i to basel ii is procyclical we also show that liquidity injections relieve financial instability but have ambiguous effects on output fluctuations

a network analysis of the italian overnight money market the objective of this paper is to analyse the network topology of the italian segment of the european overnight money market through methods of statistical mechanics applied to complex networks we investigate differences in the activities of banks of different sizes and the evolution of their connectivity structure over the maintenance period the main purpose of the analysis is to establish the potential implications of the current institutional arrangements on the stability of the banking system and to assess the efficiency of the interbank market in terms of absence of speculative and preferential trading relationships

income distribution credit and fiscal policies in an agent based keynesian model this work studies the interactions between income distribution and monetary and fiscal policies in terms of ensuing dynamics of macro variables gdp growth unemployment etc on the grounds of an agent based keynesian model the direct ancestor of this work is the keynes meeting schumpeter formalism presented in dosi et al 2010 to that model we add a banking sector and a monetary authority setting interest rates and credit lending conditions the model combines keynesian mechanisms of demand generation a schumpeterian innovation fueled process of growth and minskian credit dynamics the robustness of the model is checked against its capability to jointly account for a large set of empirical regularities both at the micro level and at the macro one the model is able to catch salient features underlying the current as well as previous recessions the impact of financial factors and the role in them of income distribution we find that different income distribution regimes heavily affect macroeconomic performance more unequal economies are exposed to more severe business cycles fluctuations higher unemployment rates and higher probability of crises on the policy side fiscal policies do not only dampen business cycles reduce unemployment and the likelihood of experiencing a huge crisis in some circumstances they also affect positively long term growth further the more income distribution is skewed toward profits the greater the effects of fiscal policies about monetary policy we find a strong non linearity in the way interest rates affect macroeconomic dynamics in one regime with low rates changes in interest rates are ineffective up to a threshold beyond which increasing the interest rate implies smaller output growth rates and larger output volatility unemployment and likelihood of crises

a new approach to business fluctuations heterogeneous interacting agents scaling laws and financial fragility abstract in this paper we discuss a scaling approach to business fluctuations our starting point consists in recognizing that concepts and methods derived from physics have allowed economists to re discover a set of stylized facts which have to be satisfactorily accounted for in their models standard macroeconomics based on a reductionist approach centered on the representative agent is definitely badly equipped for this task on the contrary we show that a simple financial fragility agent based model based on complex interactions of heterogeneous agents is able to replicate a large number of scaling type stylized facts with a remarkable high degree of statistical precision

evaluating the performance of benefit transfer an empirical inquiry abstract benefit transfers are used by public agencies needing information on costs and benefits of policy decisions although scientific debate regarding the validity of benefit transfer is ongoing this article develops a methodology to evaluate the performance of direct benefit transfer and benefit function transfer and applies the methodology to two pairs of similar non market amenities empirical results indicate that benefit function transfer is more robust than transfer of average site benefits our results suggest that the circumstances under which benefit function transfer provides valid policy relevant information may be limited and that errors from applying benefit transfer can be quite large even across seemingly similar amenities

discrete choice with social interactions this paper provides an analysis of aggregate behavioural outcomes when individual utility exhibits social interaction effects we study generalized logistic models of individual choice which incorporate terms reflecting the desire of individuals to conform to the behaviour of others in an environment of noncooperative decisionmaking laws of large numbers are generated in such environments multiplicity of equilibria in these models which are equivalent to the existence of multiple self consistent means for average choice behaviour will exist when the social interactions exceed a particular threshold local stability of these multiple equilibria is also studied the properties of the noncooperative economy are contrasted with the properties of an economy in which a social planner determines the set of individual choices finally a likelihood function based on the theoretical model is given and conditions for the econometric identifiability of the model are established

how to grow a bubble a model of myopic adapting agents abstract we present a simple agent based model to study the development of a bubble and the consequential crash and investigate how their proximate triggering factor might relate to their fundamental mechanism and vice versa our agents invest according to their opinion on future price movements which is based on three sources of information i public information i e news ii information from their friendship network and iii private information our bounded rational agents continuously adapt their trading strategy to the current market regime by weighting each of these sources of information in their trading decision according to its recent predicting performance we find that bubbles originate from a random lucky streak of positive news which due to a feedback mechanism of these news on the agents strategies develop into a transient collective herding regime after this self amplified exuberance the price has reached an unsustainable high value being corrected by a crash which brings the price even below its fundamental value these ingredients provide a simple mechanism for the excess volatility documented in financial markets paradoxically it is the attempt for investors to adapt to the current market regime which leads to a dramatic amplification of the price volatility a positive feedback loop is created by the two dominating mechanisms adaptation and imitation which by reinforcing each other result in bubbles and crashes the model offers a simple reconciliation of the two opposite herding versus fundamental proposals for the origin of crashes within a single framework and justifies the existence of two populations in the distribution of returns exemplifying the concept that crashes are qualitatively different from the rest of the price moves

winter is possibly not coming mitigating financial instability in an agent based model with interbank market abstract we develop a macroeconomic agent based model to study how financial instability can emerge from the co evolution of interbank and credit markets and the policy responses to mitigate its impact on the real economy the model is populated by heterogenous firms consumers and banks that locally interact in different markets in particular banks provide credit to firms according to a basel ii or iii macro prudential frameworks and manage their liquidity in the interbank market the central bank performs monetary policy according to different types of taylor rules we find that the model endogenously generates market freezes in the interbank market which interact with the financial accelerator possibly leading to firm bankruptcies banking crises and the emergence of deep downturns this requires the timely intervention of the central bank as a liquidity lender of last resort moreover we find that the joint adoption of a three mandate taylor rule tackling credit growth and the basel iii macro prudential framework is the best policy mix to stabilize financial and real economic dynamics however as the liquidity coverage ratio spurs financial instability by increasing the pro cyclicality of banks liquid reserves a new counter cyclical liquidity buffer should be added to basel iii to improve its performance further finally we find that the central bank can also dampen financial instability by employing a new unconventional monetary policy tool involving active management of the interest rate corridor in the interbank market

social interactions and asset pricing bubbles abstract we investigate the influence of social interactions on asset markets and provide an empirical test of the hypothesis that social interactions increase asset pricing bubbles we test the impact of social interactions on bubbles in a bubble prone experimental asset pricing market over a total of 21 markets we compare asset pricing bubbles in a design that allows for social interactions with a standard laboratory setting markets that allow for face to face communication between participants in a lab in the field setting show significantly larger asset pricing bubbles relative to standard laboratory markets face to face communication increases bubbles to a larger extend than a popular social media feature the like

environmental value transfer state of the art and future prospects abstract the main objectives of the paper are to 1 give an overview of the state of the art of environmental value transfer 2 discuss its prospects and potential role in cba as a decision support tool and 3 provide further guidelines for proper use and application environmental value or benefit transfer is a technique in which the results of studies on monetary environmental valuation are applied to new policy contexts the technique is controversial not least because of academic and political reservations over the usefulness and technical feasibility of economic valuation tools to demonstrate the importance of environmental values in project or programme appraisals testing of environmental value transfer so far has been unable to validate the practice taking into account the conditions set out in the literature for valid and reliable value transfer most transfers appear to result in substantial transfer errors this paper discusses why and addresses the question of which factors may have been overlooked it is argued that the problem is much more fundamental than previously acknowledged strict guidelines in terms of quantitative adjustment mechanisms to valid value transfer are meaningless if the more fundamental issue of differences in the very nature of the values elicited is not addressed at the same time

nonspeculative bubbles in experimental asset markets lack of common knowledge of rationality vs actual irrationality we report the results of an experiment designed to study the role of speculation in the formation of bubbles and crashes in laboratory asset markets in a setting in which speculation is not possible bubbles and crashes are observed the results suggest that the departures from fundamental values are not caused by the lack of common knowledge of rationality leading to speculation but rather by behavior that itself exhibits elements of irrationality much of the trading activity that accompanies bubble formation in markets where speculation is possible is due to the fact that there is no other activity available for participants in the experiment

heterogeneous expectations and speculative behavior in a dynamic multi asset framework abstract this paper develops a dynamic model of a financial market where heterogeneous agents invest among multiple risky assets and a risk free asset under a market maker scenario particular attention is paid to the case of two risky assets and two agent types fundamentalists and trend chasers whose beliefs on both first and second moments of the conditional distribution of returns are based on past observations conditions for the stability of the fundamental equilibrium are established and the effect of the correlation between the risky assets is examined it turns out that investors anticipated correlation and dynamic portfolio diversification do not always have a stabilizing role but rather may act as a source of complexity in the financial market

an independent sample test of yea saying and starting point bias in dichotomous choice contingent valuation abstract we developed several diagnostic tools to test the convergent validity of two common contingent valuation elicitation procedures data were collected from independent samples receiving dichotomous choice and payment card questions we compared actual with counter factual responses using deterministic and monte carlo methods and we found that wtp distributions and mean values varied by the value elicitation method we also developed a paired comparison test for procedure variance which indicated that yea saying and starting point bias influenced dichotomous choice responses

firm growth and laplace distribution the importance of large jumps abstract recent empirical studies have shown that firm growth rate distribution is not gaussian but closely follows a laplace distribution this robust feature of the growth rate distribution challenges existing models based on gibrat s model because it predicts a gaussian distribution first we analyze more than 100 000 japanese firms and empirically show that the laplace shape can be observed for the japanese firms then by using the theory of stochastic processes we theoretically show that the absence of jumps causes the discrepancy between gibrat s model and the laplace shape in particular based on the laplace shape and the law of proportionate effect we show that the firm growth process is a jump process in other words firm growth cannot be explained by the consequence of many small shocks but is determined by a few large jumps the widely observed laplace distribution reflects this jump property of firm growth dynamics

basel iii capital surcharges for g sibs are far less effective in managing systemic risk in comparison to network based systemic risk dependent financial transaction taxes in addition to constraining bilateral exposures of financial institutions there exist essentially two options for future financial regulation of systemic risk first regulation could attempt to reduce the financial fragility of global or domestic systemically important financial institutions g sibs or d sibs as for instance proposed by basel iii second it could focus on strengthening the financial system as a whole by reducing the probability of large scale cascading events this can be achieved by re shaping the topology of financial networks we use an agent based model of a financial system and the real economy to study and compare the consequences of these two options by conducting three computer experiments with the agent based model we find that re shaping financial networks is more effective and efficient than reducing financial fragility capital surcharges for g sibs could reduce systemic risk but they would have to be substantially larger than those specified in the current basel iii proposal in order to have a measurable impact this would cause a loss of efficiency

a method for agent based models validation abstract this paper proposes a new method to empirically validate simulation models that generate artificial time series data comparable with real world data the approach is based on comparing structures of vector autoregression models which are estimated from both artificial and real world data by means of causal search algorithms this relatively simple procedure is able to tackle both the problem of confronting theoretical simulation models with the data and the problem of comparing different models in terms of their empirical reliability moreover the paper provides an application of the validation procedure to the agent based macroeconomic model proposed by dosi et al 2015

the validity of environmental benefits transfer further empirical testing this paper provides further empirical evidence of the validity of environmental benefits transfer based on cv studies by expanding the analysis to include control factors which have not been accounted for in previous studies these factors refer to differences in respondent attitudes traditional population characteristics were taken into account but these variables do not explain why respondents from the same socio economic group may still hold different beliefs norms or values and hence have different attitudes and consequently state different wtp amounts the test results are mixed the function transfer approach is valid in one case but is rejected in the 3 other cases investigated in this paper we provide further evidence that in the case of statistically valid benefits transfer the function approach results in a more robust benefits transfer than the unit value approach we also show that the equality of coefficient estimates is a necessary but insufficient condition for valid benefit function transfer and discuss the implications for previous and future validity testing

basic needs versus distributional weights in social cost benefit analysis the purpose of this paper is to compare and contrast two alternative ways of bringing what we might loosely call distributional considerations into the machinery of social cost benefit analysis the first of these ways is an outgrowth of the utilitarian tradition that has been a part of economics at least since the times of bentham and mill it holds that the marginal utility of an extra dollar to a rich man is lower than that of the same dollar to a poor man alternatively this same notion can be thought of as applying distributional weights to the changes in welfare of different people that occur as a consequence of a particular project policy or program the second approach does not rely on differential weighting of the welfare of different individuals rather it imputes to some individuals external benefits connected with the improvement in the circumstances of others most people genuinely feel it is good for the sick to be healed the hungry fed the illiterate taught the homeless sheltered and so on they have demonstrated these feelings over the centuries through charitable acts in which their own money has been spent to bring about one or more of these objectives similar motivations may also lie behind legislation in which societies have accepted a collective responsibility for meeting the medical educational nutritional and housing needs of their less fortunate citizens i use the term distributional weights to characterize the first of these approaches and basic needs to describe the second in what follows i shall try to show that these two ways of introducing distributional considerations into social cost benefit analysis or into applied welfare economics more generally are really conceptually quite distinct and have very different implications for public policy and social choice while they are not in principle inconsistent with one another

adjusting for cultural differences in international benefit transfer values for non market goods can be expected to be sensitive to variations in the cultural contexts of beneficiaries however little progress has been made to date in adapting benefit transfer bt procedures for cultural variations using information from a study that ranked 62 societies with respect to nine attributes of their cultures we develop an index that is then used to re weight multiple coastal ecosystem service value estimates we examine whether these culturally adjusted bt estimates are statistically different than simply transferring the income adjusted mean transfer estimates for each coastal ecosystem service from international study sites to the policy site we find that once differences in income levels have been accounted for the differences in cultural dimensions between study and policy sites actually have little impact on the magnitude of our transfer estimates this is not a surprising result given that the majority of the study site estimates are derived from countries that share many ethnic linguistic and other cultural similarities to the policy site however benefit adjustments based on cultural factors could have a much higher impacts in settings different to that investigated here

international benefit transfer methods and validity tests abstract the use of value estimates measured in one country to value policy changes in another country would seem to introduce some unique issues and challenges even when the good being valued is identical these issues include how should values be converted from one currency to another how to account for differences in measurable characteristics when those can vary markedly between countries especially income and how to account for differences between countries in culture and shared experiences that are difficult to quantify however these challenges in international benefit transfer are not that different from those encountered in transfers between regions within a country and transfer errors are comparable to those seen in intra country transfers

do stated preference methods stand the test of time a test of the stability of contingent values and models for health risks when facing an extreme event abstract this paper focuses on the temporal stability of dichotomous choice dc contingent values and models and the implication of time related aspects for benefits transfer as a viable valuation method from a practical point of view time plays an important role in benefits transfer results are used from studies often carried out years ago and the obvious question is to what extent the estimated values and models stand the test of time in the case of value function transfer this implies testing the robustness of the estimated coefficient estimates over time the novelty of the temporal stability work presented here is that two identical dc contingent valuation cv studies of the health risks associated with bathing water quality were carried out before and during extreme weather conditions causing the closure of bathing locations for public health reasons differences in contingent values and models before and during the extreme event are tested the extreme event causes the seasonal good in question to become temporarily scarcer and marginal wtp is therefore expected to be higher during the extreme event than before but not that underlying preferences have changed hence basically two things are tested the effect of time on stated preferences for a seasonal good and the effect of the extreme event on these preferences wtp values before and during the event appear to be robust also when accounting for substitution effects the results before and during the extreme event remain transferable when accounting for theoretically expected factors in a simple multivariate transfer model however when introducing additional and contextual ad hoc factors in the model the estimated models and their random components become significantly different and hence not transferable suggesting that unobserved preferences may not have been randomly distributed across the two surveys after all

thar she blows can bubbles be rekindled with experienced subjects we report 28 new experiment sessions consisting of up to three experience levels to examine the robustness of learning and error elimination among participants in a laboratory asset market and its effect on price bubbles our answer to the title question is yes we impose a large increase in liquidity and dividend uncertainty to shock the environment of experienced subjects who have converged to equilibrium and this treatment rekindles a bubble however in replications of that same challenging environment across three experience levels we discover that the environment yields a rare residual tendency to bubble even in the third experience session therefore a caveat must be placed on the effect of twice experienced subjects in asset markets in order for price bubbles to be extinguished the environment in which the participants engage in exchange must be stationary and bounded by a range of parameters experience including possible error elimination is not robust to major new environment changes in determining the characteristics of a price bubble jel c91 d83

benefit transfer in europe how reliable are transfers between countries the benefits for specific health impacts related to air and water quality were measured in simultaneous contingent valuation surveys conducted in five different european countries consistent inter country differences in willingness to pay to avoid ill health episodes could not be explained by measurable differences in individual characteristics international transfer of unit values resulted in an average transfer error of 38 accounting for measurable differences among countries in health status income and other demographic measures either through ad hoc adjustments to the transferred values or through value function transfer did not improve transfer performance

to bail out or to bail in answers from an agent based model since the beginning of the 2008 financial crisis almost half a trillion euros have been spent to financially assist eu member states in taxpayer funded bail outs these crisis resolutions are often accompanied by austerity programs causing political and social friction on both domestic and international levels the question of how to resolve failing financial institutions and how this depends on economic preconditions is therefore a pressing and controversial issue of vast political importance in this work we employ an agent based model to study the economic and financial ramifications of three highly relevant crisis resolution mechanisms to establish the validity of the model we show that it reproduces a series of key stylized facts of the financial and real economy the distressed institution can either be closed via a purchase assumption transaction it can be bailed out using taxpayer money or it may be bailed in in a debt to equity conversion we find that for an economy characterized by low unemployment and high productivity the optimal crisis resolution with respect to financial stability and economic productivity is to close the distressed institution for economies in recession with high unemployment the bail in tool provides the most efficient crisis resolution mechanism under no circumstances do taxpayer funded bail out schemes outperform bail ins with private sector involvement

schumpeter meeting keynes a policy friendly model of endogenous growth and business cycles this paper studies an agent based model that bridges keynesian theories of demandgeneration and schumpeterian theories of technology fueled economic growth we employ the model to investigate the properties of macroeconomic dynamics and the impact of public polices on supply demand and the fundamentals of the economy we find profound complementarities between factors influencing aggregate demand and drivers of technological change that affect both short run fluctuations and longterm growth patterns from a normative point of view simulations show a corresponding complementarity between keynesian and schumpeterian policies in sustaining long run growth paths characterized by milder fluctuations and relatively lower unemployment levels the matching or mismatching between innovative exploration of new technologies and the conditions of demand generation appear to suggest the presence of two distinct regimes of growth or absence thereof characterized by different short run fluctuations and unemployment levels

stabilizing an unstable complex economy on the limitations of simple rules abstract this paper offers a systematic comparison of a wide range of leaning against the wind interest rate policy rules within a macroeconomic stock flow consistent agent based model the model generates endogenous booms and busts along credit cycles as feedback loops on aggregate demand affect the goods and the labor markets the real and the financial sides of the economy are closely interconnected the baseline scenario is able to qualitatively reproduce a wide range of stylized facts we show that a monetary policy rule that targets the movements in the net worth of firms significantly dampens the credit cycles and reduces the employment costs of financial crises because this indicator incorporates early signals of financial imbalances performances of this three mandate taylor rule are also more robust to the specific parameter values and regulatory framework than the standard dual mandate taylor rules nonetheless none of the policy rules under study completely eliminates the high employment costs of financial crises

imprecise preferences and survey design in contingent valuation during recent years the contingent valuation cv method has been widely used to value non marketed goods and services we present the results of a cv study of the value of road safety we find that stated preferences for road safety exhibit considerable imprecision appear subject to various systematic biases and are insensitive to variations in the quantity and quality of the safety improvements concerned one broad implication of these findings may be that for an important class of goods of which safety is one example standard assumptions about the structure of people s preferences may be much too strong a more specific implication concerning the design and conduct of cv surveys is that the noaa panel s widely cited blueprint for good cv practice may rely far too heavily on assumptions about the precision and sensitivity of people s preferences

three dilemmas of environmental accounting abstract economist during the past two decades have tried to logically extended the system of national accounts to include the value of resources environmental systems and their services alternative proposals for improving the accounts have been extensively debated but no agreement has been reached the debate has been fueld by a false implicit belief among the participants that there is one best way to understand how economies interrelate with environmental systems the falsity is exposed through the elaboration of irresolvable dilemmas rather than trying to agree on a single approach the alternative strategy of experimenting with many approaches is espoused the development and use of multiple approaches would be scientifically more rigorous and more likely fail safe

self referential behaviour overreaction and conventions in financial markets abstract we study a generic model for self referential behaviour in financial markets where agents build strategies using correlations estimated using the past history itself between certain quantitative information and the price the impact of these strategies on the price modify the observed correlations and create a feedback loop that can destabilize the market from efficient behaviour for large enough feedbacks non trivial correlations spontaneously set in and the market switches between two long lived states that we call conventions this mechanism leads to overreaction and excess volatility we provide empirical evidence for the existence of such long lasting anomalous correlations in real markets

exploring benefit transfer disamenities of waste transfer stations the benefit transfer method was developed as an alternative way to value externalities using values from studies of similar circumstances carried out at similar sites somewhere else given the challenges and high costs inherent in assessing the actual cost specifically in order to test the performance of the benefit transfer method employing hedonic price models this study focused on estimates of disamenities associated with waste transfer stations at four different cities in israel the sites were intentionally selected to represent a variety of circumstances we transferred the estimated benefit function from a study site to a policy site the goodness of fit was examined by comparing the calculated value with actual data from the policy site to test the sensitivity of the benefit transfer function to socioeconomic and housing characteristics it was repeatedly applied to different sets of observations the findings suggest that a relatively large number of alternative benefit functions are transferable statistical inequality outcome regarding the degree of similarity between samples does not unequivocally rule out the appropriateness of transferring environmental values across studies transfer errors varied between 21 and 29 and the absolute average error for all transfers was 15 4 errors were lower for transfer between relatively similar cities in terms of size and location and between sub samples that were similar in socioeconomic characteristics and housing type however when a site with very dissimilar data was involved the average absolute error rose to 19

bailouts and bank runs theory and evidence from tarp during the recent financial crisis there were bank runs right after government bailout announcements this paper develops a global game model of information based bank runs to analyze how the announcement of bailouts affects investors bank run incentives the equilibrium probability of bank runs is uniquely determined i conclude that before the announcement the existence of such bailout policy reduces investors bank run incentives but after the announcement investors may run on the bank since such an announcement reflects the government s information about the bad bank asset the empirical evidence from tarp is consistent with my theory