analysis of a solar and aerothermal plant combined with a conventional system in an esco model in chile abstract the work provides technical and economic feasibility studies for solar thermal and aerothermal energy systems for the production of sanitary hot water in large volumes in chile the proposed project is based in an energy service company model using a particular consumption profile a sensitivity model has been developed in order to design the aero solar thermal system and to obtain financial indicators the indicators were applied for both the company that evaluates the business opportunity and to their future customers also the model includes an analysis of the reduction of greenhouse emissions and its impact on the project s financial performance a dynamic sensitivity analysis was carried out in order to obtain a probability distribution for the financial results and its risk case analysis considered 16 solar collectors a heat pump of 32 kw for the use of aerothermal energy and a conventional boiler the set up allows to obtain an annual solar coverage of 14 meanwhile aerothermal coverage was around 70 and the contribution of the conventional system was 16 the participation of each subsystem was motivated by a purely financial decision as a result of the sensitivity analysis of the model on the one hand a net present value of 35 600 usd and an internal rate of return of 21 were reached for the client on the other hand the energy service company obtained a net present value of 9200 usd and an internal rate of return of 69 concerning risk results indicate that for the customer there exists a 88 probability to obtain a positive net present value and for the company this probability is about 70 obtaining generally positive results however sensitivity analysis indicates that there exists high elasticity in some relevant variables such as fuel prices and operational costs which could increase considerably risk to the project

optimal interest rate rules asset prices and credit frictions we study optimal taylor type interest rate rules in an economy with credit market imperfections our analysis builds on the agency cost framework of carlstrom and fuerst 1997 agency costs net worth and business fluctuations a computable general equilibrium analysis american economic review 87 893 910 which we extend in two directions first we embed monopolistic competition and sticky prices second we modify the stochastic structure of the model in order to generate a countercyclical premium on external finance this is achieved by linking the mean distribution of investment opportunities faced by entrepreneurs to aggregate total factor productivity we model monetary policy in terms of simple welfare maximizing interest rate rules we find that monetary policy should respond to increases in asset prices by lowering interest rates however when monetary policy responds strongly to inflation the marginal welfare gain of responding to asset prices vanishes within the class of linear interest rate rules that we analyze a strong anti inflationary stance always attains the highest level of welfare

on the sources of aggregate fluctuations in emerging economies recent research on macroeconomic fluctuations in emerging economies has advocated introducing a stochastic productivity trend or allowing for interest rate shocks and financial frictions we estimate a model that encompasses these two approaches shedding light on their relative merits and on how financial frictions affect the transmission of shocks the model accounts for aggregate fluctuations by assigning a dominant role to financial frictions in amplifying conventional temporary productivity shocks whereas trend shocks play a minor role a link between spreads and expected future productivity emerges as essential for a reasonable approximation to the data

dynamic comovement among banks systemic risk and the macroeconomy abstract this paper develops a new measure of comovement in the banking sector that takes into account the dynamic nature of interlinkages in the return on assets roa and net chargeoffs nco among different bank holding corporations by using a dynamic factor model with time varying parameters and stochastic volatility we find that the degree of comovement in roa and nco peaked during the 2008 2009 financial crisis suggesting a significant increase in sector wide stress using the least absolute shrinkage and selection operator lasso methodology we show that comovement and risk measures derived from our approach perform well when compared to other widely used measures of systemic risk in explaining real economic activity

consumption housing collateral and the canadian business cycle using bayesian methods we estimate a small open economy model in which consumers face limits to credit determined by the value of their housing stock the purpose of this paper is to quantify the role of collateralized household debt in the canadian business cycle

exploiting the monthly data flow in structural forecasting a quarterly stochastic general equilibrium dsge model is combined with a now casting model designed to read timely monthly information as it becomes available this implies 1 mapping the structural quarterly dsge with a monthly version that maintains the same economic restrictions 2 augmenting the model with a richer data set and 3 updating the estimates of the dsge s structural shocks in real time following the publication calendar of the data our empirical results show that our methodology enhances the predictive accuracy in now casting an analysis of the great recession also shows that our framework would have helped tracing the dsge s structural shocks in real time obtaining for example a more timely account of the 2008 contraction

the role of investment specific technological change in the business cycle this is a quantitative investigation of the importance of technological change speci c to new investment goods for postwar us aggregate uctuations a growth model that incorporates this form of technological change is calibrated to us data and simulated using the relative price of new equipment to identify the process driving investmentspeci c technology shocks the analysis suggests that this form of technological change is the source of about 30 of output uctuations 2000 elsevier science b v all rights reserved

optimal monetary policy rules financial amplification and uncertain business cycles abstract this paper studies optimal monetary policy in the presence of uncertainty time variation in cross sectional dispersion of firms productive performance using a model with financial market imperfections the results suggest that i optimal policy is to dampen the strength of financial amplification by responding to uncertainty at the expense of creating mild degree of fluctuations in inflation ii higher uncertainty makes the welfare maximizing planner more willing to relax financial constraints iii credit spreads are a good proxy for uncertainty hence a non negligible response to credit spreads together with a strong anti inflationary policy stance achieves the highest aggregate welfare possible

slow recoveries any role for corporate leverage abstract this paper examines whether financial conditions of the non financial corporate sector can explain why the recovery from recessions in the united states is slower since the mid 1980s leverage by the corporate sector has increased significantly since the financial deregulation of the mid 1980s empirical evidence shows that slow recoveries are associated with a significant drop in the growth rates of investment and bank loans and with a surge in the growth rates of corporate bonds in an estimated dynamic stochastic general equilibrium model with a financial accelerator counterfactual experiments based on estimates of two samples 1965 1983 and 1984 2007 show that the non financial corporate indebtedness affects only marginally the speed of the recovery in the two samples

revisiting price based controls on capital inflows in a sophisticated emerging market summary large and volatile capital flows pose serious challenges for macroeconomic management in developing countries in this paper we examine the price based capital controls adopted by brazil during the 1990s with the objective of facing some of those difficulties we use data on capital account transactions at a monthly frequency in order to evaluate the effects of those policies on net fixed income capital flows and on total portfolio flows using gmm techniques our results suggest that the controls could have been effective in reducing both types of flows

are price based capital account regulations effective in developing countries the author evaluates the effectiveness of policy measures adopted by chile and colombia aiming to mitigate the deleterious effects of pro cyclical capital flows in the case of chile according to his generalized method of moments gmm analysis capital controls succeeded in reducing net short term capital flows but did not affect long term flows as far as colombia is concerned the regulations were capable of affecting total flows and also long term ones in addition the co integration models indicate that the regulations did not have a direct effect on the real exchange rate in the chilean case nonetheless the model used for colombia did detect a direct impact of the capital controls on the real exchange rate therefore the results do not seem to support the idea that those regulations were easily evaded

are adjustments in the default risk premium asymmetric this article employs threshold cointegration and error correction models to the default risk premium the approach allows asymmetry in the dynamic process that has not been captured in previous studies of corporate credit spreads the results indicate that the adjustment process is asymmetric and would be beneficial to investors and macroeconomic forecasters as the default risk premium may signal future business cycles

taking financial frictions to the data we estimate a dynamic stochastic general equilibrium dsge model with various financial frictions and analyze how well the model explains the great recession predictive analysis shows that the model can only slightly better explain the large deviation from trend during the crisis relative to a model without financial frictions specifically the risk premium shock which is a shock to the external finance premium of the entrepreneurs leverage explains the largest part of the investment downfall during the crisis however the balance sheet channel of financial frictions in the model which structurally links balance sheet conditions of financial intermediaries and nonfinancial borrowers to their borrowing rates is estimated to be weak we examine alternative prior specifications for how the financial frictions enter the model and continue to find a limited role for these frictions rolling window estimation provides evidence for substantial time variation in parameters governing financial frictions we conclude that the well known financial frictions studied in this paper are not able to explain the financial crisis in a linearized and estimated model

yield spreads as predictors of industrial production expectations on short rates or term premia this paper reconsiders information in the us t bill term structure for predicting movements in real monthly industrial production it is shown that although t bill spreads contain little or no predictive content increases in term premia estimated from a garch m model of the term structure do since these estimated premia are linear functions of the conditional variance of excess returns the implication is that increases in interest rate variability are associated with reductions in industrial production this evidence is robust to the inclusion of the spread between the 10 year tbond yield and one month t bill yields the t bill term structure therefore contains information which is independent of the long end of the term structure

the information in the high yield bond spread for the business cycle evidence and some implications the market for high yield below investment grade corporate bonds developed in the middle 1980s we show that since this time the high yield spread has had significant explanatory power for the business cycle we interpret this finding as possibly symptomatic of financial factors at work in the business cycle along the lines suggested by the financial accelerator we also show that over this period the high yield spread outperforms other leading financial indicators including the term spread the paper bill spread and the federal funds rate we conjecture that changes in the conduct of monetary policy over time may account for the reduced informativeness of these alternative indicators all of which are tied closely to monetary policy copyright 1999 by oxford university press

the slope of the yield curve and real economic activity tracing the transmission mechanism abstract the slope of the yield curve in the us and the uk is strongly associated with the temporary rather than the permanent components of real economic activity suggesting that the yield curve affects economic activity primarily through the demand side

monetary and fiscal policy interactions in the post war u s abstract a new keynesian model allowing for an active monetary and passive fiscal policy ampf regime and a passive monetary and active fiscal policy pmaf regime is estimated to fit various u s samples from 1955 to 2007 the results show that data in the pre volcker periods strongly prefer an ampf regime even with a prior centered in the pmaf region the estimation however is not very informative about whether the federal reserve s reaction to inflation is greater than one in the pre volcker period because much lower values can still preserve determinacy under passive fiscal policy in addition whether a pmaf regime can generate consumption growth following a government spending increase depends on the degree of price stickiness an income tax cut can yield an unusual negative labor response if monetary policy aggressively stabilizes output growth

cointegration and threshold adjustment this article proposes an extension to the engle granger testing strategy by permitting asymmetry in the adjustment toward equilibrium in two different ways we demonstrate that our test has good power and size properties over the engle granger test when there are asymmetric departures from equilibrium we consider an application namely whether there exists cointegration among interest rates for instruments with different maturities this issue has been widely tested with mixed results we argue that either cautious policy or possibly opportunistic behavior on the part of the federal reserve implies that an equilibrium relationship between short and long term interest rates exists but that adjustments from disequilibrium are asymmetric in nature empirical tests using u s yields confirm the asymmetric nature of error correction among interest rates of different maturities

review of us esco industry market trends an empirical analysis of project data abstract this comprehensive empirical analysis of us energy service company esco industry trends and performance employs two parallel analytical approaches a survey of firms to estimate total industry size and a database of 1500 esco projects from which we report target markets and typical project characteristics energy savings and customer economics we estimate that industry investment for energy efficiency related services reached us 2 billion in 2000 following a decade of strong growth esco activity is concentrated in states with high economic activity and strong policy support typical projects save 150 200 mj m2 year and are cost effective with median benefit cost ratios of 1 6 and 2 1 for institutional and private sector projects the median simple payback time spt is 7 years among institutional customers 3 years is typical in the private sector reliance on dsm incentives has decreased since 1995 preliminary evidence suggests that state enabling policies have boosted the industry in medium sized states escos have proven resilient in the face of restructuring and will probably shift toward selling energy solutions with energy efficiency part of a package we conclude that appropriate policy support both financial and non financial can jump start a viable private sector energy efficiency services industry that targets large institutional and commercial industrial customers

natural resource economics under the rule of hotelling abstract natural resource stocks held in situ are physical assets equilibrium in the assets market requires that their rates of return be such that their owners are just willing to hold on to them rather than invest elsewhere i discuss a number of factors relating to the evolution of extraction costs to the durability of the resource to market structure and to uncertainty that are important in correctly characterizing the rate of return on holding exhaustible natural resource stocks the emphasis is put on how those factors can potentially help bridge the gap between the basic hotelling s rule of natural resource exploitation and the historical behaviour of the flow price of a number of resources i also highlight some theoretical and empirical issues that need further attention

credit indicators as predictors of economic activity a real time var analysis using readily available indicators of the profitability price and availability of credit the term spread junk bond spread and banks willingness to lend as reported by the federal reserve we show that it is possible to significantly improve on the real time output and employment predictions of forecasting professionals at the medium run horizons that are most relevant to policymakers and private decision makers key to this improvement is a flexible state space model of data revisions the willingness to lend variable is the best real time predictor of gdp growth for forecasting job growth all three credit indicators prove helpful

a note on uncertainty and the hotelling rule abstract in this paper we derive the hotelling rule of optimal natural resource depletion modified to account for uncertainty in rates of return it is shown that in the presence of risk aversion the rule implies that the expected equilibrium rate of increase of net resource price must equal the expected rate of interest if and only if there exists a zero covariance between the marginal utility of consumption and the difference between the rate of net price increase and the rate of interest the sign of this covariance is an empirical question as an example illustrates

from volatility to value analysing and managing financial and performance risk in energy savings projects abstract many energy related investments are made without a clear financial understanding of their values risks and volatilities in the face of this uncertainty the investor such as a building owner or an energy service company will often choose to implement only the most certain and thus limited energy efficiency measures conversely commodities traders and other sophisticated investors accustomed to evaluating investments on a value risk and volatility basis often overlook energy efficiency investments because risk and volatility information are not provided fortunately energy efficiency investments easily lend themselves to such analysis using tools similar to those applied to supply side risk management accurate and robust analysis demands a high level of understanding of the physical aspects of energy efficiency which enables the translation of physical performance data into the language of investment with a risk management analysis framework in place the two groups energy efficiency experts and investment decision makers can exchange the information they need to expand investment in demand side energy projects in this article we first present the case for financial risk analysis in energy efficiency in the buildings sector we then describe techniques and examples of how to identify quantify and manage risk finally we describe emerging market based opportunities in risk management for energy efficiency

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

environmental and resource economics a canadian retrospective the paper reviews research contributions to environmental and resource economics by scholars in canada we focus mainly on work from the past 25 years but also highlight earlier pathbreaking work we begin by looking at broad trends in research both internationally and within canada we then review canadian contributions to various topics in the field canadians have played a leading role in the development of the field especially in resource economics international environmental economics and the valuation of environmental amenities

an empirical study of credit shock transmission in a small open economy in this paper we identify and estimate the dynamic effects of foreign us and national canadian credit shocks in a small open economy we use standard credit spreads as proxies to the external finance premium our first result suggests that the us and canadian credit spreads contain substantial forecasting power for several measures of the canadian real economic activity especially during the recent financial crisis and its aftermath secondly an adverse us credit shock generates a significant and persistent economic slowdown in canada the national external finance premium rises immediately while interest rates credit aggregates output and employment indicators decline variance decomposition reveals that credit shocks have a sizeable effect on real activity measures leading indicators and credit spreads yet the unexpected shocks in domestic credit spreads are not able to generate any significant dynamic response of the real activity once we control for the us credit market conditions

futures markets price stabilization and efficient exploitation of exhaustible resources markets for natural resource futures contracts and cash forward contracts experience a rapid growth according to theory this should result in more efficient resource depletion implying that price formation is more consistent with hotelling s rule the rationale of this stabilization effect is briefly discussed next we analyze the impact of expanding futures markets on the behaviour of individual resource owners trading on the cash market using a simple pulse extraction model we demonstrate that the expected time of depletion can shift to the present or the future and that utility of exploitation can go up or down as market prices are stabilized

nonlinear autoregressive leading indicator models of output in g 7 countries this paper studies linear and nonlinear autoregressive leading indicator models of business cycles in g 7 countries our models use the spread between short term and long term interest rates as leading indicators for gdp we examine data admissibility by determining whether these models have the ability to produce time series with classical cycles that resemble the observed classical cycles in the data and then we ask whether this data admissibility lends itself to better predictions of the probability of recession copyright 2007 john wiley sons ltd

the time varying cost channel of monetary transmission abstract this paper studies the time varying role of the cost channel of monetary transmission i e the supply side effect of monetary policy based on firms costs of holding working capital for that purpose we provide rolling window estimates of an augmented new keynesian phillips curve and show that the cost channel exhibits important time varying dynamics we find as a general pattern that the cost channel was most important in the pre volcker period and less important in the volcker greenspan era recently however the cost channel regained importance since the cost channel is based on the transmission of policy impulses through bank lending it is likely that the time varying cost channel reflects the cyclical nature of financial frictions

speed limit policies the output gap and optimal monetary policy in a standard new keynesian model a myopic central bank concerned with stabilizing inflation and changes in the output gap will implement a policy under discretion that replicates the optimal timeless perspective precommitment policy by stabilizing output gap changes the central bank imparts inertia into output and inflation that is absent under pure discretion even a fully optimizing i e non myopic central bank operating in a discretionary policy environment achieves better social outcomes if it focuses on inflation and changes in the output gap than are achieved under inflation targeting this abstract was borrowed from another version of this item

catalysing the energy service market the role of intermediaries the uk market for energy service contracts is expanding owing in part to the emergence of intermediaries for those contracts in different parts of the public sector these intermediaries combine a legal framework for establishing contracts with an organisational framework that facilitates contract negotiation and execution this paper examines the nature and operation of these intermediaries in more detail including their achievements to date and their similarities and differences it uses ideas from transaction cost economics to develop a theoretical model of the contracting decision and shows how intermediary organisations can lower the transaction costs incurred by both clients and contractors thereby increasing the viability of contracting the paper argues that intermediaries can play an important role in expanding the market for energy service contracts and hence in delivering cost effective energy efficiency improvements throughout the public sector

financial intermediation business failures and real business cycles in this paper a general equilibrium business cycle model is construct ed that when subjected to real disturbances mimics observed qualita tive comovements among real output money business failures risk pr emia intermediary loans and prices in contrast monetary disturban ces generate cycles that have several inconsistencies with empirical evidence thus providing support for real business cycle theory at th e expense of monetary theories of the business cycle financial inter mediation arises endogenously in the model and intermediation matters for business cycle behavior a credit supply mechanism acts in tande m with an intertemporal substitution effect in propagating stochastic disturbances copyright 1987 by university of chicago press

concepts and measures of natural resource scarcity with a summary of recent trends a general model of resource scarcity is presented from which previous models can be derived as special cases previous models of scarcity are compared and contrasted refining the concept of scarcity and leading to a resolution of current disputes over the appropriate measure of scarcity an update of the original work done by barnett and morse is summarized leading to reconsideration of their original conclusions it is found that energy and forest products experienced increasing scarcity during the 1970s

the role of bank capital in the propagation of shocks abstract the recent financial turmoil has underlined the importance of analyzing the link between banks balance sheets and economic activity we develop a dynamic stochastic general equilibrium model in which bank capital mitigates an agency problem between banks and their creditors as a result the capital position of banks affects their ability to attract loanable funds and therefore influences the business cycle through a bank capital channel of transmission we find that the bank capital channel greatly amplifies and propagates the effects of technology shocks on output investment and inflation moreover bank capital shocks create sizeable declines in output and investment

shocks structures or monetary policies the euro area and us after 2001 abstract the us federal reserve cut interest rates more vigorously in the recent recession than the european central bank did by comparison with the fed the ecb followed a more measured course of action we use an estimated dynamic general equilibrium model with financial frictions to show that comparisons based on such simple metrics as the variance of policy rates are misleading we find that because there is greater inertia in the ecb s policy rule the ecb s policy actions actually had a greater stabilizing effect than did those of the fed as a consequence a potentially severe recession turned out to be only a slowdown and inflation never departed from levels consistent with the ecb s quantitative definition of price stability other factors that account for the different economic outcomes in the euro area and us include differences in shocks and differences in the degree of wage and price flexibility

a new comparative approach to macroeconomic modeling and policy analysis in the aftermath of the global financial crisis the state of m acroeconomic modeling and the use of macroeconomic models in policy analysis has come under heavy criticism macroeconomists in academia and policy institutions are blamed for relying too much on a particular class of macroeconomic models that did not sufficiently this paper propose s a comparative approach to macroeconomic policy analysis that is open to competing modeling paradigms macroeconomic model comparison projects have helped produce some very influenti al insights such as the taylor rule however they have been infrequent and costly because they require the input of many teams of researchers and multiple meetings to obtain a limited set of comparative findings this paper provides a new comparative approach to model based research and policy analysis that enables individual researchers to conduct model comparisons easily frequently at low cost and on a large scale using this approach a model archive is built that incl udes many well known empirically estimated models that may be used for quantitative analysis of monetary and fiscal stabilization policies a computational platform is created that allows straightforward comparisons of models implications its application is illustrated by compa ring different monetary and fiscal policies across selected models researchers can easily include new models in the data base and compare the effects of novel extensions to established benchmarks thereby fostering a comparative instead of insular approach to model development

financial distress and the business cycle in this paper we argue that firms financial distress should play a greater role in the macroeconomic analysis of the business cycle we provide a non technical account of a general equilibrium model that exhibits financially driven equilibrium cycles we show that the empirical evidence is widely supportive of the key hypothesis and implications of our approach we use the model in order to evaluate the effects of several policy measures it turns out that deepening the market for second hand capital goods subsidizing the interest payments of companies which start up when financial conditions are tight and bailing out some companies in default can indeed stabilize the economy by way of generalization we may say that the policy reaction to a financially driven bust should be accommodating

an empirical analysis of information in the yield spread on future recessions in japan this article examines whether the yield spread contains information on the likelihood of future economic recessions using a probit model by taking the stability of the relationship between the yield spread and future recessions into account we also compare the accuracy of information in the yield spread with stock returns and money supply we find the following results in this article first a structural change in the relationship between the yield spread and future recessions occur at the end of 1996 second whereas the japanese yield spread contains more precise information on future recessions than stock returns and nominal money supply before the structural break we cannot predict future recessions using the yield spread after the break third the money supply does not forecast future recessions for the entire sample period

changing credit limits changing business cycles abstract in the last half century capital markets across the industrialized world have undergone massive deregulation involving large increases in the loan to value ltv ratios of households and firms we study the business cycle implications of this phenomenon in an estimated dynamic general equilibrium model with multiple credit constrained agents a progressive relaxation of credit constraints initially leads to both higher macroeconomic volatility and stronger comovement between debt and real activity this pattern reverses at ltv ratios not far from those currently observed in many advanced economies due to credit constraints becoming non binding more often the non monotonic relationship between credit market conditions and macroeconomic fluctuations carries important lessons for regulatory and macroprudential policymakers while reducing the average ltv ratio may unintentionally increase macroeconomic volatility a countercyclical ltv ratio proves to be successful in dampening business cycle fluctuations and most importantly avoiding dramatic output drops

a martingale characterization of the price of a nonrenewable resource with decisions involving uncertainty abstract this paper presents a general model of nonrenewable resource consumption and exploration decisions involving uncertainty about the time of occurrence of an event such as exhaustion stock discovery or a substitute development the resulting price process is characterized in terms of necessary and sufficient conditions under which the price is expected to rise at a rate equal to greater than or less than the discount rate the general model is illustrated and the price process and the optimal decisions are characterized by examining the three types of uncertainty indicated above

fleshing out the monetary transmission mechanism output composition and the role of financial frictions financial frictions affect the way in which different macroeconomic series respond to a monetary policy shock we embed the financial accelerator of bernanke gertler and gilchrist 1999 into a medium scale dsge model and evaluate the relative importance of financial frictions in explaining monetary transmission specifically we apply minimum distance estimation based on impulse responses for the volcker greenspan period apart from providing estimates for structural parameters our procedure lends itself for specification tests that can be used to assess the relative fit of various restricted models financial frictions turn out to be of lesser importance for the descriptive success of our model

competition transmission and bank pricing policies evidence from belgian loan and deposit markets abstract this paper addresses the pass through from market interest rates to retail bank interest rates the paper advocates a heterogeneous approach and applies it to the belgian banking market a substantial proportion of the heterogeneity in bank pricing policies can be explained by the bank lending channel and the relative market power hypothesis the results also suggest that the long term pass through is typically less than one for one rejecting the completeness hypothesis while there is no convincing evidence for asymmetry in retail rates large deviations from equilibrium mark ups are faster reduced than small deviations overall conditions for corporate loans are more competitive compared to consumer loans demand and savings deposits have by far the most rigid prices

varma versus var for macroeconomic forecasting in this article we argue that there is no compelling reason for restricting the class of multivariate models considered for macroeconomic forecasting to vector autoregressive var models given the recent advances in vector autoregressive moving average varma modeling methodology and improvements in computing power to support this claim we use real macroeconomic data and show that varma models forecast macroeconomic variables more accurately than vars

monetary policy shocks and financial conditions a monte carlo experiment abstract the effects of monetary policy shocks on financial conditions are often estimated by appealing to recursive vector autoregressions vars we assess the ability of this class of vars to recover the true effects of a monetary policy shock via a monte carlo experiment in which the data generating process is a dynamic stochastic general equilibrium dsge model featuring macro finance interactions and estimated with u s quarterly data our dsge model predicts a negative and significant reaction of financial conditions to an unexpected monetary policy tightening we point out that such reaction is just overlooked by recursive vars moreover we show that cholesky vars may substantially underestimate the welfare costs due to macroeconomic fluctuations

modelling the dependence structures of australian itraxx cds index in contrast to market expectations the correlation between credit default swap cds spreads and their respective stock prices in australia was found to be positive the global financial crisis gfc affected the nonlinear association between the two asset classes with firms experiencing financial distress and stock prices plummeting cdss issuers reacted to such exogenous shocks by increasing their risk premiums on their spreads reflecting the increased inherent risk by splitting the data into pre and post gfc contexts and by employing the use of archimedean copulas we observe a negative co movement in the post gfc period this finding is robust to several equity indices overall such result is critical for investors engaging in arbitrageur activities

currency versus banking in the financial crisis of 1931 during the 1920s germany was the world s largest capital importer financing reparations through u s credits we examine financial channels in crisis transmission between these two countries around the german financial crisis of 1931 we specify a structural dynamic factor model to identify financial and monetary factors separately for each of the two economies we find substantial crisis transmission from germany to the united states via the financial channel while monetary or financial crisis transmission from the united states to germany was weak we also find major real effects of the 1931 crisis on both economies again transmitted via the financial channel

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

the external finance premium and the macroeconomy us post wwii evidence abstract the central variable of theories of financial frictions the external finance premium is unobservable this paper distils the external finance premium from a dynamic stochastic general equilibrium dsge model estimated on us macroeconomic data covering the period 1954 to 2004 within the dsge framework movements in the premium can be given an interpretation in terms of shocks driving business cycles a key result is that the estimate based solely on non financial macroeconomic data picks up over 70 of the dynamics of lower grade corporate bond spreads the paper also identifies a gain in fitting key macroeconomic aggregates by including financial frictions in the model and documents how shock transmission is affected

business cycle implications of mortgage spreads abstract how do aggregate quantities at the business cycle frequency respond to shocks to the spread between residential mortgage rates and government bonds using a structural var approach we find that mortgage spread shocks impact the real economy by both economically and statistically significant magnitudes a 100 basis point decline in the spread causes a peak increase in consumption residential investment and gdp by 1 6 percent 6 2 percent and 1 9 percent respectively presumably these effects are magnified when the policy rate is held fixed as was the case in the us during the recent implementation of unconventional monetary policy

introducing financial frictions and unemployment into a small open economy model the current nancial crisis has made it abundantly clear that business cycle modeling no longer can abstract from nancial factors it is also becoming increasingly clear that the stylized modeling of labor markets without explicit unemployment that is the current standard approach has its limitations some questions which the dominating extant business cycle models are mute on but that we would like to answer are how important are nancial and labor market frictions for the business cycle dynamics of a

comparing shocks and frictions in us and euro area business cycles a bayesian dsge approach this paper estimates a dsge model with many types of shocks and frictions for both the us and the euro area economy over a common sample period 1974 2002 the structural estimation methodology allows us to investigate whether differences in business cycle behaviour are due to differences in the type of shocks that affect the two economies differences in the propagation mechanism of those shocks or differences in the way the central bank responds to those economic developments our main conclusion is that each of these characteristics is remarkably similar across both currency areas copyright 2005 john wiley sons ltd

estimating the evolution of money s role in the u s monetary business cycle we assess money s role in the post wwii u s business cycle by employing both fixed coefficient and rolling window bayesian estimations of a structural model of the business cycle with money our empirical evidence favors a specification with drifting parameters for money consumption nonseparability and the federal reserve s reaction to nominal money growth the role of money is estimated to have been important during the 1970s and declined afterward the omission of money produces severely distorted impulse response functions relative to the model with money money is found to be important in replicating the u s output volatility during the great inflation

trends in natural resource commodity prices an analysis of the time domain abstract this paper attempts to reconcile the theoretical predictions of increasing real prices for nonrenewable natural resource commodities obtained from hotelling style models with the empirical findings of falling prices for these commodities a theoretical model for relative price movements is derived for the case of exogenous technical change and endogenous change in the grade of ores mined the model suggests a u shaped time path for relative prices the implied price movements are tested for all the major metals and fuels and the model parameters are found to be statistically significant for 11 out of the 12 commodities tested

factor augmented varma models with macroeconomic applications we study the relationship between vector autoregressive moving average varma and factor representations of a vector stochastic process we observe that in general vector time series and factors cannot both follow finite order var models instead a var factor dynamics induces a varma process while a var process entails varma factors we propose to combine factor and varma modeling by using factor augmented varma favarma models this approach is applied to forecasting key macroeconomic aggregates using large u s and canadian monthly panels the results show that favarma models yield substantial improvements over standard factor models including precise representations of the effect and transmission of monetary policy

costly external finance and labor market dynamics abstract we study the role of agency frictions and costly external finance in cyclical labor market dynamics with a focus on how credit market frictions may amplify aggregate tfp shocks the main result is that aggregate tfp shocks lead to large fluctuations of labor market quantities if the model is calibrated to the empirically observed countercyclicality of the finance premium a financial accelerator mechanism thus amplifies labor market fluctuations by rendering rigidity in real wage dynamics in contrast if the finance premium is procyclical which the model can be parameterized to accommodate amplification is absent and labor market fluctuations display the shimer 2005 puzzle

time variation in macro financial linkages summary we analyze the contribution of credit spread house and stock price shocks to the us economy based on a time varying parameter vector autoregressive model we find that the contribution of financial shocks to gross domestic product growth fluctuates from about 20 in normal times to more than 50 during the great recession the great recession and the subsequent weak recovery can largely be traced back to negative housing shocks housing shocks have become more important for the real economy since the early 2000s and negative housing shocks are more important than positive ones unexpected increases in credit spreads have not been deflationary recently copyright 2016 john wiley sons ltd

analysis of esco activities using country indicators energy service companies escos are private sector instruments that offer energy emission improvement energy saving energy efficiency energy conservation emission reduction projects in the developed and in some developing countries literature reveals that energy emission improvements of countries may be related to their innovation and r d activity levels in this work we use a literature data on the activities and the sectors targeted by escos in 38 countries summarized in terms of the age of esco market aem number of esco companies ne and total value of esco projects ve along with the global innovation index gii data of the countries we investigate the relationships among the esco indicators eis aem ne ve sectors targeted by escos and the country indicators cis gii and per capita gdp energy consumption co2 emission we observe noteworthy dependencies between the eis and cis using the simple trend equations we estimate the missing ves in the original data we also project as a hint for the size and orientation of the upcoming turkish esco market the set of eis and the distribution of the sectors that are likely to be targeted by escos in turkey

the choice of energy saving modes for an energy intensive manufacturer considering non energy benefits in practice energy intensive manufacturers have two main options when improving their energy efficiency design and implement energy efficiency projects on their own we call this self saving or enter into an energy performance contracting epc which mainly includes shared savings and guaranteed savings in this paper we will discuss an energy intensive manufacturer facing self saving and shared savings options and how this manufacturer chooses the optimal energy saving mode when non energy benefits are considered we only consider costs and profit as non energy benefits and formulate an optimization model of self saving and a stackelberg game model of shared savings from our model analysis when considering only energy savings we find that the optimal unit savings has a monotonic impact on the optimal profit of the manufacturer our results indicate that the manufacturer will prefer the second option to the first when the investment cost factor ratio of the energy service company esco to the manufacturer is small otherwise the manufacturer will prefer the first to the second furthermore when considering non energy benefits we find that the results change in some cases

do financial variables help forecasting inflation and real activity in the euro area abstract this paper uses a large data set consisting of 447 monthly macroeconomic time series concerning the main countries of the euro area to simulate out of sample predictions of the euro area industrial production and the harmonized inflation index and to evaluate the role of financial variables in forecasting we considered two models which allow forecasting based on large panels of time series forni et al rev econom statist 82 2000 540 mimeo 2001b and stock and watson mimeo 1999 performance of both models were compared to that of a simple univariate ar model results show that multivariate methods outperform univariate methods for forecasting inflation at one three six and twelve months and industrial production at one and three months we find that financial variables do help forecasting inflation but do not help forecasting industrial production

do banking shocks matter for the u s economy abstract the quantitative significance of shocks to the financial intermediary fi has not received much attention up to now we estimate a dsge model with what we describe as chained credit contracts using bayesian technique in the model credit constrained fis intermediate funds from investors to credit constrained entrepreneurs through two types of credit contract we find that the shocks to the fis net worth play an important role in the investment dynamics accounting for 17 of its variations in particular in the great recession they are the key determinants of the investment declines accounting for 36 of the variations

financial shocks and the us business cycle employing the financial accelerator fa model of bernanke gertler and gilchrist 1999 enhanced to include a shock to the fa mechanism we construct and study shocks to the efficiency of the financial sector in post war us business cycles we find that financial shocks are very tightly linked with the onset of recessions more so than tfp or monetary shocks the financial shock invariably remains contractionary for sometime after recessions have ended the shock accounts for a large part of the variance of gdp and is strongly negatively correlated with the external finance premium second moments comparisons across variants of the model with and without a stochastic fa mechanism suggests the stochastic fa model helps us understand the data

evolution of the u s energy service company industry market size and project performance from 1990 2008 lbnl xxxx e rnest o rlando l awrence b erkeley n ational l aboratory evolution of the u s energy service company industry market size and project performance from 1990 2008 peter h larsen charles a goldman and andrew satchwell environmental energy technologies division may 2012 pre print of article submitted for publication to energy policy the work described in this report was funded by the u s department of energy s office of energy efficiency and renewable energy weatherization and intergovernmental program and the permitting siting and analysis division of the office of electricity delivery and energy reliability under contract no de ac02 05ch11231

cyclical changes in firm volatility we estimate changes in the volatility of firm level sales earnings and employment growth of us firms our method differs from existing measures for firm level sales and employment volatility in that it not only captures longer run changes in volatility but also measures cyclical changes in firm volatility we detect substantial cyclical variation in firm specific volatility around trend firm specific volatility was low in the early 1990s rose in the mid and late 1990s and was high around 2000 our results are consistent with the hypothesis deduced from models with financial frictions that rising idiosyncratic volatility before 2001 contributed to the coincident rise in the external finance premium and to the 2001 recession endogenous pricing models imply that price adjustment is less frequent and disinflation more costly when firm specific volatility is low consistent with endogenous pricing models we find that the output cost of disinflation was three times larger in the early 1990s than in the early 2000s

option valuation with co integrated asset prices abstract this paper investigates theoretical and practical aspects of options that are based upon two or more assets which are co integrated for this purpose a new discrete time model of asset prices is developed a model featuring both the co integration property as well as stochastic volatilities using a garch equilibrium based option pricing approach it is shown that when volatilities are deterministic the option prices do not depend on the co integration parameters except for the mis specification effect as to the manner in which the volatilities are estimated however with stochastic volatilities the option prices explicitly depend upon the co integration parameters in order to understand these results better this paper also examines a continuous time diffusion limit of the asset price system and empirically studies the co integration effect using spread options based upon the s p500 and the nasdaq100 these numerical results suggest that consideration of co integration can substantially alter the value delta and vega of a spread option