inefficient credit booms this paper studies the welfare properties of competitive equilibria in an economy with financial frictions hit by aggregate shocks in particular it shows that competitive financial contracts can result in excessive borrowing ex ante and excessive volatility ex post even though from a first best perspective the equilibrium always displays under borrowing from a second best point of view excessive borrowing can arise the inefficiency is due to the combination of limited commitment in financial contracts and the fact that asset prices are determined in a spot market this generates a pecuniary externality that is not internalized in private contracts the model provides a framework to evaluate preventive policies which can be used during a credit boom to reduce the expected costs of a financial crisis copyright 2008 wiley blackwell

composite forecasting approach application for next day electricity price forecasting abstract accurate forecasting of electricity prices can provide significant benefits to energy suppliers when allocating their assets and to energy consumers for defining an optimal portfolio there are numerous methods that efficiently support the forecasting of time series such as electricity prices which have high volatility however the performance of these approaches varies depending on data sets and operational conditions in this work the concept of composite forecasting is presented and implemented in a retrospective study in real industrial forecasting conditions to show the potential of forecast performance improvement and comparable high consistency of a forecast performance across different day peak and day base electricity price data sets for different seasons as individual methods support vector regression artificial neural networks and ridge regression are implemented the forecast performances of these methods are evaluated and compared with their forecast combination using different error measures the results show that composite forecasting processes with inverse root mean squared error combination approach can generate on average a more accurate and robust forecast than using an individual methods or other combination schemas

reforms and the real exchange rate the role of pricing to market abstract the paper investigates how endogenous markups affect the extent to which policy reforms can influence international competitiveness in a two country model where trade costs allow for international market segmentation we show that endogenous pricing to market behavior of firms acts as an important transmission channel of the policies by strengthening the degree of competition between firms product market deregulation at home leads to a reduction in domestic markups which generally leads to an improvement in the international competitiveness of the home country conversely the power of competitive tax policy to depreciate the real exchange rate is dampened as domestic firms take the opportunity of the labor tax cut to increase their markups the variability of markups also affects the normative implications of the reforms this indicates the importance of taking into account endogenous pricing to market behavior when intending to correctly evaluate the overall effects of the reforms

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

the return of the wage phillips curve the standard new keynesian model with staggered wage setting is shown to imply a simple dynamic relation between wage inflation and unemployment under some assumptions that relation takes a form similar to that found in empirical applications starting with the original phillips 1958 curve and may thus be viewed as providing some theoretical foundations to the latter the structural wage equation derived here is shown to account reasonably well for the comovement of wage inflation and the unemployment rate in the u s economy even under the strong assumption of a constant natural rate of unemployment

combining day ahead forecasts for british electricity prices abstract this paper considers how well the approach of combining forecasts extends to the context of electricity prices with the increasing popularity of regime switching and time varying parameter models for predicting power prices the multi model and evolutionary considerations that usually support the combining of simpler time series methods may be less applicable when the individual models incorporate these features we address this question with a backtesting analysis on british day ahead prices furthermore given the volatility of power prices and concerns about accurate forecasting under extreme price excursions we evaluate the results using various error metrics including expected shortfall the comparisons are furthermore carefully simulated to consider model selection uncertainty in order to realistically test the value of combining as an ex ante policy overall our results support combining for both accurate operational planning and risk management

the intrafamily allocation of goods how to separate the adult from the child separability between parents and children s consumption is a necessary assumption in any attempt to impute the intrafamily allocation of goods this assumption implies an estimation procedure where the observed effect of demographic variables on the marginal propensity to consume adult goods is used as a key for identifying the rule governing the distribution between children s and parents consumption using the u s 1972 consumption expenditure survey i found that white and black families tend to allocate three quarters of their consumption to parents and one quarter to children tests for robustness for selectivity bias and of the separability assumption itself uphold these findings

an equilibrium model of the business cycle with household production and fiscal policy the authors estimate a dynamic general equilibrium model of the u s economy that includes an explicit household production sector and stochastic fiscal variables they use their estimates to investigate two issues first the authors analyze how well the model accounts for aggregate fluctuations they find that household production has a significant impact and reject a nested specification in which changes in the home production technology do not matter for market variables second the authors study the effects of some simple fiscal policy experiments and show that the model generates different predictions for the effects of tax changes than similar models without home production copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

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

intrahousehold distribution and poverty evidence from cote d ivoire poverty measures often ignore the distribution of resources within families and the gains from joint consumption in this paper we estimate the allocation process and adult economies of scale in households from cote d ivoire using a collective model of household consumption identification relies on the observation of adult specific goods as in the rothbarth method and a joint estimation on couples and singles our results show that men and women s shares of total expenditure are of the same order of magnitude and children s shares are small scale economies are large and affect poverty measures

electricity derivatives pricing with forward looking information in order to increase overall transparency on key operational information power transmission system operators publish an increasing amount of fundamental data including forecasts of electricity demand and available capacity we employ a fundamental model for electricity prices which lends itself well to integrating such forecasts while retaining ease of implementation and tractability to allow for analytic derivatives pricing formulae in an extensive futures pricing study the pricing performance of our model is shown to further improve based on the inclusion of electricity demand and capacity forecasts thus confirming the general importance of forward looking information for electricity derivatives pricing however we also find that the usefulness of integrating forecast data into the pricing approach is primarily limited to those periods during which electricity prices are highly sensitive to demand or available capacity whereas the impact is less visible when fuel prices are the primary underlying driver to prices instead

analysis of the nonlinear response of electricity prices to fundamental and strategic factors this paper seeks to characterize the nonlinear effects of exogenous factors on wholesale electricity price formation using a special type of regime switching the logistic smooth transition regression model we capture the mean reverting and spiky characteristics of spot prices and at the same time estimate their rather complex relationships to fundamentals we show that for different trading periods within the day prices can be a function of fundamentally different drivers in addition to including the usual fuel price demand and reserve margin drivers this analysis tests whether a market concentration variable is as significant in the high frequency context as it is known to be over the longer term the analysis is also innovative in testing the nonlinear influence of carbon emission trading

multiperiod loans occasionally binding constraints and monetary policy a quantitative evaluation we study the implications of multiperiod mortgage loans for monetary policy considering several realistic modifications fixed interest rate contracts a lower bound constraint on newly granted loans and the possibility of the collateral constraint to become slack to an otherwise standard dsge model with housing and financial intermediaries we estimate the model in its nonlinear form and argue that all these features are important to understand the evolution of mortgage debt during the recent us housing market boom and bust we show how the nonlinearities associated with the two constraints make the transmission of monetary policy dependent on the housing cycle with weaker effects observed when house prices are high or start falling sharply we also find that higher average loan duration makes monetary policy less effective and may lead to asymmetric responses to positive and negative monetary shocks

robust estimation and forecasting of the long term seasonal component of electricity spot prices when building stochastic models for electricity spot prices the problem of uttermost importance is the estimation and consequent forecasting of a component to deal with trends and seasonality in the data while the short term seasonal components daily weekly are more regular and less important for valuation of typical power derivatives the l ong term seasonal components ltsc seasonal annual are much more diffi cult to tackle surprisingly in many academic papers dealing with electricity spot price modeling the importance of the seasonal decomposition is neglected and the problem of forecasting it is not considered with this paper we want to fill the gap and present a thorough study on estimation and forecasting of the ltsc of electricity spot prices we consider a battery of models based on fourier or wavelet decomposition combined with linear or exponential decay we find that all considered wavelet base d models are significantly better in terms of forecasting spot prices up to a year ahead than all considered sine based models this result questions the validity and usefulness of stochastic models of spot electricity prices built on sinusoidal long term seasonal components

housing finance and monetary policy we document three facts concerning how the structure of housing finance affects the monetary transmission mechanism first the characteristics of residential mortgage markets differ markedly across industrialized countries second the impact of monetary policy shocks to residential investment and house prices is significantly stronger in those countries with larger flexibility development of mortgage markets third the transmission to consumption is stronger only in those countries where mortgage equity release is common and mortgage contracts are predominantly of the variable rate type we then build a two sector dsge model with financial constraints to rationalize those facts

the influence of household composition on household expenditure patterns theory and spanish evidence a concept of demographic separability is proposed that formalizes the notion that there are groups of goods adult goods that have little or no relationship to specific classes of household demographics the numbers or ages of children that there exist adult goods demographically separable from children is a necessary but not sufficient condition for the validity of rothbarth s method for measuring child costs we propose two different methods for testing demographic separability and present results from a 1981 survey of spain the econometric evidence is in fair agreement with the theoretical presuppositions

housing dynamics over the business cycle housing construction measured by housing starts leads gdp in a number of countries measured as residential investment the lead is observed only in the united states and canada elsewhere residential investment is coincident variants of existing theory however predict housing construction lagging gdp in all countries in the sample nominal interest rates are low ahead of gdp peaks introducing long term nominal mortgages and an estimated process for nominal interest rates into a standard model aligns the theory with observations on starts as mortgages transmit nominal rates into real housing costs longer time to build makes residential investment cyclically coincident abstract from author

effects of monetary and macroprudential policies evidence from four inflation targeting economies we examine the effects of monetary and macroprudential policies in the asia pacific region where many inflation targeting economies have adopted macroprudential policies in order to safeguard financial stability using structural panel vector autoregressions that identify both monetary and macroprudential policy actions we show that tighter macroprudential policies used to contain credit growth also have a significant negative impact on macroeconomic aggregates such as real gdp and the price level the similar effects of monetary and macroprudential policies may suggest a complementary use of the two policies at normal times however they could also create challenges for policymakers especially during times when low inflation coincides with buoyant credit growth

capital goods measured tfp and growth the case of spain the effect of investing in equipment and or structures on tfp and long run growth is investigated here we argue that economies can grow in spite of stagnant tfp if the investment rate is inefficiently high we study the case of spain where real gdp per worker grew at 2 74 percent annually and tfp was stagnant during 1996 2007 we show that low spanish tfp is due to low istc and an inefficiently high investment in residential structures we quantify the effect of the housing boom of the 2000s the total cost of subsidies to residential structures in terms of tfp and income growth

housing market dynamics and macroprudential policy we perform an analysis to determine how well the introduction of a countercyclical loanto value ltv ratio can reduce household indebtedness and housing price fluctuations compared with a monetary policy rule augmented with house price inflation

occbin a toolkit for solving dynamic models with occasionally binding constraints easily abstract the toolkit adapts a first order perturbation approach and applies it in a piecewise fashion to solve dynamic models with occasionally binding constraints our examples include a real business cycle model with a constraint on the level of investment and a new keynesian model subject to the zero lower bound on nominal interest rates compared with a high quality numerical solution the piecewise linear perturbation method can adequately capture key properties of the models we consider a key advantage of the piecewise linear perturbation method is its applicability to models with a large number of state variables

fixed and variable rate mortgages business cycles and monetary policy the aim of this paper is twofold first i study how the proportion of xed and variable rate mortgages in an economy can aect the way shocks are propagated second i analyze optimal implementable simple monetary policy rules and the welfare implications of this proportion i develop and solve a new keynesian dynamic stochastic general equilibrium model that features a housing market and a group of constrained individuals who need housing collateral to obtain loans a given proportion of constrained households borrows at a variable rate while the rest borrows at a xed rate the model predicts that in an economy with mostly variable rate mortgages an exogenous interest rate shock has larger eects on borrowers than in a xed rate economy aggregate eects are also larger for the variable rate economy for plausible parametrizations dierences are muted by wealth eects on labor supply and by the presence of savers more persistent shocks such as in ation target and technology shocks cause larger aggregate dierences from a normative perspective i nd that in the presence of collateral constraints the optimal taylor rule is less aggressive against in ation than in the standard sticky price model furthermore for given monetary policy a high proportion of xed rate mortgages is welfare enhancing

hourly electricity prices in day ahead markets this paper focuses on the characteristics of hourly electricity prices in day ahead markets in these markets quotes for day ahead delivery of electricity are submitted simultaneously for all hours in the next day the same information set is used for quoting all hours of the day the dynamics of hourly electricity prices does not behave as a time series process instead these prices should be treated as a panel in which the prices of 24 cross sectional hours vary from day to day this paper introduces a panel model for hourly electricity prices in day ahead markets and examines their characteristics the results show that hourly electricity prices exhibit hourly specific mean reversion and that they oscillate around an hourly specific mean price level furthermore a block structured cross sectional correlation pattern between the hours is apparent

the housing boom and bust model meets evidence we build a model of the us economy with multiple aggregate shocks that generate fluctuations in equilibrium house prices through counterfactual experiments we study the housing boom bust around t

short run electricity load forecasting with combinations of stationary wavelet transforms short term forecasting of electricity load is an essential issue for the management of power systems and for energy trading specific modeling approaches are needed given the strong seasonality and volatility in load data in this paper we investigate the benefit of combining stationary wavelet transforms to produce one day ahead forecasts of half hourly electric load in france first we assess the advantage of decomposing the aggregate load into several subseries with a wavelet transform each component is predicted separately and aggregated to get the final forecast one innovation of this paper is to propose several approaches to deal with the boundary problem which is particularly detrimental in electricity load forecasting second we examine the benefit of combining forecasts over individual models an extensive out of sample evaluation shows that a careful treatment of the border effect is required in the multiresolution analysis combinations including the wavelet predictions provide the most accurate forecasts this result is valid with several assumptions about the forecast error in temperature and for different types of hours peak normal off peak different days of the week and various forecasting periods

mortgages and monetary policy mortgages are long term nominal loans under incomplete asset markets monetary policy is shown to affect housing investment and the economy through the cost of new mortgage borrowing and the value of payments on outstanding debt these channels distinct from traditional transmission of monetary policy are evaluated within a general equilibrium model persistent monetary policy shocks resembling the level factor in the nominal yield curve have larger effects than transitory shocks manifesting themselves as long short spread the transmission is stronger under adjustable than fixed rate mortgages higher persistent inflation benefits homeowners under frms but hurts them under arms

structural reforms in a debt overhang we assess the eects of reforms in product and labor markets in an econ omy where credit restrictions and long term debt combine to produce a persis tent recession with slow deleveraging following a negative nancial shock we show that reforms that reduce markups in product markets stimulate output and employment even in the short run despite their de ationary eects by favouring a faster recovery of investment and collateral values product mar ket reforms bring forward the end of the deleveraging phase this last eect is missing in the case of labor market reforms the short run eects of which are sensitive to the response of trade ows and to debt maturity

an empirical comparison of alternate regime switching models for electricity spot prices one of the most profound features of electricity spot prices are the price spikes markov regime switching mrs models seem to be a natural candidate for modeling this spiky behavior however in the studies published so far the goodness of fit of the proposed models has not been a major focus while most of the models were elegant their fit to empirical data has either been not examined thoroughly or the signs of a bad fit ignored with this paper we want to fill the gap we calibrate and test a range of mrs models in an attempt to find parsimonious specifications that not only address the main characteristics of electricity prices but are statistically sound as well we find that the most universal and robust structure is that of an independent spike 3 regime model with heteroscedastic diffusion type base regime dynamics and shifted spike regime distributions

forecasting day ahead electricity spot prices the impact of the exaa to other european electricity markets abstract in our paper we analyze the relationship between the day ahead electricity price of the energy exchange austria exaa and other day ahead electricity prices in europe we focus on markets which settle their prices after the exaa which enables traders to include the exaa price into their calculations for each market we employ econometric models to incorporate the exaa price and compare them with their counterparts without the price of the austrian exchange by employing a forecasting study we find that electricity price models can be improved when exaa prices are considered

efficient modeling and forecasting of electricity spot prices abstract the increasing importance of renewable energy especially solar and wind power has led to new forces in the formation of electricity prices hence this paper introduces an econometric model for the hourly time series of electricity prices of the european power exchange epex which incorporates specific features like renewable energy the model consists of several sophisticated and established approaches and can be regarded as a periodic var tarch with wind power solar power and load as influences on the time series it is able to map the distinct and well known features of electricity prices in germany an efficient iteratively reweighted lasso approach is used for the estimation moreover it is shown that several existing models are outperformed by the procedure developed in this paper

averages of forecasts some empirical results an alternative to using a single forecasting method is to average the forecasts obtained from several methods in this paper we investigate empirically the impact of the number and choice of forecasting methods on the accuracy of simple averages it is concluded that the forecasting accuracy improves and that the variability of accuracy among different combinations decreases as the number of methods in the average increases thus combining forecasts seems to be a reasonable practical alternative when as is often the case a true model of the data generating process or a single best forecasting method cannot be or is not for whatever reasons identified

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

explaining the boom bust cycle in the u s housing market a reverse engineering approach we use a quantitative asset pricing model to reverse engineer the sequences of shocks to housing demand and lending standards needed to replicate the boom bust patterns in u s housing value and mortgage debt from 1993 to 2015 conditional on the observed paths for u s real consumption growth the real mortgage interest rate and the supply of residential fixed assets a specification with random walk expectations outperforms one with rational expectations in plausibly matching the patterns in the data counterfactual simulations show that shocks to housing demand housing supply and lending standards were important but movements in the mortgage interest rate were not

a note on using the hodrick prescott filter in electricity markets abstract recently nowotarski et al 2013 have found that wavelet based models for the long term seasonal component ltsc are not only better in extracting the ltsc from a series of spot electricity prices but also significantly more accurate in terms of forecasting these prices up to a year ahead than the commonly used monthly dummies and sine based models however a clear disadvantage of the wavelet based approach is the increased complexity of the technique as compared to the other two classes of ltsc models and the resulting need for dedicated numerical software which may not be readily available to practitioners in their work environments to facilitate this problem we propose here a much simpler yet equally powerful method for identifying the ltsc in electricity spot price series it makes use of the hodrick prescott hp filter a widely recognized tool in macroeconomics

debt deleveraging and the exchange rate abstract deleveraging from high debt can provoke deep recession with significant international side effects swings in the nominal exchange rate and large variations in consumption output and terms of trade can happen during the adjustment all these movements are inefficient and interesting trade offs emerge from the perspective of global welfare the optimal adjustment to global imbalances should not necessarily require large movements in the nominal exchange rate a global liquidity trap can be desirable when countries are more open to trade

addressing household indebtedness monetary fiscal or macroprudential policy in this paper we build a dynamic stochastic general equilibrium model with housing and household debt and compare the effectiveness of monetary policy housing related fiscal policy and macroprudential regulations in reducing household indebtedness

macroeconomic effects of regulation and deregulation in goods and labor markets product and labor market deregulation reduce and redistribute rents leading economic players to adjust to this new distribution it typically comes with distribution and dynamic effects to study these effects we build a macroeconomic model on two central assumptions monopolistic competition in the goods market which determines the size of rents and bargaining in the labor market which determines the distribution of rents product market regulation determines entry costs and the degree of competition labor market regulation determines the bargaining power of workers we show the effects of deregulation we then use our results to discuss the political economy of deregulation and recent macroeconomic evolutions in europe

leaning against boom bust cycles in credit and housing prices this paper studies the potential gains of monetary and macro prudential policies that lean against house price and credit cycles we rely on a model that features borrowers and savers and allows for over borrowing induced by news shock driven cycles we find that policy that responds to changes in financial variables is socially optimal considering the use of a single policy instrument both types of agents are better off when the interest rate optimally responds to credit growth when we allow for the implementation of both interest rate and ltv policies heterogeneity in the welfare implications is key in determining the optimal use of policy instruments the optimal policy for the borrowers is characterized by a ltv ratio that responds countercyclically to credit growth which most effectively stabilizes credit relative to gdp in contrast the optimal policy for the savers features a constant ltv ratio coupled with an interest rate response to credit growth news shock driven cycles account for most of the gains from a policy response to changes in financial variables

housing taxation and capital accumulation this paper studies the impact of the preferential tax treatment of housing capital in a dynamic general equilibrium life cycle economy populated by heterogeneous individuals the model includes the main housing tax provisions currently in place in the u s and a minimum downpayment requirement upon purchasing non divisible houses the tax code makes the return on housing capital larger than that on business capital which distorts the lifetime profile and composition of individuals savings the wedge between the two rates of return emanates from the failure to tax imputed rents and is amplified by the presence of mortgage interest deductibility simulations show that individuals at all income levels would rather live in a world where imputed rents are taxed or one where mortgage interest payments are not deductible furthermore distributional effects are much smaller than conventionally believed

macroprudential and monetary policies implications for financial stability and welfare in this paper we analyze the implications of macroprudential and monetary policies for business cycles welfare and financial stability we consider a dynamic stochastic general equilibrium dsge model with housing and collateral constraints a macroprudential rule for the loan to value ratio ltv which responds to credit growth interacts with a traditional taylor rule for monetary policy we compute the optimal parameters of these rules both when monetary and macroprudential policies act in a coordinated and in a non coordinated way we find that both policies acting together unambiguously improves the stability of the system in both cases this interaction is welfare improving for the society especially in the case of the non coordinated game there is though a trade off between borrowers and savers however borrowers can compensate the saver s welfare loss view the mathml sourcela kaldor hicks to achieve a pareto superior outcome

leaning against the credit cycle how should a central bank act to stabilize the ratio of debt over gross domestic product gdp we show how the persistent nature of household debt shapes the answer to this question in environments where households repay mortgages gradually surprise interest hikes only weakly influence household debt and tend to increase debt to gdp in the short run while reducing it in the medium run interest rate rules with a positive weight on debt to gdp cause indeterminacy compared to inflation targeting debt to gdp stabilization calls for a more expansionary policy when debt to gdp is high so as to deflate the debt burden through inflation and output growth

component estimation for electricity prices procedures and comparisons abstract electricity price time series usually exhibit some form of nonstationarity corresponding to long term behavior one or more periodic components as well as dependence on calendar effects as a result modeling electricity prices requires accounting for both long term and periodic components in the literature several filtering procedures have been proposed but a standard has not yet been found furthermore since different procedures are applied in contexts that are not homogeneous with respect to data periods and final goals a fair comparison is difficult this work considers several methods for component estimation in a homogeneous framework and compares them according to specific criteria the final purpose is to find an estimation procedure that performs well independently of the intended market and that can be proposed as a reference for electricity price time series filtering

understanding the gains from wage flexibility the exchange rate connection we study the gains from increased wage exibility and their dependence on exchange rate policy using a small open economy model with staggered price and wage setting two results stand out i the impact of wage adjustments on employment is smaller the more the central bank seeks to stabilize the exchange rate and ii an increase in wage exibility often reduces welfare and more likely so in economies under an exchange rate peg or an exchange rate focused monetary policy our ndings call into question the common view that wage exibility is particularly desirable in a currency union

recent advances in electricity price forecasting a review of probabilistic forecasting abstract since the inception of competitive power markets two decades ago electricity price forecasting epf has gradually become a fundamental process for energy companies decision making mechanisms over the years the bulk of research has concerned point predictions however the recent introduction of smart grids and renewable integration requirements has had the effect of increasing the uncertainty of future supply demand and prices academics and practitioners alike have come to understand that probabilistic electricity price and load forecasting is now more important for energy systems planning and operations than ever before with this paper we offer a tutorial review of probabilistic epf and present much needed guidelines for the rigorous use of methods measures and tests in line with the paradigm of maximizing sharpness subject to reliability the paper can be treated as an update and a further extension of the otherwise comprehensive epf review of weron 1 or as a standalone treatment of a fascinating and underdeveloped topic that has a much broader reach than epf itself

on fiscal multipliers estimates from a medium scale dsge model this paper contributes to the debate on fiscal multipliers in the context of a structural model i estimate a micro founded dynamic stochastic general equilibrium model that features a rich fiscal policy block and a transmission mechanism for government spending shocks using bayesian techniques for us data

forecasting electricity spot prices using time series models with a double temporal segmentation the french wholesale market is set to expand in the next few years under european pressure and national decisions in this article we assess the forecasting ability of several classes of time series models for electricity wholesale spot prices at a day ahead horizon in france electricity spot prices display a strong seasonal pattern particularly in france given the high share of electric heating in housing during winter time to deal with this pattern we implement a double temporal segmentation of the data for each trading period and season we use a large number of specifications based on market fundamentals linear regressions markov switching ms models and threshold models with a smooth transition an extensive evaluation on french data shows that modelling each season independently leads to better results among nonlinear models ms models designed to capture the sudden and fast reverting spikes in the price dynamics yield more accurate forecasts finally pooling forecasts give more reliable results

housing dynamics over the business cycle housing dynamics over the business cycle over the u s business cycle fluctuations in residential investment are well known to systematically lead gdp these dynamics are documented here to be specific to the u s and canada in other developed economies residential investment is broadly coincident with gdp nonresidential investment has the opposite dynamics being coincident with or lagging gdp these observations are in sharp contrast with the properties of nearly all business cycle models with disaggregated investment including mortgages and interest rate dynamics aligns the theory more closely with u s observations longer time to build in housing construction makes residential investment coincident with output

money prices interest rates and the business cycle the mechanisms governing the relationship of money prices and interest rates to the business cycle are the most studied and most disputed topics in macroeconomics in this paper we first document key empirical aspects of this relationship we then ask how well three benchmark rational expectations macroeconomic models a real business cycle model a sticky price model and a liquidity effect model account for these central facts while the models have diverse successses and failures none can account for the fact that real and nom inal interest rates are inverted leading indicators of real economic activity that is none of the models captures the post war u s business cycle fact that a high real or nominal interest rate in the current quarter predicts a low level of real economic activity two to four quarters in the future i introduction the positive correlation of monetary aggregates and real economic activity over the course of many business cycles is a key empirical fact about the u s economy indeed the dynamic dimension of this covariation is so strong and stable that a monetary variable has long been included in the commerce department s index of leading economic indica tors while this pattern of cyclical comovement is widely agreed upon its interpretation is not some macroeconomists view money as purely passive with a positive response to varying levels of economic activity producing the positive correlation others view changes in the quantity of money as an important perhaps dominant source of economic fluctua tions frequently the real effects of monetary changes are suggested to arise from frictions in commodity labor or financial markets in economic theories that describe the influence of these frictions the transmission mechanism from monetary changes to real activity is typically viewed as involving interest rates and the price level the primary goal of this paper is to evaluate three models that explain the link between money prices interest rates and the business cycle we do this in three steps first we docu ment the cyclical behavior of these variables in the united states over the postwar period second we construct three quantitative rational expectations models of macroeconomic activity i a real business cycle model with endogenous money ii a model of commodity market frictions with mon etary non neutralities arising from gradual adjustment of goods prices and iii a model of financial market frictions with monetary non neutralities arising from gradual adjust ments of portfolios finally we compare the models predic tion for the business cycle behavior of money prices and interest rates with the data in exploring the predictions of these models we take the stock of money to be one of several exogenous variables in the system all of our models are capable of generating a forecasting role for money relative to real economic activity similar to that found in the u s data in the real business model monetary changes can forecast real activity because productivity is related to many underlying sources of shocks and because these real shocks also affect the money stock in the models with sticky prices and liquidity effects short hand names for the models with frictions in the com modity and financial markets monetary changes have an additional direct positive effect on aggregate output the outline of the paper is as follows section ii describes the data and documents its business cycle characteristics section iii outlines the three macroeconomic models and develops the particular quantitative versions of the models used in our analysis our main empirical results are pre sented in section iv and section v summarizes our results and concludes

the impact of ecb policy on structural reforms abstract we estimate the impact of monetary policy on structural reform adoption in the euro area we identify exogenous ecb policy changes through an event study that extracts the unexpected variation in euro area interest rates on policy announcement days we find that surprise monetary expansions increase the number of reforms significantly and that the effect is stronger for countries with weaker macroeconomic fundamentals or tighter public budget constraints these findings are consistent with the hypothesis that expansionary monetary policy by attenuating the short run costs of reforms and increasing governments financial leeway spurs competition friendly supply side policy

tax expenditures for owner occupied housing deductions for property taxes and mortgage interest and the exclusion of imputed rental income federal income tax policy affects the cost of homeowner ship for many households popular discussions of the favorable tax treatment of owner occupied housing usually focus on the tax deductibility of mortgage interest and prop erty tax payments as well as the specialized tax rules that affect housing capital gains academic discussions in contrast emphasize the exclusion of the imputed rental income on owner occupied housing as the key tax benefit for homeowners this paper summarizes the current distribution of the tax benefits associated with the mortgage interest and property tax deductions it contrasts this with the distribution of tax benefits asso ciated with the current tax regime for imputed rental income relative to one that taxes home

demographic effects in demand analysis estimation of the quadratic expenditure system using microdata the purpose of this paper is to estimate a complete theoretically plausible system of demand equations on microdata using the rich detail of these data to investigate the impact of demographic variables on demand behavior the system which we estimate is the quadratic expenditure system qes introduced by howe pollak and wales we evaluate four methods for incorporating demographic variables into the demand system three of these procedures imply parameter restrictions while the fourth does not tests on the restrictions imply that for our data unrestricted estimation yields significantly greater explanatory power

the value of forecasts quantifying the economic gains of accurate quarter hourly electricity price forecasts abstract we propose a multivariate elastic net regression forecast model for german quarter hourly electricity spot markets while the literature is diverse on day ahead prediction approaches both the intraday continuous and intraday call auction prices have not been studied intensively with a clear focus on predictive power besides electricity price forecasting we check for the impact of early day ahead da exaa prices on intraday forecasts another novelty of this paper is the complementary discussion of economic benefits a precise estimation is worthless if it cannot be utilized we elaborate possible trading decisions based upon our forecasting scheme and analyze their monetary effects we find that even simple electricity trading strategies can lead to substantial economic impact if combined with a decent forecasting technique

expenditure on children a rothbarth type method consistent with scale economies and parents bargaining abstract we suggest a new methodology to estimate the share of household income accruing to children the household behavior is represented according to the collective approach that is each household member is characterized by specific preferences following the principle of the rothbarth approach the identification of the children s share requires the observation of adult specific goods our method differs from this traditional approach in that it is compatible with economies of scale as well as with parents bargaining we illustrate the method with an application to the french household budget survey

on the importance of the long term seasonal component in day ahead electricity price forecasting abstract in day ahead electricity price forecasting epf the daily and weekly seasonalities are always taken into account but the long term seasonal component ltsc is believed to add unnecessary complexity to the already parameter rich models and is generally ignored conducting an extensive empirical study involving state of the art time series models we show that i decomposing a series of electricity prices into a ltsc and a stochastic component ii modeling them independently and iii combining their forecasts can bring contrary to a common belief an accuracy gain compared to an approach in which a given time series model is calibrated to the prices themselves

regime jumps in electricity prices many countries are liberalizing their energy markets participants in these markets are exposed to market risk due to the characteristics of electricity price dynamics electricity prices are known to be mean reverting very volatile and subject to frequent spikes models that describe the dynamics of electricity prices should incorporate these characteristics in order to capture the price spikes many researchers have introduced stochastic jump processes but we argue and show that this specification might lead to potential problems with specifying the true amount of mean reversion within the process in this paper we propose a regime switching model that models price spikes separated from normal mean reverting prices

instrument choice the demand for mortgages in canada abstract this paper is directed at understanding the factors which caused mortgage demand to fluctuate to the degree witnessed in the 1980s we model the mortgage choice decision as involving simultaneous options on both the term and the amortization choice by cost minimizing risk averse borrowers the model is estimated using a bivariate ordered probit methodology an extensive database containing details on the financial and demographic characteristics of households is used we find that contrary to the dominant model of mortgage demand borrowers react to market conditions in a risk averse and cost minimizing manner

household economies of scale in consumption theory and evidence household economies of scale arising from the existence of househo ld public goods increasing returns in household production and or bulk discounts are incorporated into a utility theoretic model of household demands individuals are assumed to be identical and symmetrically treated within households economies of scale parameters for five goods are estimated using the quadratic expenditu re system and data from the u s consumer expenditure survey on expenditures by all adult households results suggest the existence o f significant economies of scale in the consumption of all of the included goods with economies being especially pronounced in the consumption of shelter copyright 1988 by the econometric society

leaning against the wind during financial disruptions market makers provide liquidity by absorbing external selling pressure they buy when the pressure is large accumulate inventories and sell when the pressure alleviates this paper studies optimal dynamic liquidity provision in a theoretical market setting with large and temporary selling pressure and order execution delays i show that competitive market makers offer the socially optimal amount of liquidity provided they have access to sufficient capital if raising capital is costly this suggests a policy role for lenient central bank lending during financial disruptions

the costs of macroprudential policy abstract central banks increasingly rely on macroprudential measures to manage the financial cycle however the effects of such measures on the core objectives of monetary policy to stabilise output and inflation are largely unknown in this paper we quantify the effects of changes in maximum loan to value ltv ratios on output and inflation we rely on a narrative identification approach based on detailed reading of policy makers objectives when implementing the measures we find that over a four year horizon a 10 percentage point decrease in the maximum ltv ratio leads to a 1 1 reduction in output as a rule of thumb the impact of a 10 percentage point ltv tightening can be viewed as roughly comparable to that of a 25 basis point increase in the policy rate however the effects are imprecisely estimated and the effect is only present in emerging market economies we also find that tightening ltv limits has larger economic effects than loosening them at the same time we show that changes in maximum ltv ratios have substantial effects on credit and house price growth using inverse propensity weights to rerandomise ltv actions we show that these effects are likely causal

household debt overhang and transmission of monetary policy we investigate how the level of household indebtedness affects the monetary transmission mechanism in the u s economy using state dependent local projection methods we find that the effects of monetary policy are less powerful during periods of high household debt in particular the impact of monetary policy shocks is smaller on gdp consumption residential investment house prices and household debt during a high debt state we then build a partial equilibrium model of borrower households with financial constraints to rationalize these facts the model points to the weakening of the home equity loan channel as a possible reason for the decline in monetary policy effectiveness when initial debt levels are high

how important are financial frictions in the united states and the euro area this paper aims to evaluate whether frictions in credit markets are important for business cycles in the united states and the euro area i modify the dsge financial accelerator model developed by bernanke gertler and gilchrist 1999 by adding such frictions as price indexation to past inflation sticky wages consumption habits and variable capital utilization when estimating the model using bayesian methods i find that financial frictions are relevant in both areas according to the posterior odds ratio the data clearly favor the model with financial frictions both in the united states and the euro area moreover financial frictions are larger in the euro area

forecasting electricity spot prices using lasso on capturing the autoregressive intraday structure in this paper we present a regression based model for day ahead electricity spot prices we estimate the considered linear regression model by the lasso estimation method the lasso approach allows for many possible parameters in the model but also shrinks and sparsifies the parameters automatically to avoid overfitting thus it is able to capture the autoregressive intraday dependency structure of the electricity price well we discuss in detail the estimation results which provide insights to the intraday behavior of electricity prices we perform an out of sample forecasting study for several european electricity markets the results illustrate well that the efficient lasso based estimation technique can exhibit advantages from two popular model approaches