budget processes and commitment to fiscal discipline abstract we present a framework of investigation into the political economy of the budget process our model suggests that institutional rules governing the budget process can be found to limit the importance of fiscal illusion empirical evidence supports that proposition the choice of rules depends on the political environment as well as the dominant source of uncertainty in the budget process

testing dependence between gdp and tourism s growth rates abstract the main aim of this paper is to link the economic behaviour and statistical properties of gdp and tourism receipts growth rates through modelling the dependence to that end two developed economies such as the united kingdom non tourist oriented and spain tourist oriented and an emerging economy such as croatia tourist oriented are considered as case studies therefore a copula based garch approach is employed to describe the dependence structure between gdp and tourism receipts growth rates in this respect any causality and cointegration between tourism and gdp could justify public policies that promote a more efficient public resource allocation in the tourism industry additionally evidence of dependence between growth rates can justify the extent and direction of these policies results indicate that there is a significant asymmetric and positive dependence between tourism and gdp growth rates for the three countries studied though only for croatia is it time varying over time

tourism as a long run economic growth factor the spanish case this paper examines the role of tourism in the spanish long run economic development the tourism led growth hypothesis is confirmed through cointegration and causality testing the results indicate that at least during the last three decades economic growth in spain has been sensible to persistent expansion of international tourism the increase of this activity has produced multiplier effects over time external competitivity has also been proved in the model to be a fundamental variable for spanish economic growth from the empirical analysis it can be inferred the positive effects on income that government policy in the adequacy of supply as well as in the promotion of tourist activity may bring about

parametric pricing of higher order moments in s p500 options a general parametric framework based on the generalized student t distribution is developed for pricing s p500 options higher order moments in stock returns as well as time varying volatility are priced an important computational advantage of the proposed framework over monte carlo based pricing methods is that options can be priced using one dimensional quadrature integration the empirical application is based on s p500 options traded on select days in april 1995 a total sample of over 100 000 observations a range of performance criteria are used to evaluate the proposed model as well as a number of alternative models the empirical results show that pricing higher order moments and time varying volatility yields improvements in the pricing of options as well as correcting the volatility skew associated with the black scholes model

the contribution of tourism development to economic growth in the korean economy abstract this study investigates the causal relations between tourism growth and economic expansion for the korean economy by using engle and granger two stage approach and a bivariate vector autoregression var model two principle results emerge from this study first the results of a cointegration test indicate that there is no long run equilibrium relation between two series second the outcomes of granger causality test imply the one way causal relationship of economic driven tourism growth the hypothesis of tourism led economic growth is not held in the korean economy this consequence is supported by testing the sensitivity of causality test under different lag selections along with the optimal lag

assessing green energy economy stimulus packages evidence from the u s programs targeting renewable energy the paper provides a comprehensive empirical assessment of american stimulus policies aimed at renewable energy re technologies we use an indicator based methodology to assess progress with respect to energy environmental and socio economic issues resulting from re stimulus programs linked to the american recovery and reinvestment act and review and analyze the emerging but scattered literature overall our results indicate that stimulus programs have had a positive effect on the re sector this is despite the fact that they were originally planned to work in combination with a greenhouse gas cap and trade system which has not been implemented from the methodological perspective our approach is resource intensive and our analysis highlights numerous challenges notably related to causality and additionality despite these limitations this research improves our understanding of the broad effects and impacts of re stimulus programs

hierarchical organization and incentives abstract we study decentralization in public decision making as the possibility for local authorities to sign incentive contracts with local agents in a context of asymmetric information we first review some theoretical arguments put forward for the optimality of decentralized structures we then present a model of organization of incentive policy in the eu context where national authorities have better information on their agents but less bargaining power than central authorities at the community level we show the complementarities between both levels of regulation

nash equilibria in models of fiscal competition abstract this paper analyzes nash equilibria in a simple model of an economy with jurisdictions engaging in fiscal competition small number nash equilibria in which tax rates are the strategic variables are shown not to coincide with nash equilibria in which public expenditure levels are the strategic variables

the impact of decentralization of health services on health outcomes evidence from canada this article contributes to the limited empirical literature on the impact of decentralization on economic welfare by investigating the hypothesis that shifts towards more fiscal decentralization in health services would be accompanied by improvements in population health building on a conventional public finance model applied to health care this hypothesis is tested on a panel data of the highly decentralized canadian provinces during the period 1979 to 1995 the results of the exploratory empirical analysis presented in this article suggest that fiscal decentralization of health services in canada has had a positive and substantial influence on the effectiveness of public policy in improving a population s health over the period studied

a copula var x approach for industrial production modelling and forecasting world economies and especially european ones have become strongly interconnected in the last decade and a joint modelling is required we propose here the use of copulae to build flexible multivariate distributions since they allow for a rich dependence structure and more flexible marginal distributions that better fit the features of empirical data such as leptokurtosis we use our approach to forecast industrial production series in the core european monetary union emu countries and we provide evidence that the copula vector autoregression var model outperforms or at worst compares similarly to normal var models keeping the same computational tractability of the latter approach

the political economy of fiscal restrictions implications for europe from the united states abstract this paper analyzes fiscal restrictions in the united states as a way of shedding light on the likely effects of the excessive deficits provisions of the maastricht treaty we consider their impact on levels of deficits on the cost of borrowing and on the stabilization function of fiscal policy if u s experience is any guide maastricht s fiscal restraints are enforceable but if vigorously enforced they could significantly diminish the stabilization capacity of national budgets

identifying barriers in the diffusion of renewable energy sources abstract rapid diffusion of renewable energy sources res in the electricity power sector is crucial if the eu wants to fulfill its 2050 co2 reduction commitments for this reason identifying and alleviating all barriers that hinder the development of res is necessary to the successful deployment of these technologies this paper discusses the main barriers in the diffusion of wind and photovoltaic pv solar power in the greek electricity sector by drawing on the literature of technological innovation systems and system functions furthermore we provide an explanation of the different diffusion rates between the two technologies inadequate financial resources low grid capacity delays in the issuance of building permits opposition from local communities to the construction of wind farms and the lack of a stable institutional framework are among the most important barriers that inhibit the diffusion of the wind and pv solar power the nature of the barriers identified in this study calls for policy intervention

economic and political determinants of budget deficits in developing countries abstract the evidence from a large sample of developing countries tends to reject the empirical implications of optimizing models of the process of determination of fiscal deficits tax rates seigniorage and inflation the paper also presents some preliminary evidence that an important reason for the failure of the equilibrium approach to fiscal policy is that fiscal deficits are partly determined by political factors and that cross country differentials in budget deficits may depend on measures of political instability in particular as suggested by a number of recent theoretical approaches an increase in the degree of political instability appears to lead to greater budget deficits

local fiscal policies default risk and municipal borrowing costs abstract this paper provides an empirical study of the effects that a local government s fiscal decisions exert on its cost of borrowing using a sample of new jersey municipalities the results are consistent with the view that current period fiscal decisions do impact the cost of borrowing a one standard deviation increase in the amount borrowed is associated with a 66 basis point increase in the annual yield furthermore that the standard approach of treating current period policy variables as exogenous regressors leads to a downward bias in the effect of additional borrowing on the interest rate

patterns of acceptance and non acceptance within energy landscapes a case study on wind energy expansion in austria abstract wind energy is a key technology in the transition toward a low carbon society but acceptance is considered to be a constraining factor in achieving ambitious wind deployment targets based on an austrian case study this paper investigates eight decisive patterns of acceptance and non acceptance of wind energy we apply qualitative research methods such as interviews focus groups and worldcafe discussions with stakeholders on the national level and with citizens and local decision makers at potential wind power expansion sites the results show that local opposition to wind energy cannot be explained by single factors but is caused by a complex set of individual and collective preferences rooted in institutional and socio political arrangements the problem concerning these conflicting patterns is that they are trapped in often opposing or confronting policy core beliefs which are unlikely to change hence it is necessary to appeal to overarching targets like the claims of environmental justice to counterbalance the impacts of wind energy we conclude that there is a strong demand for fair decision making processes and an equal distribution of environmental and economic gains and losses this article is part of a virtual special issue entitled the collaborative making of energy landscapes

tourism led growth hypothesis in the top ten tourist destinations new evidence using the quantile on quantile approach this paper examines the empirical validity of the tourism led growth hypothesis in the top ten tourist destinations in the world china france germany italy mexico russia spain turkey the united kingdom and the united states using the quantile on quantile qq approach and a new index of tourism activity that combines the most commonly used tourism indicators this methodology recently introduced by sim and zhou 2015 provides an ideal framework with which to capture the overall dependence structure between tourism development and economic growth the empirical results primarily show a positive relation between tourism and economic growth for the ten countries considered with substantial variations across countries and across quantiles within each country the weakest links are noted for china and germany possibly because of the limited importance of the tourism sector relative to other major economic activities in those countries important country specific policy implications may be drawn from these findings

fiscal decentralization chinese style good for health outcomes summary this study analyzes the effect of fiscal decentralization on health outcomes in china using a panel data set with nationwide county level fiscal data we find that more fiscally decentralized provinces have lower infant mortality rates than provinces that are the main spending authority if certain conditions are met key among those conditions are the county governments own fiscal capacity and intergovernmental transfers local spending responsibilities need to be matched with county governments own fiscal capacity when the county s government relative spending responsibility is held constant the ability to spend on local public goods and health outcomes depend upon intergovernmental transfers

regional decentralization and fiscal incentives federalism chinese style abstract aligning the interests of local governments with market development is an important issue for developing and transition economies using a panel data set from china we investigate the relationship between provincial government s fiscal incentives and provincial market development we report three empirical findings first we find that during the period of fiscal contracting system the discrepancy between ex ante contracts and ex post implementation was relatively small suggesting that the fiscal contracts were credible second we find a much higher correlation about four times between the provincial government s budgetary revenue and its expenditure during 1980s and 1990s as compared to 1970s demonstrating that provincial governments faced much stronger ex post fiscal incentives after reform third we find that stronger ex ante fiscal incentives measured by the contractual marginal retention rate of the provincial government in its budgetary revenue are associated with faster development of the non state sector as well as more reforms in the state sector in the provincial economy this holds even when we control for the conventional measure of fiscal decentralization finally we compare federalism chinese style to federalism russian style

tourism development and economic growth a closer look at panels abstract this paper applies the new heterogeneous panel cointegration technique to re investigate the long run comovements and causal relationships between tourism development and economic growth for oecd and nonoecd countries including those in asia latin america and sub sahara africa for the 1990 2002 period on the global scale after allowing for the heterogeneous country effect a cointegrated relationship between gdp and tourism development is substantiated it is also determined that tourism development has a greater impact on gdp in nonoecd countries than in oecd countries and when the variable is tourism receipts the greatest impact is in sub sahara african countries additionally the real effective exchange rate has significant effects on economic growth finally in the long run the panel causality test shows unidirectional causality relationships from tourism development to economic growth in oecd countries bidirectional relationships in nonoecd countries but only weak relationships in asia our empirical findings have major policy implications

options on the minimum or the maximum of two risky assets analysis and applications this paper provides analytical formulas for european put and call options on the minimum or the maximum of two risky assets the properties of these formulas are discussed in detail options on the minimum or the maximum of two risky assets are useful to price a wide variety of contingent claims of interest to financial economists applications discussed in this paper include the valuation of foreign currency debt option bonds compensation plans risk sharing contracts secured debt and growth opportunities involving mutually exclusive investments

pricing multivariate contingent claims using estimated risk neutral density functions abstract many asset price series exhibit time varying volatility jumps and other features inconsistent with assumptions about the underlying price process made by standard multivariate contingent claims mvcc pricing models this article develops an interpolative technique for pricing mvccs flexible nls pricing that involves the estimation of a flexible multivariate risk neutral density function implied by existing asset prices as an application the flexible nls pricing technique is used to value several bivariate contingent claims dependent on foreign exchange rates in 1993 and 1994 the bivariate flexible risk neutral density function more accurately prices existing options than the bivariate log normal density implied by a multivariate geometric brownian motion in addition the bivariate contingent claims analyzed have substantially different prices using the two density functions suggesting flexible nls pricing may improve accuracy over standard methods

the implications of tourism specialisation in the long run an econometric analysis for 13 oecd economies abstract the paper aims to illumine the longrun impact of specialisation in tourism it is shown that specialisation in tourism may not be deleterious for economic welfare once the terms of trade are considered conditions for an improvement in welfare are laid out and their existence tested by econometric methods within an almost ideal demand system formulation of tourist expenditure for 13 oecd economies the analysis uses cointegration techniques and novel sequential break dating procedures evaluated where the time dimension is small the values of the estimated parameters suggest that long run growth may not be harmed by tourism specialisation

why are stabilizations delayed when a stabilization has significant distributional implications e g tax increases to eliminate a large budget deficit socioeconomic groups may attempt to shift the burden of stabilization onto other groups the process leading to stabilization becomes a war of attrition each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden the authors solve for the expected time of stabilization in a model of rational delay and relate it to several political and economic variables they motivate this approach and its results by comparison to historical and current episodes copyright 1991 by american economic association

decentralization of governance and development all around the world in matters of governance decentralization is the rage even apart from the widely debated issues of subsidiarity and devolution in the european union and states rights in the united states decentralization has been at the center stage of policy experiments in the last two decades in a large number of developing and transition economies in latin america africa and asia the world bank for example has embraced it as one of the major governance reforms on its agenda for example world bank 2000 burki perry and dillinger 1999 take also the examples of the two largest countries of the world china and india decentralization has been regarded as the major institutional framework for the phenomenal industrial growth in the last two decades in china taking place largely in the nonstate nonprivate sector india ushered in a landmark constitutional reform in favor of decentralization around the same time it launched a major program of economic reform in the early 1990s on account of its many failures the centralized state everywhere has lost a great deal of legitimacy and decentralization is widely believed to promise a range of benee ts it is often suggested as a way of reducing the role of the state in general by fragmenting central authority and introducing more intergovernmental competition and checks and balances it is viewed as a way to make government more responsive and efe cient technological changes have also made it somewhat easier than before to provide public services like electricity and water supply relatively efe ciently in smaller market areas and the lower levels of government have now a greater ability to handle certain tasks in a world of rampant ethnic cone icts and separatist movements decentralization is also regarded as a way of diffusing social and political tensions and ensuring local cultural and political autonomy these potential benee ts of decentralization have attracted a very diverse range

modeling exchange rate dependence dynamics at different time horizons despite an extensive body of research the best way to model the dependence of exchange rates remains an open question in this paper we present a new approach which employs a flexible time varying copula model it allows the conditional correlation between exchange rates to be both time varying and modeled independently from the marginal distributions we introduce a dynamic specification for the correlation using the fisher transformation applied to euro us dollar and japanese yen us dollar our results reveal a significantly time varying correlation dependent on the past return realizations we find that a time varying copula with the proposed correlation specification gives better results than alternative dynamic benchmark models the dynamic copula model outperforms at six different time horizons ranging from hourly to daily confirming the model specification c 2010 elsevier ltd all rights reserved

strategic choices for renewable energy investment conceptual framework and opportunities for further research this paper introduces the special issue on strategic choices for renewable energy investment which is a collection of best papers presented at an international research conference held in st gallen switzerland in february 2010 substantial private investment is needed if public policy objectives to increase the share of renewable energy and prevent dangerous anthropogenic climate change are to be achieved the aim of this paper and the entire special issue is to draw scholarly attention to the processes underlying strategic choices for renewable energy investment and how they are influenced by energy policy we disentangle the role of risk return perceptions portfolio effects and path dependence in explaining energy investment decisions and suggest that the heterogeneous universe of investors requires a segmentation of policies the paper outlines some of the rich opportunities for further research in this emerging area

tourism expansion tourism uncertainty and economic growth new evidence from taiwan and korea abstract this study examines the causal relationship between tourism expansion and economic growth in two asian countries taiwan and south korea an egarch m model with uncertainty factors is employed to examine the direction of causality between tourism expansion and economic growth as well as the impulse impacts of uncertainty on both variables the results indicate that the tourism led economic growth hypothesis is supported for taiwan while a reciprocal causal relationship is found for south korea the significant impacts of uncertainty on growth are also identified

are output growth rate distributions fat tailed some evidence from oecd countries this work explores some distributional properties of aggregate output growth rate time series we show that in the majority of oecd countries output growth rate distributions are well approximated by symmetric exponential power densities with tails much fatter than those of a gaussian fat tails robustly emerge in output growth rates independently of i the way we measure aggregate output ii the family of densities employed in the estimation iii the length of time lags used to compute growth rates we also show that fat tails still characterize output growth rate distributions even after one washes away outliers autocorrelation and heteroscedasticity

the valuation of multivariate contingent claims in discrete time models there are several examples in the literature of contingent claims whose payoffs depend on the outcomes of two or more stochastic variables familiar cases of such claims include options on a portfolio of options options whose exercise price is stochastic and options to exchange one asset for another this paper derives risk neutral valuation relationships rnvrs in a discrete time setting that facilitate the pricing of such complex contingent claims in two specific cases joint lognormally distributed underlying variables and constant proportional risk aversion on the part of investors and joint normally distributed underlying variables and constant absolute risk aversion preferences respectively this methodology is then applied to the valuation of several interesting complex contingent claims such as multiperiod bonds multicurrency option bonds and investment options

the economic value of co movement between oil price and exchange rate using copula based garch models article i nfo the us dollar is used as the primary currency of international crude oil trading as such the recent substantial depreciation in the us dollar has resulted in a corresponding increase in crude oil prices in addition oil price and exchange rate returns have been shown to be skewed and leptokurtic and to exhibit an asymmetric or tail dependence structure therefore this study proposes dynamic copula based garch models to explore the dependence structure between the oil price and the us dollar exchange rate more importantly an asset allocation strategy is implemented to evaluate economic value and confirm the efficiency of the copula based garch models in terms of out of sample forecasting performance a dynamic strategy based on the cgarch model with the student t copula exhibits greater economic benefits than static and other dynamic strategies in addition the positive feedback trading activities are statistically significant within the oil market but this information does not enhance the economic benefits from the perspective of an asset allocation decision finally a more risk averse investor generates a higher fee for switching from a static strategy to a dynamic strategy based on copula based garch models

the political economy of benefits and costs a neoclassical approach to distributive politics this essay offers a rational political explanation for the notorious inefficiency of pork barrel projects with an optimization model of legislative behavior and legislative institutions the model emphasizes the economically arbitrary from a welfare point of view importance of the geographic incidence of benefits and costs owing to the geographic basis for political representation we explore the implications of a legislator s objective function and derive conditions under which a representative legislature will select an omnibus of projects each of which exceeds the efficient scale

modelling multivariate international tourism demand and volatility international tourism demand which is typically measured as tourist arrivals to australia has experienced dramatic fluctuations in recent years due to changes in the economic financial and political environment however variations in tourism demand specifically the conditional variance or volatility have not previously been investigated in the tourism literature an analysis of such volatility is essential for investigating the effects of shocks in tourism demand models this paper models the conditional mean and conditional variance of the logarithm of the monthly tourist arrival rate from the four leading tourism source countries to australia namely japan new zealand uk and usa using three multivariate static or constant conditional correlation ccc volatility models specifically the symmetric ccc mgarch model of rev econ stat 72 1990 498 symmetric vector arma garch model of econ theory 19 2003 278 and asymmetric vector arma agarch model of australasian meeting of the econometric society brisbane australia 2002 monthly data from july 1975 to 2000 are used in the empirical analysis the results suggest the presence of interdependent effects in the conditional variances between the four leading countries and asymmetric effects of shocks in two of the four countries this is an important result as it emphasizes interdependencies between major tourism source countries as well as the asymmetric effects of positive and negative shocks in tourism demand the estimated ccc matrices for the three models are not substantially different from each other which confirms the robustness of the estimates to alternative specifications of the multivariate conditional variance

the impact of crisis events and macroeconomic activity on taiwan s international inbound tourism demand abstract the number of inbound tourism arrivals directly impacts the tourism industry and the government agency investments therein therefore policymakers need to improve their understanding of how crisis events affect the demand for inbound tourism from the first quarter of 1996 to the second quarter of 2006 taiwan experienced four major disasters at approximately two year intervals these disasters included the asian financial crisis in 1997 the 21st september 1999 earthquake the 11th september 2001 attacks in the united states and the outbreak of sars in 2003 this paper examines the impact of crisis events on the demand for tourism in order to establish a better understanding of changes and trends in the demand for international tourism this paper uses the auto regression distributed lag model by pesaran shin and smith pesaran m h shin y smith r j 2001 bounds testing approaches to the analysis of long run relationship journal of applied econometrics 16 289 326 to examine the negative impact of these disasters on the demand for inbound tourism this paper also explores the influence of variables such as foreign exchange rates incomes relative prices and transportation costs on the dynamics of the demand for inbound tourism this paper finds that a long term equilibrium exists among all variables indicating that macroeconomic variables may be used to determine the rise or fall of the number of inbound tourism arrivals income and foreign exchange rates are both significant explanatory variables in terms of incurred losses the number of inbound tourism arrivals suffered the greatest decline during the outbreak of severe acute respiratory syndrome sars followed by the 21st september 1999 earthquake and the 11th september 2001 attacks the impact of the asian financial crisis was relatively mild this paper finds that any impact on safety whether domestic or international negatively affects tourism demand the impact of financial crises on tourism demand is less significant ensuring the safety and health of tourists is the key to maintain demand for inbound tourism

challenges in the wind turbines location process in central europe the use of spatial decision support systems abstract the implementation of a framework for climate and energy policies in europe entails a number of development projects connected to renewable energy resources as far as many western countries have realized some of those investments during recent decades and have more experience in that field most of the countries in central europe have to face that challenge right now however a rapid increase in renewable energy production in those countries can cause some dysfunctions in the investment process national control authorities in poland marked that the decision making process concerning the location of wind turbines has not been carried out properly the paper presents a review of the studies regarding the use of spatial analysis in renewable energy policy implementation and a proposition for the use of the multi criteria spatial decision support system based on geographical information systems the presented model has a character of an open framework which allows a user to add any location parameter or factor which is possible to be represented as a metric value the spatial character of the proposed solution exceeds only mathematical models in the way of interpretation of the results an intuitive model supports communication with stakeholders and helps to explain the correlations between human activity and the location of power plants the model was tested on the case study of wroclaw agglomeration area poland and includes 13 location factors the use of a multi criteria model guaranteed a broader point of view in comparing five different scenarios of wind farms development in the decision making process as it combines conflicted interests groups minimalizes subjective assessment and enables to define priorities while setting weights of factors

the firm as a communication network this paper analyzes how organizations can minimize costs of processing and communicating information communication is costly because it takes time for an agent to absorb new information sent by others agents can reduce this time by specializing in the processing of particular types of information when these returns to specialization outweigh costs of communication it is efficient for several agents to collaborate within a firm it is shown that efficient networks involve centralization that individuals delegate tasks to subordinates only if they are overloaded and that the number of transits to the top tends to be equalized across individual information items

conflicts between decentralized renewable electricity production and landscape services a spatially explicit quantitative assessment for switzerland abstract the production of decentralized renewable electricity often collides with provisioning regulating and cultural services of the landscape in this paper we operationalize the landscape service approach and generate conflict maps between three renewable energies wind pv forest biomass and six competing landscape services nutrition and materials aesthetics physical and experiential interactions heritage and symbolic content water and liquid flows lifecycle maintenance habitat and gene pool protection media content analysis and expert interviews were used to ground truth the national conflict maps in several swiss regions and to understand to what degree the national conflict assessments match the regional and local perceptions of these conflicts in switzerland approximately 40 000 km 2 biomass from forests is by far the least conflicting renewable energy followed by pv on roofs for the latter 68 of the technically feasible energy potential can be generated with low conflicts and more is expected with new materials wind has a high conflict potential only 12 of the technically feasible energy potential is low conflict pv on open land marginal land and shrubland is at the moment not currently feasible in switzerland the accuracy of our conflict assessment is sufficiently high to estimate the proportion that socially sustainable energy could cover of the overall energy gap of 22 25 twh yr caused by the phase out of swiss nuclear plants by 2050 low conflict solar energy from rooftops could contribute approximately 30 of the required 22 25 twh yr intensified wood production and wind energy could add another 40 the gap of approximately 30 must come from undisputed energy sources such as biogas from recycled organic material from centralized renewable energies such as geothermal or large hydropower or from new or technologically improved renewable energies the presented decision support tools are a timely contribution to the designation of legally binding zones for renewable energy production

designing tax policy in federalist economies an overview abstract the emerging economic federations of the european union russia and south africa along with the established federations in australia canada and the united states confront the task of designing the institutions for federal fiscal policy this paper reviews the literature on the design of tax policy in federalist economies we conclude that taxation by lower level governments can lead to significant economic inefficiencies and inequities the usual assignment view of federalis recommends central government policies for example resident based taxation or grants in aid to correct these failures these recommendations assume that the central government will act as a benevolent social planner the political economy view of federalism suggests that this assumption is in error and that additional federalist institutions must be considered alternative legislative structures and constitutional rules are considered

the valuation of options when asset returns are generated by a binomial process this paper values options on assets whose returns over a finite interval of time are generated by a binomial process it shows that a simple valuation relationship between the option and the underlying stock obtains if investors have preference functions that belong to a particular class even if opportunities to hedge do not exist one particular application of the theory is in the case where the stock price over a finite interval could increase by an amount fall by the same amount or stay at the same level the results in this paper may be viewed as the foundation of the preference based approaches to obtaining a risk neutral valuation relationship in this paper we value options on assets whose returns over a single period of time are generated by a multi stage binomial process of the additive and multiplicative types the market is open only at the beginning and end of the single period and consequently the risks involved in holding options cannot be hedged the case of a single stage binomial process in such a setting has been

options on the maximum or the minimum of several assets using an intuitive approach that also provides new intuition concerning the black and scholes equation this paper extends the results of johnson and stulz to the pricing of options on the minimum or the maximum of several risky assets

the multiprincipal nature of government abstract one of the theoretical tools required to open the black box of the government organization is the theory of multiprincipals which describes how different incentive mechanisms compete with each others in viewing the set of relationships between several government bodies and the entities they regulate as a set of competing contracts in which the control of the regulatory process is shared amongst these different regulators we can address the question of the costs and the possible benefits of such structural separation first this paper surveys the previous literature on the topic then it traces out the possible benefits of such structures to the non benevolence of regulators we discuss also how regulatory rights of control and communication channels must be designed all together to deal with this problem

incentives and optimal size of local jurisdictions abstract a model of optimal territorial decentralization is presented in which smaller local governments have an informational advantage concerning public goods production costs and the central government has imperfect information on spillover effects induced by local projects the attention is focused on the optimal size of local entities and on the shape of transfer schedules from the central government to local jurisdictions the optimal territorial organization is a compromise between small jurisdictions so as to benefit from the geographical proximity effect on information and large entities in which spillover effects are more easily internalized by means of linear or non linear taxation schemes implemented by the centre

fiscal decentralization and intergovernmental fiscal relations a cross country analysis abstract fiscal decentralization consists primarily of devolving revenue sources and expenditure functions to lower tiers of government by bringing the government closer to the people fiscal decentralization is expected to boost public sector efficiency as well as accountability and transparency in service delivery and policy making decentralization also entails greater complexity in intergovernmental fiscal relations and coordination failures in fiscal relations are likely to have a bearing on fiscal positions nationally and subnationally evidence provided in this paper for a sample of 30 countries suggests that coordination failures in intergovernmental fiscal relations are likely to result in a deficit bias in decentralized policy making particularly in the case of developing countries which may not meet important requirements for successful decentralization

determinants of expenditure decentralization evidence from china summary this study is the first attempt to examine the determinants of expenditure decentralization at sub provincial levels in china the chinese central government gives detailed guidelines to local governments on public finance but ironically their expenditure assignment is far from being well regulated differences in fiscal decentralization on the expenditure side are enormous among local governments employing a panel dataset of 1995 2006 we provide empirical evidence that transfer dependency negatively affects expenditure decentralization in chinese local governments it suggests that intermediate governments i e provincial governments may have grabbed central grants for self interests

modelling the uncertainty in monthly international tourist arrivals to the maldives abstract the indian ocean tsunami of 26 december 2004 made clear the devastating short term impact in lost lives as well as the longer term impact in lost livelihoods and an uncertain future tourism was one of the more obvious non human casualties of this tragic natural phenomenon tourism is the principal industry in the maldives accounting for more than 30 of gdp and more than 60 of foreign exchange earnings as over 55 of government tax revenue arises from tourism related taxes and monthly government budget financing depends largely on international tourist arrivals the monitoring of daily weekly and monthly international tourist arrivals is essential for fiscal policy evaluation over 600 000 tourists visited the maldives in 2004 this paper examines the time series properties of monthly international tourist arrivals to the maldives from eight major tourist source countries namely italy germany uk japan france switzerland austria and the netherlands from 1 january 1994 to 31 december 2003 monthly international tourist arrivals and the associated uncertainty are estimated for the eight principal tourist source countries univariate and multivariate time series models of conditional volatility or uncertainty are estimated and tested the conditional correlations are estimated and examined to ascertain whether there is specialization diversification or segmentation in the international tourism demand shocks from the major tourism source countries to the maldives the estimated static conditional correlations for monthly international tourist arrivals as well as for the respective transformed series were found to be significantly different from zero but also relatively low this indicates that the government of the maldives and the major tour operators that organise tourist vacations have to emphasise their marketing efforts independently of each tourist source country

evaluating ecosystem service trade offs with wind electricity production in switzerland in switzerland different types of land use including electricity production compete directly for little available space the swiss energy strategy relies heavily on incorporating renewable sources of electricity including wind in order to ensure long term efficient socially acceptable and sustainable electricity production land use conflicts should be addressed and properly managed through a comprehensive and balanced process we propose a method to apply the ecosystem service es approach combined with an optimisation tool to tackle the complex problems posed by wind electricity development in a topographically challenging landscape marxan was used as optimisation software to evaluate assess and quantify the trade offs between es provisioning and wind electricity production expressing different es in comparable units and evaluating the costs to the system when these are lost versus the benefits gained from wind electricity production generated an output of possible solutions when compared to similar studies modelling wind electricity output that avoid negative interaction with es throughout switzerland the current results using the optimisation tool marxan suggest a solution requiring 13 5 fewer turbines 1903 in an average solution in order to produce 12 twh yr of wind generated electricity and 18 fewer turbines 842 on average to produce 5 twh yr thus using optimisation software can lead to more efficient spatial planning solutions our methodology can be applied toward cost effective renewable energy development that minimises opportunity cost in terms of foregone es provisioning

political and monetary institutions and public financial policies in the industrial countries institutions and policies vittorio grilli donato masciandaro and guido tabellini why do countries as similar as the industrialized oecd countries go through such different experience in terms of public deficits and debts or in terms of inflation the answer cannot come from macroeconomic policy responses to different disturbances nor from the principles of optimal taxation but rather from politics this article focuses on the role that particular institutions exert in providing constraints and incentives which shape the actions of policymakers the electoral process and political traditions affect the ability of governments to deal with deficits and mounting debts what seems to matter most it is found is the effect of the durability of governments governments with short horizons act myopically and never quite tackle the hard choices such governments typically exist in countries with an electoral system favouring many small political parties central bank independence promotes low inflation with no apparent costs in terms of real economic performance irrespective of the political institutions in fact there is no link between monetary and fiscal discipline these findings carry powerful implications for countries facing high indebtedness or stubborn inflation but also for the construction of the european economic and monetary union

does a common currency promote countries growth via trade and tourism the main aim of this study is to contribute to the debate on the effects of a common currency in particular the impact of a common currency on growth via trade and tourism is explored for a panel dataset which includes 179 countries as destination and 30 oecd countries as origin over the period 1995 2006 this research contributes to previous work in three ways i tourism is included as an additional channel for a common currency to promote growth ii the heterogeneity of countries is addressed by dividing the sample into three groups of countries by income and iii up to date data including the case of the euro are considered the results obtained suggest that a common currency strengthens economic growth by promoting not only international trade but also tourism

an algorithm for computing values of options on the maximum or minimum of several assets an approximate method is developed for computing the values of european options on the maximum or the minimum of several assets the method is very fast and is accurate for parameter ranges that are often of the most interest the approach casts the problem in terms of order statistics and can be used to handle situations where the initial asset prices the asset variances and the covariances are all unequal numerical values are given to illustrate the accuracy of the method

numerical evaluation of multivariate contingent claims we develop a numerical approximation method for valuing multivariate contingent claims the approach is based on an n dimensional extension of the lattice binomial method closed form solutions for the jump probabilities and the jump amplitudes are obtained the accuracy of the method is illustrated in the case of european options when there are three underlying assets article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

a lattice framework for option pricing with two state variables a procedure is developed for the valuation of options when there are two underlying state variables the approach involves an extension of the lattice binomial approach developed by cox ross and rubinstein to value options on a single asset details are given on how the jump probabilities and jump amplitudes may be obtained when there are two state variables this procedure can be used to price any contingent claim whose payoff is a piece wise linear function of two underlying state variables provided these two variables have a bivariate lognormal distribution the accuracy of the method is illustrated by valuing options on the maximum and minimum of two assets and comparing the results for cases in which an exact solution has been obtained for european options one advantage of the lattice approach is that it handles the early exercise feature of american options in addition it should be possible to use this approach to value a number of financial instruments that have been created in recent years

searching for leviathan an empirical study in several papers and a recent book geoffrey brennan and james buchanan 1977 1978 1980 have put forth a striking and controversial view of the public sector drawing by analogy on the conventional theory of monopoly in the private sector they envision a monolithic government that systematically seeks to exploit its citizenry through the maximization of the tax revenues that it extracts from the economy from this perspective they develop a fiscal constitution whose central purpose is to constrain leviathan by limiting in various ways its access to tax and other fiscal instruments while the leviathan hypothesis has been the source of lively debate and a wide range of policy proposals it has not been the subject of much systematic empirical work or testing this is a matter of some importance since the policy implications of the leviathan view are disturbing to put it mildly in particular brennan and buchanan virtually stand on their heads many of the basic theorems in public finance for an efficient and equitable tax system if in fact the leviathan view is an inaccurate depiction of the functioning of the public sector the introduction of their policy proposals is likely to make a sorry mess of the fiscal system the leviathan model does however have some straightforward implications for observable fiscal behavior it is the purpose of this paper to examine one of these testable implications brennan and buchanan stress that fiscal decentralization is itself a powerful constraint on leviathan competition among governments in the context of the interjurisdictional mobility of persons in pursuit of fiscal gains can offer partial or possibly complete substitutes for explicit fiscal constraints on the taxing power 1980 p 184 such competition among governments in a federal system that places heavy reliance on local fiscal decisions will greatly limit the capacity of leviathan to channel resources into the public sector in short as indicated by the epigraph to this paper the leviathan model implies that other things equal the size of the public sector should vary inversely with the extent of fiscal decentralization 2