arch and bilinearity as competing models for nonlinear dependence in this article we consider whether the wide acceptance of autoregressive conditional heteroscedasticity arch models may be at the expense of other nonlinear processes such as bilinear models we first propose a joint test for arch and bilinearity a nonnested test is then suggested to determine whether nonlinear dependence should be attributed to arch or bilinearity the tests are then applied to three series when generalized arch garch models are taken as the null hypothesis we fail to reject it for all the data series when bilinearity is taken as the null however it is rejected in two cases moreover an out of sample forecasting exercise shows that the garch model is superior the results therefore indicate a strong preference for the garch model

public research and industrial innovations in germany this paper deals with the effects of publicly funded research at universities polytechnics and federal research labs on industrial innovations in germany we discuss the characteristics of companies that benefit from the findings of public research institutions in questioning 2 300 companies we found that less than one tenth of product or process innovating firms introduced innovations between 1993 and 1995 that would not have been developed without public research these new products amount to approximately 5 percent of all new product sales regressions show that firms own r d support the ability to absorb the findings of public research and turn them into innovations contrary to the widely held opinion that proximity to public research institutions does promote collaboration between firms and public research and increase the amount of received knowledge spillovers we found no higher probability of publicly supported innovations for firms in germany that are located near universities or polytechnics

innovation behaviour and regional indigenous potential meyer krahmer f 1985 innovation behaviour and regional indigenous potential reg studies 19 523 534 this paper has been written in order to present empirical results about some hypotheses not yet very well clarified in innovation oriented regional research the first part relates to one of the assumptions underlying innovation oriented regional policy which is that innovating and non innovating firms have different characteristics with respect to employment product lines and markets in particular the contribution to regional growth made by innovating firms is said to be larger in the second part of the paper the results of a study are presented in which it was attempted to find out empirically the extent of regional differences in indigenous innovation potential in the federal republic of germany reference is made to the innovating firms their performance and behaviour and bottlenecks in innovation as in other recent studies it is confirmed that there exists also in rural regions a sizeab

preferential trading arrangements as strategic positioning abstract we analyze a three country model of trade negotiations in which countries can form bilateral free trade areas bilateral customs unions or a trilateral preferential trading arrangement and can continue negotiating after reaching an agreement in contrast to the literature on multilateral bargaining the set of agreements can form a nonpartitional network while in contrast to the network literature players can reach multilateral agreements patient enough countries only reach bilateral agreements if insiders gain more than outsiders which allows them to manipulate the status quo in subsequent negotiations however a hub and spoke pattern may then emerge and insiders then dissipate the advantages of strategic positioning we also use variants on the model to explain why a us commitment not to bargain bilaterally sustained progress at gatt negotiations and the rarity of open access preferential trading arrangements

testing for nonlinear dependence in daily foreign exchange rates the purpose of this article is to investigate whether daily changes in five major foreign exchange rates contain any nonlinearities although the data contain no linear correlation evidence indicates the presence of substantial nonlinearity in a multiplicative rather than additive form further examination reveals that a generalized autoregressive conditional heteroskedasticity model can explain a large part of the nonlinearities for all five exchange rates copyright 1989 by the university of chicago

temporal aggregation of an estar process some implications for purchasing power parity adjustment nonlinear models of deviations from ppp have recently provided an important theoretically well motivated contribution to the ppp puzzle most of these studies use temporally aggregated data to empirically estimate the nonlinear models as noted by taylor 2001 if the true dgp is nonlinear the temporally aggregated data could exhibit misleading properties regarding the adjustment speeds we examine the effects of different levels of temporal aggregation on estimates of estar models of real exchange rates our monte carlo results show that temporal aggregation does not imply the disappearance of nonlinearity and that adjustment speeds are significantly slower in temporally aggregated data than in the true dgp furthermore the autoregressive structure of some monthly estar estimates found in the literature is suggestive that adjustment speeds are even faster than implied by the monthly estimates

exchange rate target zones a survey of the literature this work selectively reviews the literature on exchange rate target zones and their theoretical and empirical methodologies and examines whether they can be used to clarify to what extent this type of exchange rate regime could contribute to greater exchange rate stability we discuss the main contributions of the first and second generations of exchange rate target zone models in an attempt to reconcile the poor empirical performance of the krugman model with the reality of exchange rate target zone regimes this line of research integrates target zones with alternative underlying economic models such as imperfect credibility intra marginal interventions and sticky price models it was thus possible to understand the correlations observed between the exchange rate its fundamentals determinants and the interest rate differential and to explain the fact that the statistical distribution of the exchange rate is hump shaped rather than u shaped this implies that the initial emphasis of target zone models on nonlinearities honeymoon effect smooth pasting and marginal interventions has vanished exchange rate target zones are better described as similar to managed floating regimes with intra marginal interventions with some marginal interventions when the exchange rate reaches the edges of the floating band

measuring the returns of r d an empirical study of the german manufacturing sector over 45 years abstract motivated by recent statistics that show significant growth in labor productivity this paper seeks to analyze the long term relationship between domestic rd recent rates of return on r d are estimated to have reached an all time low spanning the last 45 years current yields of r d are only one third compared to the sixties in conclusion though the productivity slowdown of the seventies seems to have been overcome this is not attributed to r d investments

government r d subsidies as a signal for private investors abstract government subsidies for r d are intended to promote projects with high returns to society but too little private returns to be beneficial for private investors this may be caused by spillovers or a low appropriability rate apart from the direct funding of these projects government grants may serve as a signal for good investments for private investors we use a simple signaling model with different types of r d projects to capture this phenomenon the agency has a preference for basic research projects as they promise high expected social returns while banks prefer applied research projects with high private returns in a setup where the subsidy can only be used to distinguish between basic and applied research projects government agency s signal is not very helpful for banks however if the subsidy is accompanied by a quality signal it can lead to increased or better selected private investments

academic research underlying industrial innovations there has been no systematic study of the characteristics of the universities and academic researchers that seem to have contributed most to industrial innovation nor do we know how such academic research has been funded this paper based on data obtained from sixty six firms in seven major manufacturing industries and from over two hundred academic researchers sheds new light on the sources characteristics and financing of academic research underlying industrial innovation the findings should be of interest to economists concerned with technological change and to policymakers attempting to increase the economic payoff from the nation s academic research copyright 1995 by mit press

target zone models with stochastic realignments an econometric evaluation abstract this paper provides empirical support for the second generation of target zone models with stochastic devaluation risk i propose a simple non linear framework with a time varying probability of exchange rate realignment this model nests alternatives i with no devaluation risk ii with constant devaluation risk and iii the random walk i reject these three in favor of a stochastic realignment model where devaluation risk varies with economic fundamentals the model predicts 13 of 17 realignments for the franc and lira including an out of sample episode in august 1993

the formation of networks with transfers among players we examine the formation of networks among a set of players whose payoffs depend on the structure of the network when players may bargain by promising or demanding transfer payments when forming links we vary three aspects of the game i whether players can only make transfers to and receive transfers from players to whom they are directly linked or whether they can also subsidize links that they are not directly involved in ii whether or not transfers relating to a given link can be made contingent on the full resulting network or only on the link itself and iii whether or not players can pay other players to refrain from forming links we characterize the networks that are supported under these variations and show how each of the above aspects either accounts for a specific type of externality or deals with the combinatorial nature of network payoffs

modelling business cycle nonlinearity in conditional mean and conditional variance some international and sectoral evidence this paper tests for the presence of output mean and variance nonlinearities in international industrial production and uk and us sectoral production growth rates using armagqarch bilinear bl and joint bl gqarch models arma gqarch models confirm the presence of asymmetric variance effects in italian uk and us industrial production and in all sectors other than us nondurables and such that the conditional variance of output is increased following negative shocks bl models are identified for german italian and us industrial production and us manufacturing while bl gqarch models of joint nonlinearity in both conditional mean and conditional variance are also found to hold for us industrial production and manufacturing moreover with the exception of italy all bl and bl qarch models provide superior out of sample mean forecasts relative to forecasts from both naive models and models of the arma gqarch class

nonlinear nonparametric nonessential exchange rate estimation a wide variety of empirical exchange rate mo dels have been estimated over the years but despite the considerable energies that have been devoted to this work the economics profession has remarkably little to show for itself there is little evidence that conclusively links the bilateral exchange rates of typical oecd countries to fundamental macroeconomic determinants of exchange rates such as money output relative prices or interest differentials coefficient estimates are notoriously unstable and frequently mis signed compared with theoretical predictions exchange rate equations do not fit particularly well and forecast no better than the simplest naive alternatives recently a new class of exchange rate models was introduced by paul krugman 1988 these models provide a potential reason for the poor performance of traditional exchange rate models because they are nonlinear if the exchange rate actually depends in a nonlinear way on exogenous macroeconomic fundamentals linear exchange rate models may work poorly even though the exchange rate is closely linked to fundamentals in this paper we provide a brief sketch of some of this work as well as some preliminary evidence on the actual performance of these nonlinear models in our empirical analysis we use a nonparametric estimator that can handle a wide variety of nonlinear phenomena we examine fixed exchange rate regimes where nonlinearities should be quite easy to detect however we do not find strong empirical support for the hypothesis that the incorporation of nonlinear effects significantly improves models of exchange rate determination in section i we briefly review the theoretical literature on nonlinear target zone exchange rate models linking this work to the tests for intrinsic bubbles we draw heavily on recent papers by kenneth froot and maurice obstfeld 1989a b our methodology and data are discussed in section ii section iii contains new empirical tests for nonlinearities in exchange rate models

the economic impact of industry funded university r d abstract in recent years industry has increased its direct funding of university r d this article examines whether such collaborative r d leads to increases in technological innovation in industry data are analyzed for the years 1953 through 1986 it is found that direct industry funding of university research is associated with subsequent increases in industry r d expenditures these expenditures include funding from both federal and industry sources this increase in r d expenditures occurs with a median lag of five years rival hypotheses are examined such as the effect of general university research expenditures however these hypotheses are rejected this article concludes by raising significant implications for policy

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

modelling and forecasting exchange rates with a bayesian time varying coefficient model this paper employs a multivariate bayesian time varying coefficients tvc approach to model and forecast exchange rate data it is shown that if used as a data generating mechanism a tvc model induces nonlinearities in the conditional moments and leptokurtosis in the unconditional distribution of the series it is also shown that leptokurtic behavior disappears under time aggregation as a forecasting device a bayesian tvc model improves over a random walk model the improvements are robust to several changes in the forecasting environment

bilateralism and free trade we study a setting with many countries in each country there are firms that can sell in the domestic as well as foreign markets countries can sign bilateral free trade agreements that lower import tariffs and thereby facilitate trade we allow a country to sign any number of bilateral free trade agreements a profile of free trade agreements defines the trading regime our principal finding is that in symmetric settings bilateralism is consistent with global free trade we also explore the effects of asymmetries across countries and political economy considerations on the incentives to form trade agreements

the statistical properties of daily foreign exchange rates 1974 1983 abstract this paper examines the statistical properties of daily rates of change of five foreign currencies from 1974 to 1983 the main purpose is to discriminate between two competing explanations for the observed heavy tails of the distribution that the data are independently drawn from a heavy tail distribution which remains fixed over time and that the data come from distributions which vary over time evidence point to the rejection of the first hypothesis further investigations show that the rejection can be attributed to changing means and variances in the data which can be described by a simple statistical model

endogenous risk in a portfolio balance rational expectations model of the deutschemark dollar rate abstract a portfolio balance model of the dm s rate under rational expectations is specified in which systematic risk induced deviations from uncovered interest parity are allowed this leads to a reduced from containing a potentially time varying risk premium which we approximate and estimate using an arch in mean approach the maximum likelihood estimator and a lagrande multiplier test for arch in mean are developed the estimation results indicate a small but non negligible time varying risk premium

networks of collaboration in oligopoly abstract in an oligopoly prior to competing in the market firms have an opportunity to form pair wise collaborative links with other firms these pair wise links involve a commitment of resources and lead to lower costs of production of the collaborating firms we study the incentives of firms to form links and the architecture of the resulting collaboration network we find that incentives to form links are intimately related to the nature of market competition our analysis also suggests that collaborations are used by firms to generate competitive advantage and that strategically stable networks are often asymmetric with some firms having many links while others have few links or are isolated specifically we show that networks with the dominant group architecture stars and inter linked stars are stable we also present some results on the architecture of socially efficient networks

science dependence of technologies evidence from inventions and their inventors abstract articulating a compelling economic rationale to justify investments in research by definition furthest removed from direct immediate economic benefit is perhaps one of chief challenges of r d managers policy makers and science analysts in the years ahead although several innovation studies and surveys have provided some convincing empirical evidence of impacts and benefits of research to technical progress there is still an urgent need for comprehensive models reliable data and analytical tools to describe and monitor links between r d and industrial innovation in more detail as for the role of scientific and engineering research in the innovation process this paper reports on the findings of a novel methodology to increase our understanding of the contribution of research efforts to successful technical inventions the approach is based on a nation wide mail survey amongst inventors working in the corporate sector and the public research sector in the netherlands the inventors inside information regarding their patented inventions and related technological innovations on the market provided a range of quantitative data on the importance of the underpinning research activities statistical models attempting to explain the degree of science dependence of the inventions identify a range of relevant variables covering the inventor s own capabilities and previous r d achievements external information sources as well as the inventor s r d environment in general some 20 of the private sector innovations turned out to be partially based on public sector research furthermore citations in patents referring to basic research literature were found to be invalid indictors of a technology s science dependence

a trading approach to testing for predictability we propose a market timing test for conditional mean independence of financial returns the new excess predictability ep test statistic has an interpretation of a properly normalized return of a certain trading strategy we discuss similarities of the ep test to the popular directional accuracy da test of pesaran and timmermann power properties of the ep test are advantageous and size properties are comparable to those of the da test we illustrate application of the test using weekly data on the s p500 index

allocating value among farsighted players in network formation we study the stability of networks when players are farsighted and allocations are determined endogenously the set of strongly efficient networks is the unique von neumann morgenstern farsightedly stable set with bargaining if the value function is anonymous component additive and top convex and the allocation rule is anonymous and component efficient moreover the componentwise egalitarian allocation rule emerges endogenously

academic research and industrial innovation the purpose of this study is to estimate the extent to which technological innovations in various industries have been based on recent academic research and the time lags between the investment in recent academic research projects and the industrial utilization of their findings because no attempt to my knowledge has been made to estimate the social rate of return from academic research we also make some rough and tentative estimates of this sort while the results are subject to many limitations discussed below they should be of interest to public policy makers concerned with science and technology as well as to

the statistical distribution of exchange rates empirical evidence and economic implications the abundant evidence that changes in exchange rates have distributions with fatter tails than the normal distribution has led researchers to consider non normal distributions including the student the stable paretian and mixtures of distributions this paper compares the empirical fits of three non normal candidates and the normal distribution for daily changes in the logarithms of exchange rates using maximum likelihood estimation of the parameters and chi square goodness of fit tests the student and mixture of two normals provide the best fits but there is evidence that the distribution parameters may vary over time

a one stage model of link formation and payoff division abstract in this paper we introduce a strategic form model in which cooperation structures and divisions of the payoffs are determined simultaneously we analyze the cooperation structures and payoff divisions that result according to nash equilibria strong nash equilibria and coalition proof nash equilibria we find that no cycle will be formed if a player claims a positive amount for the formation of one of its links and that a player does not necessarily profit from a central position in a cooperation structure journal of economic literature classification numbers c71 c72

developments in the nonlinear analysis of economic series various aspects of the analysis of nonlinearities are surveyed in this paper a possibility of distinguishing between a low dimensional deterministic chaotic process and a white noise stochastic process using estimates of the correlation dimension is discussed it is concluded that there is no evidence of chaos as opposed to nonlinearity in the economic data the modes of testing for nonlinearity are briefly surveyed with particular attention paid to a new test based on a neural network specification it is found that aggregation can reduce nonlinearity and a definition of long memory is proposed that suggests a nonlinear generalization of cointegration

nonlinear dynamics and stock returns simple deterministic systems are capable of generating chaotic output that mimics the output of stochastic systems for this reason algorithms have been developed to distinguish between these two alternatives these algorithms and related statistical tests are also useful in detecting the presence of nonlinear dependence in time series in this article the authors apply these procedures to stock returns and find evidence that indicates the presence of nonlinear dependence on weekly returns from the center for research in security prices value weighted index copyright 1989 by the university of chicago

chicken and egg competition among intermediation service providers we analyze a model of imperfect price competition between intermediation service providers we insist on features that are relevant for informational intermediation via the internet the presence of indirect network externalities the possibility of using the nonexclusive services of several intermediaries and the widespread practice of price discrimination based on users identity and on usage efficient market structures emerge in equilibrium as well as some specific form of inefficient structures intermediaries have incentives to propose non exclusive services as this moderates competition and allows them to exert market power we analyze in detail the pricing and business strategies followed by intermediation services providers copyright 2003 by the rand corporation

the persistence in volatility of the us term premium 1970 1986 abstract this paper examines the persistence of the volatility of the risk premia for excess holding period returns of the term structure using a garch m model of the conditional variance the finding of a high degree of persistence cannot be sustained once allowance is made for a structural break in the unconditional variance caused by a change in the operation of us monetary policy during 1979 1982

risk uncertainty and exchange rates this paper is motivated by two facts failure of log linear empirical exchange rate models of the 1970 s and the observed variability of risk premiums in the forward market rational maximizing models predict that changes in conditional variances of monetary policies government spendings and income growths affect risk premiums and induce conditional volatility of exchange rates i examine theoretically how changes in these exogenous conditional variances affect the level of the current exchange rate and attempt to quantify the extent that this channel explains exchange rate volatility using autoregressive conditional heteroscedastic models

the law of the few the law of the few refers to the following empirical phenomenon in social groups a very small subset of individuals invests in collecting information while the rest of the group invests in forming connections with this select few in many instances there are no observable dierences in characteristics between those who invest in information and those who invest in forming connections this paper shows that the law of few naturally emerges in environments with identical rational agents we develop a strategic game in which players have the opportunity to invest in collecting information as well as in investing in bilateral connections with others we find that every strict equilibrium of this game exhibits the law of the few we also show that this pattern of social dierentiations is ecient in some cases

institutions supporting technical advance in industry elsewhere 1982 economists beliefs that modern capitalism is a fine innovation generating machine have no intellectual grounding in contemporary neoclassical theory the twin theorems take technologies as given the apparent effectiveness of capitalism in this arena must reside in characteristics and mechanisms other than those featured in the microeconomic theory textbooks in our book we attempt to analyze these it also is true that the capitalist engine is a much more complicated one than many economists seem to think i presently am

is the business cycle characterized by deterministic chaos abstract tests are conducted on u s macroeconomic data for the presence of low dimensional deterministic chaos where deterministic chaos is defined as in grandmont s 1985 walras bowley lecture or in brock 1986 the idea is to test for evidence of endogenous instability causing the business cycle low order autoregressions are hard to reject with our methods evidence of chaos is weak but our tests may be too weak to detect it evidence of nonlinearity is present in employment 1950 i to 1983 iv unemployment 1949 i to 1982 iv monthly post war industrial production and pig iron production 1877 1937

energy sector pricing on the role of neglected nonlinearity modern economies have been subjected to a number of shocks during the past several years such as the burst of the internet bubble terrorist attacks corporate scandals the war in iraq the uncertainty about energy prices and the recent subprime mortgage crisis in particular during the last few years the energy shock has caused concerns for potential stagflation for both the united states and numerous other countries we perform numerous univariate tests for non linearity and chaotic structure using price data from the energy sector to resolve whether the sector s fundamentals or exogenous shocks drive these prices

regional clusters of the information economy in germany matuschewski a 2006 regional clusters of the information economy in germany regional studies 40 409 422 in germany similar to other countries enterprises that belong to the information economy ie tend to concentrate in a few regions the paper takes a closer look at the reasons and driving forces for regional clustering within the ie it is based on the analysis of three german ie clusters hamburg dresden and the technology region karlsruhe the analysis follows an explorative actor oriented approach using a mixture of qualitative and quantitative empirical methods the paper concentrates on selected aspects of clustering questioning the relevance of different theoretical concepts for regional clusters within the ie it confirms that regional clusters rely on sectoral and regional factors that shape specific regional development paths matuschewski a 2006 regional clusters of the information economy in germany regional studies 40 409 422 in germany similar to other countries enterpri

modeling non linearities in real effective exchange rates abstract the aim of this paper is to test for and model non linearities in the real effective exchange rates of 10 major industrial countries the g 10 to exploit non linear dependencies in exchange rates we apply the star smooth transition autoregressive family of models these non linear models imply the existence of two distinct regimes in exchange rates with potentially different dynamic properties but the transition between the regimes is smooth tests reject linearity for eight exchange rates the real exchange rate process is cyclical in both regimes for almost all countries and there appears to be some evidence of asymmetry star models outperform hamilton s markov regime switching model in an out of sample forecasting contest

tradable set aside requirements tsars conserving spatially dependent environmental amenities land conversion patterns can conflict with endangered species protection by fragmenting the landscape incentive mechanisms can help mitigate the threat of habitat fragmentation by aggregating landowner conservation decisions across the landscape the optimal conservation strategy for endangered species can target the most connected habitat cluster as an initial starting point and then expand the conservation patch to maximize connectivity herein we present an incentive mechanism the tradable set aside requirements tsars designed to target the low cost contiguous conservation landscape and share the burden of conservation among landowners in the lab we examine the performance of two land use conservation policies tsars and the tsars combined with an agglomeration bonus evaluated by economic and biological measures of efficiency we find that tsars relative to a command and control policy increases patch size and habitat connectivity within the landscape additionally combining tsars with the agglomeration bonus increases biological efficiency habitat connectivity and patch size within the landscape but at a price higher opportunity cost tsars with the agglomeration bonus can be more cost effective than a tsars only policy for species sensitive to large core habitat requirements and landscape connectivity

on the short and long run efficiency of energy and precious metal markets this article contributes to the related literature by empirically investigating the efficiency of nine energy and precious metal markets over the last decades employing several pronounced models we test for both short and the long run efficiency using in addition to linear cointegration models nonlinear cointegration and error correction models ecms which allow the efficiency intensity to change per regime our findings can be summarized as follows i futures prices are found to be cointegrated with spot prices but they do not constitute unbiased predictors of future spot prices ii the hypothesis of risk neutrality is rejected iii the short run efficiency hypothesis is rejected suggesting that using past futures price returns improves the modeling and forecasting of future spot prices and iv the nonlinear modeling suggests the presence of two distinct regimes wherein the first regime the efficiency hypothesis is supported whereas in the second it is rejected the empirical findings have important implications for producers hedgers speculators and policymakers

network economics and the environment insights and perspectives local interactions and network structures appear to be a prominent feature of many environmental problems this paper discusses a wide range of issues and potential areas of application including the role of relational networks in the pattern of adoption of green technologies common pool resource problems characterized by a multiplicity of sources the role of social networks in multi level environmental governance infrastructural networks in the access to and use of natural resources such as oil and natural gas the use of networks to describe the internal structure of inter country relations in international agreements and the formation of bilateral links in the process of building up an environmental coalition for each of these areas we examine why and how network economics would be an effective conceptual and analytical tool and discuss the main insights that we can foresee

multivariate nearest neighbour forecasts of ems exchange rates exchange rate modelling has been a persistent puzzle for international economists forecasts from popular models for the exchange rate generally fail to improve upon the random walk out of sample while a multivariate nonparametric approach provides useful information about exchange rates the model produces forecasts superior to the random walk for only one of the three ems currencies examined using a statistic developed in mizrach 1991 i find that the forecast improvement a 4 5 percent reduction in mean squared error for the lira in daily returns is not statistically significant a cross validation exercise suggests that the improvement is also not robust

core and periphery in networks abstract we study a model of network formation where the benefits from connections exhibit decreasing returns and decay with network distance we show that the unique equilibrium network is a periphery sponsored star where one player the center maintains no links and earns a high payoff while all other players maintain a single link to the center and earn lower payoffs both the star architecture and payoff inequality are preserved in an extension of the model where agents can make transfers and bargain over the formation of links under the condition that the surplus of connections increases in the size of agents neighborhoods our model thus generates two common features of social and economic networks 1 a core periphery structure 2 positive correlation between network centrality and payoffs

cross licensing and competition we study bilateral cross licensing agreements between n 2 firms that engage in competition after the licensing phase it is shown that the most collusive cross licensing royalty i e the one that allows the industry to achieve the monopoly profit is sustainable as the outcome of bilaterally efficient agreements in a symmetric setting if the terms of the cross licensing agreements are not observable to third parties the monopoly royalty is the unique symmetric bilaterally efficient royalty however when the terms of the agreements are public the most competitive royalty i e zero can also be bilaterally efficient policy implications regarding the antitrust treatment of cross licensing agreements are derived from these results

exchange rate predictability the main goal of this article is to provide an answer to the question does anything forecast exchange rates and if so which variables it is well known that exchange rate fluctuations are very difficult to predict using economic models and that a random walk forecasts exchange rates better than any economic model the meese and rogoff puzzle however the recent literature has identified a series of fundamentals methodologies that claim to have resolved the puzzle this article provides a critical review of the recent literature on exchange rate forecasting and illustrates the new methodologies and fundamentals that have been recently proposed in an up to date thorough empirical analysis overall our analysis of the literature and the data suggests that the answer to the question are exchange rates predictable is it depends on the choice of predictor forecast horizon sample period model and forecast evaluation method predictability is most apparent when one or more of the following hold the predictors are taylor rule or net foreign assets the model is linear and a small number of parameters are estimated the toughest benchmark is the random walk without drift

a survey of the literature on human capital intensive firms the aim of this paper is to provide an exhaustive survey of the academic research dedicated to the study of human capital intensive firms hcifs we use a bibliometric analysis based on the three widely used databases econlit science direct and wiley over the period 1992 2015 we are adapting a methodology developed in previous works to our specific object of study and we generate a bottom up clustering on keywords titles and abstracts our examination of the data sheds a light on five main clusters of works that respectively focus on 1 critical human resource management 2 intellectual capital assessment 3 funding risk and innovation 4 high skilled employees supporting economic development and 5 internal and external valuable social networks in a critical appraisal of our results we stress that the bibliometric analysis remains silent on how the different clusters are linked with each other based on our own appreciation of the hcifs literature we propose a further step in the identification of a central question linking up these clusters a transversal review of the five clusters reveals that hcifs appear as a network of specialized agents whose complementary human resources are decisive for the value creation process

factors affecting university industry r d projects the importance of searching screening and signalling this paper presents an empirical analysis of the determinants of research cooperation between firms and public research organisations pros for a sample of innovating small and medium sized enterprises smes the econometric analysis is based on the results of the know survey carried out in seven eu countries during 2000 in contrast to earlier works that provide information about the importance of pros research we know the number of firm pro collaborative research and development r d projects this allows us to study the determinants of firm collaboration with pros in terms of both the propensity of a firm to undertake r d projects with a university do they cooperate or not and the extent of this collaboration number of r d projects two questions are addressed which firms cooperated with pros and what are the firm characteristics that might explain the number of r d projects with pros the results of our analysis point to two major phenomena first the propensity to forge an agreement with an academic partner depends on the absolute size of the industrial partner second the openness of firms to the external environment as measured by their willingness to search screen and signal significantly affects the development of r d projects with pros our findings suggest that acquiring knowledge through the screening of publications and involvement in public policies positively affects the probability of signing an agreement with a pro but not the number of r d projects developed in fact firms that outsource research and development and patent to protect innovation and to signal competencies show higher levels of collaboration

characterizing nonlinearities in business cycles using smooth transition autoregressive models during the past few years investigators have found evidence indicating that various time series representing business cycles such as production and unemployment may be nonlinear in this paper it is assumed that if the time series is nonlinear then it can be adequately described by a smooth transition autoregressive star model the paper describes the application of these models to quarterly logarithmic production indices for 13 countries and europe tests reject linearity for most of these series and estimated star models indicate that the nonlinearity is needed mainly to describe the responses of production to large negative shocks such as oil price shocks

forecast improvements using a volatility index this paper explores the possibility of improved out of sample forecasting for stock returns and foreign exchange rates using observed nonlinearities in the two series forecasting is done using nonparametric techniques where important information is obtained from the current level of volatility in the series for both series forecast improvements are observed but for stock returns the improvements are only marginal these results indicate the usefulness and stability of some types of nonlinear modelling for financial markets

arch models properties estimation and testing abstract the aim of this survey paper is to provide an account of some of the important developments in the autoregressive conditional heteroskedasticity arch model since its inception in a seminal paper by engle 1982 this model takes account of many observed properties of asset prices and therefore various interpretations can be attributed to it we start with the basic arch models and discuss their different interpretations arch models have been generalized in different directions to accommodate more and more features of the real world we provide a comprehensive treatment of many of the extensions of the original arch model next we discuss estimation and testing for arch models and note that these models lead to some interesting and unique problems there have been numerous applications and we mention some of these as we present different models the paper includes a glossary of the acronyms for the models we describe

brokers and competitive advantage the broker profits by intermediating between two or more parties using a biform game we examine whether such a position can confer a competitive advantage as well as whether any such advantage could persist if actors formed relations strategically our analysis reveals that if one considers exogenous the relations between actors brokers can enjoy an advantage but only if 1 they do not face substitutes either for the connections they offer or the value they can create 2 they intermediate more than two parties and 3 interdependence does not lock them into a particular pattern of exchange if on the other hand one allows actors to form relations on the basis of their expectations of the future value of those relations then profitable positions of intermediation only arise under strict assumptions of unilateral action we discuss the implications of our analysis for firm strategy and empirical research

r d collaboration networks in mixed oligopoly we develop a model of endogenous network formation in order to examine the incentives for r d collaboration in a mixed oligopoly our analysis reveals that the complete network where each firm collaborates with all others is uniquely stable when r d subsidies are not available in addition to the complete network the private partial and the private hub star networks are pareto efficient however the complete network becomes the unique pareto efficient network when r d is subsidized this result is in contrast with earlier contributions in private oligopoly where under strong market rivalry a conflict between stable and efficient networks is likely to occur it also highlights the role of a public firm as policy instrument in aligning individual incentives for collaboration with the objective of efficiency independently of whether r d subsidies are provided by the regulator

firms transfer strategies with universities and the relationship with firms innovation performance based on a representative sample of swiss firms we empirically investigated strategies for knowledge and technology transfer ktt activities between business firms and universities as well as other public research institutions based on a cluster analysis of 19 different forms for ktt three types of ktt strategies were identified they were significantly correlated mainly to i the absorptive capacity of a firm ii several factors hampering ktt activities and iii some characteristics of the transfer process such as the number of partners the existence of contacts to foreign universities and the utilization of the mediating services of transfer offices furthermore it was found that ktt strategies related to the core transfer activities such as r d contracts are stronger correlated with innovation performance compared to strategies related to softer transfer forms copyright 2009 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

stock return serial dependence and out of sample portfolio performance we study whether investors can exploit serial dependence in stock returns to improve out of sample portfolio performance we show that a vector autoregressive var model captures stock return serial dependence in a statistically significant manner analytically we demonstrate that unlike contrarian and momentum portfolios an arbitrage portfolio based on the var model attains positive expected returns regardless of the sign of asset return cross covariances and autocovariances empirically we show however that both the arbitrage and mean variance portfolios based on the var model outperform the traditional unconditional portfolios only for transaction costs below ten basis points

inefficiencies in a model of spatial networks formation with positive externalities abstract in this paper we make an exploratory use of computational techniques genetic algorithms and monte carlo simulations to compute efficient and emergent networks in a spatialized version of the connections model of jackson and wolinski jackson m o wolinski a 1996 a strategic model of social and economic networks journal of economic theory 71 44 74 this approach allows us to observe and discuss inefficiencies that arise in a strategic network formation context with imperfectly link mediated positive externalities to connections and spatial link costs our results highlight that depending on the strength of the externalities emergent and efficient networks may share several structural properties nevertheless emergent networks are insufficiently dense and should be more structured around central agents

explaining the size of the public sector this paper aims at providing an explanation for the size of the public sector based on the idea of social insurance the main assumption made is that the public sector is less efficient but also less volatile than the private sector the demand driven level of the public sector that is derived as the one that maximizes the utility of the representative employed consumer depends positively on the variance of private output an increase in the size of the public sector has a positive effect on expected employment and a negative effect on expected consumption the size of the public sector set by the government which maximizes the probability of being re elected will be higher than the demand driven level if voters preferences for employment is higher than the consumption loss associated with public employment

financial regulations and bank credit to the real economy we present a new agent based model focusing on the linkage between the interbank market and the real economy with a stylised central bank acting as lender of last resort using this model we address the tradeoff between stability and economic performance for different structures of the interbank market we also explore the efficacy of recent regulatory reforms using our richer model our results suggest that the effects of regulatory leverage ratios on the banking sector s performance can vary in a complex and non monotonic way with the state of the economy the degree of connectivity of the interbank market and the amount of information available to market participants on bank risks

networks and farsighted stability the main contribution of this paper is to provide a framework in which the notion of farsighted stability for games introduced by chwe 1994 can be applied to directed networks in particular we introduce the notion of a supernetwork a supernetwork is made up of a collection of directed networks the nodes and uniquely represents via the arcs connecting the nodes agent preferences and the rules governing network formation by reformulating chwe s basic result on the nonemptiness of farsightedly stable sets we show that for any supernetwork i e for any collection of directed networks and any collection of rules governing network formation there exists a farsightedly stable directed network we also introduce the notion of a nash network relative to a given supernetwork as well as the notions of symmetric nonsimultaneous and decomposable supernetworks to illustrate the utility of our framework we present several examples of super networks compute the farsightedly stable networks and the nash networks

modeling heteroscedasticity in daily foreign exchange rates this article estimates autoregressive conditionally heteroscedastic arch and generalized arch garch models for five foreign currencies using 10 years of daily data a variety of arch and garch specifications a number of nonnormal error densities and a comprehensive set of diagnostic checks it finds that arch and garch models can usually remove all heteroscedasticity in price changes in all five currencies goodness of fit diagnostics indicate that exponential garch with certain nonnormal distributions fits the canadian dollar extremely well and the swiss franc and the deutsche mark reasonably well only one nonnormal distribution fits the japanese yen reasonably well none fit the british pound

conditional testing for unit root bilinearity in financial time series some theoretical and empirical results abstract this paper introduces a t ratio type test for detecting bilinearity in a stochastic unit root process it appears that such a process is a realistic approximation for many economic and financial time series it is shown that under the null of no bilinearity the test statistics are asymptotically normally distributed proofs of these asymptotic normality results require the gihman and skorohod theory for multivariate diffusion processes finite sample results describe speed of convergence power of the tests and possible distortions to unit root testing which might appear due to the presence of bilinearity it is concluded that the two step testing procedure suggested here the first step for the linear unit root and the second step for its bilinearity is consistent in the sense that the size of the step one test is not affected by the possible detection of bilinearity at step two the empirical part of the paper describes testing unit root bilinearity for 65 garch adjusted stock market indices from mature and emerging markets it is shown that for at least 70 of these markets the hypothesis of no unit root bilinearity has to be rejected

in efficient interbank networks we study the efficiency properties of the formation of an interbank network banks face a trade off by establishing connections in the interbank market on the one hand banks improve the diversification of their liquidity risk and therefore can obtain a higher expected payoff on the other hand banks not sufficiently capitalized have risk shifting incentives that expose them to the risk of bankruptcy connecting to such risky banks negatively affects expected payoff we show that both the optimal and the decentralized networks are characterized by a core periphery structure the core is made of the safe banks whereas the periphery is populated by the risky banks nevertheless the two network structures coincide only if counterparty risk is sufficiently low otherwise the decentralized network is underconnected as compared to the optimal one finally we analyze mechanisms that can avoid the formation of inefficient interbank networks

a strategic model of social and economic networks we study the stability and efficiency of social and economic networks when self interested individuals can form or sever links first for two stylized models we characterize the stable and efficient networks there does not always exist a stable network that is efficient next we show that this tension persists generally to assure that there exists a stable network that is efficient one is forced to allocate resources to nodes that are not responsible for any of the production we characterize one such allocation rule the equal split rule and another rule that arises naturally from bargaining of the players

national strategic investment in european power transmission capacity abstract the transformation of the european electricity system requires substantial investment in transmission capacity to facilitate cross border trade and to efficiently integrate renewable energy sources however network planning in the eu is still mainly a national prerogative in contrast to other studies aiming to identify the pan european continental welfare optimal transmission expansion we investigate the impact of zonal planners deciding on network investment strategically with the aim of maximizing the sum of consumer surplus generator profits and congestion rents in their jurisdiction this reflects the inadequacy of current mechanisms to compensate for welfare re allocations across national boundaries arising from network upgrades we propose a three stage equilibrium model to describe the nash game between zonal planners i e national governments regulators or system operators each taking into account the impact of network expansion on the electricity spot market and the resulting welfare effects on the constituents within its jurisdiction we propose a novel way to solve the resulting gne epec type problem using a variation of a disjunctive constraints reformulation this allows to solve this problem without a priori assumptions on the relative valuation of shared constraints by each player using a four node sample network we identify several nash equilibria of the game between the zonal planners this example illustrates the failure to reach the first best welfare expansion in the absence of an effective framework for cross border cost benefit allocation

why are governmental r d and private r d complements it is well known that government r d and private r d have a complementary relationship however no previous study has provided an explanation for why that complementary relationship exists this paper argues that infratechnology is the critical link between governmental and private r d and that the observed complementarity is the result of technical complementarity at the production level between funding infratechnology and knowledge sharing a theoritical framework based on this argument is developed and examined empirically for supporting evidence evidence of technical complementary is found as well as evidence that governmental r d stimulates the sharing of knowledge

subscription mechanisms for network formation we analyze a model of network formation where the costs of forming links are publicly known but an individual s benefits are not known to the social planner the objective is to design a mechanism which not only ensures that an efficient network always forms in equilibrium but also ensures that the resulting net payoffs to the agents are equitable we propose two mechanisms towards this end in the first agents announce sequentially the set of players with whom they wish to form links and a cost contribution we show that all subgame perfect equilibria of this game result in the formation of an efficient network but the resulting net payoffs are asymmetric the second mechanism corrects this asymmetry through a two stage variant of the first mechanism we also discuss an extension of the basic model to cover the case of directed graphs and give conditions under which the proposed mechanisms are immune to deviations by coalitions

nash in nash bargaining a microfoundation for applied work a nash equilibrium in nash bargains has become the workhorse bargaining model in applied analyses of bilateral oligopoly this paper proposes a non cooperative foundation for nash in nash bargaining that extends the rubinstein 1982 model to multiple upstream and downstream rms assuming there exists gains from trade for each rm pair we prove that there exists an equilibrium with immediate agreement and negotiated prices that correspond to rubinstein prices if and only if the marginal contribution of a set of agreements is weakly greater than the sum of the agreements marginal contributions we provide stronger conditions under which equilibrium prices are unique

testing for arch in the presence of additive outliers in this paper we investigate the properties of the lagrange multiplier lm test for autoregressive conditional heteroskedasticity arch and generalized arch garch in the presence of additive outliers ao s we show analytically that both the asymptotic size and power are adversely affected if ao s are neglected the test rejects the null hypothesis of homoskedasticity too often when it is in fact true while the test has difficulty detecting genuine garch effects several monte carlo experiments show that these phenomena occur in small samples as well we design and implement a robust test which has better size and power properties than the conventional test in the presence of ao s applications to the french industrial production series and weekly returns of the spanish peseta us dollar exchange rate reveal that sometimes apparent garch effects may be due to only a small number of outliers and conversely that genuine garch effects can be masked by outliers

networked relationships in the e mid interbank market a trading model with memory interbank markets are fundamental for bank liquidity management in this paper we introduce a model of interbank trading with memory our model reproduces features of preferential trading patterns in the e mid market recently empirically observed through the method of statistically validated networks the memory mechanism is used to introduce a proxy of trust in the model the key idea is that a lender having lent many times to a borrower in the past is more likely to lend to that borrower again in the future than to other borrowers with which the lender has never or has in frequently interacted the core of the model depends on only one parameter representing the initial attractiveness of all the banks as borrowers model outcomes and real data are compared through a variety of measures that describe the structure and properties of trading networks including number of statistically validated links bidirectional links and 3 motifs refinements of the pairing method are also proposed in order to capture finite memory and reciprocity in the model the model is implemented within the mason framework in java

the formation of financial networks modern banking systems are highly interconnected despite various benefits linkages between banks carry the risk of contagion in this article i investigate whether banks can commit ex ante to mutually insure each other when there is contagion risk in the financial system i model banks decisions to share this risk through bilateral agreements a financial network that allows losses to be shared among various counterparties arises endogenously i characterize the probability of systemic risk defined as the event that contagion occurs conditional on one bank failing in equilibrium interbank networks i show that there exist equilibria in which contagion does not occur

a lagrange multiplier test for garch models abstract this paper extends the lagrange multiplier lm test to testing noise disturbances against garch disturbances in the linear regression model the resulting lm test for the garch alternative is identical to the lm test for an arch alternative

conditional variance and the risk premium in the foreign exchange market abstract we investigate the existence of a risk premium in the foreign exchange market based on the conditional variance of market forecast errors the forecast errors are assumed to follow the arch process introduced by engle 1982 estimation and diagnostic testing of the model are discussed and results are presented for the currencies of the united kingdom france germany japan and switzerland