modelling long run comovements in equity markets a flexible approach abstract international equity markets linkages are characterized by nonlinear dependence and asymmetries we investigate shifts in long run comovements in stock markets by means of an interrupted markov switching cointegration specification this flexible approach allow us to study to what extent documented changes in global integration are permanent or whether market linkages are subject to changes using an illustrative sample from 1980 to 2012 for usa uk and hong kong stock price indices we find evidence of interrupted cointegration across these markets between may 1997 and april 2002 which is consistent with the decoupling of stock prices from fundamentals during the dot com bubble

revisiting jevons s paradox of energy rebound policy implications and empirical evidence in consumer oriented financial incentives from the japanese automobile market 2006 2016 abstract while the fuel economy of japanese automobiles has improved by 40 in the past decade gasoline consumption in the transportation sector from 2007 to 2016 only decreased by 4 we seek to explain this discrepancy by investigating japanese fuel economy standards and the financial incentives given to consumers of fuel efficient cars to do so this study explores whether japanese policies caused such a rebound effect by employing the difference in difference framework we find that these policies contribute to energy rebound effect by enabling higher fuel consumption at lower costs and thus causing higher energy usages we provide evidence that policies can increase not only fuel usage but also fuel costs the main driving force behind the rebound effect is the increase in the sales of hybrid vehicles induced by financial incentives

regime switching cointegration tests for the asian stock index futures evidence for msci taiwan nikkei 225 hong kong hang seng and sgx straits times indices this study applies a cointegration system that considers regime shifts in order to study the long run relationship between the stock index and stock index futures markets the msci taiwan nikkei 225 hong kong hang seng and singapore exchange sgx straits times indices are examined the empirical evidence shows that the cointegration system with regime shifts performs better than the usual cointegration system without considering regime shifts

nonstationarity cointegration and structural breaks in the australian term structure of interest rates this article examines the unit root property of the australian short and long term interest rates using unit root tests that accommodate a single or two breaks under the null and or alternative hypothesis two breaks in interest rates are found to coincide with the 1982 83 and 1990 91 recessions or the 1993 inflation targeting period we further investigate the implications of these structural breaks on the cointegrating relationship implied by the single linear expectations hypothesis of the term structure of interest rates while there is evidence that the data are consistent with the expectations hypothesis at the shorter end of the term structure breaks in interest rates generate a shift in the cointegrating relationship thus altering the information content of the term structure failing to account for a regime shift in the cointegration regression the data erroneously supports the expectations hypothesis at the longer end of the term structure these results have profound implications for polic

measuring the rebound effect with micro data a first difference approach abstract we provide estimates of the rebound effect for car transport in denmark using a rich data set with individual household data on car use fuel efficiency and car as well as household characteristics a demand model is estimated in first differences the availability of households in the sample that replaced their car during the period of observation combined with information on their driving behaviour before and after the car switch allows us to identify the rebound effect endogeneity is taken into account by using appropriate instruments results include the following first we reject the conventional formulation in which only fuel cost per kilometre matters second the selection equation confirms that higher fuel prices induce households to switch car third the results suggest the presence of a rebound effect that is on the lower end of the estimates available in the literature specifically our best estimate of the rebound effect is some 7 5 10 fourth the fuel price sensitivity of the demand for kilometres appears to be declining with household income but we do not find a significant impact of income on the rebound effect finally simulation results indicate that the small rebound effect and changes in car characteristics in response to higher fuel prices imply that compared to the reference scenario higher fuel prices lead to a substantial reduction in both the demand for kilometres and in demand for fuel

lending booms latin america and the world recent theories of crisis put lending booms at the root of financial collapses yet lending booms may be a natural consequence of economic development and fluctuations so are lending booms dangerous in this paper we investigate empirically this question using a broad sample of lending boom episodes over 40 years with a special eye for latin america our results indicate that 1 lending booms are often associated with i a domestic investment boom ii an increase in domestic interest rates iii a worsening of the current account iv a declines in reserves v a real appreciation vi a decline in output growth 2 typical lending booms do not increase substantially the vulnerability of the banking sector or the balance of payments comparing latin america and the rest of the world we find that latin america lending booms make the economy considerably more volatile and vulnerable to financial and balance of payment crisis

bayes estimates of markov trends in possibly cointegrated series stylized facts show that average growth rates of u s per capita consumption and income differ in recession and expansion periods because a linear combination of such series does not have to be a constant mean process standard cointegration analysis between the variables to examine the permanent income hypothesis may not be valid to model the changing growth rates in both series we introduce a multivariate markov trend model that accounts for different growth rates in consumption and income during expansions and recessions and across variables within both regimes the deviations from the multivariate markov trend are modeled by a vector autoregression var model bayes estimates of this model are obtained using markov chain monte carlo methods the empirical results suggest the existence of a cointegration relation between u s per capita disposable income and consumption after correction for a multivariate markov trend this result is also obtained when per capita investment is added to the var

testing the unbiased forward exchange rate hypothesis using a markov switching model and instrumental variables this paper develops a model for the forward and spot exchange rate which allows for the presence of a markov switching risk premium in the forward market and considers the issue of testing the unbiased forward exchange rate ufer hypothesis using us uk data it is shown that the ufer hypothesis cannot be rejected provided that instrumental variables are used to account for within regime correlation between explanatory variables and disturbances in the markov switching model on which the test is based copyright 2005 john wiley sons ltd

a simple method of testing for cointegration subject to multiple regime changes abstract in this paper we propose a simple method of testing for cointegration in models that allow for multiple shifts in the long run relationship the procedure consists of carrying out conventional residual based tests with standardized residuals from an appropriate markov switching model our monte carlo results show that standard tests work well even though their asymptotic validity can be questioned because they are not based on least squares residuals an empirical application to the present value model of stock prices is also discussed

behavior of output during currency crises abstract this paper documents the behavior of output and its association with other macroeconomic variables in 195 episodes of currency crises in developing countries during 1970 2000 we find that about 60 of the crises are contractionary while the rest are expansionary crises are one and a half times more likely to be contractionary in emerging markets than in other developing economies the number of contractionary crises or their severity does not increase in the 1990s economies which experience capital inflows in the years prior to the crisis or an increase in external debt burden during the crisis are more likely to slow down during crises while those with restrictions on capital flows prior to the crisis or are more open to international trade are less likely to do so the results are robust to different ways of measuring changes in output during crises

rebound effect of efficiency improvement in passenger cars on gasoline consumption in canada abstract the fossil fuel driven transport sector has been one of the major contributors to co2 emission across the world keeping it on the energy policy agenda for the past three decades canada ranks second in gasoline consumption among oecd countries and canadian gasoline expenditure share has been increasing since the 1990s fuel efficiency policies aim to decrease gasoline consumption however the effect can be mitigated by changes in consumer behavior such as traveling more distances a rebound effect thus the effectiveness of fuel efficiency policy is dependent on the magnitude of the rebound effect in this paper we estimate the rebound effect for personal transportation in canada using data from the household spending survey for the period 1997 2009 the model includes a system of expenditure share equations for gasoline other energy goods and non energy goods specified by aids and quaids models and estimated by the nonlinear sur method our estimation results show a rather high average rebound effect of 82 88 but with significant heterogeneity across income groups provinces and gasoline prices specifically the rebound effect ranges from 63 to 96 across income groups and provinces and increases with gasoline prices

financial crises lessons from history for today making use of the propensity score matching method we match earlier crises pre 2007 with currently ongoing crises post 2007 the old and new crises are matched in three dimensions the global setting in which they occurred the structure of the economy and the domestic vulnerabilities in the pre crisis period our findings suggest that the euro periphery crises share sufficient commonalities with earlier crises in their pre crisis domestic vulnerabilities the study points to two important conclusions first the euro periphery crises are composed of unique country experiences hence it will not be easily resolved with a one size fits all set of economic policies secondly while each banking crisis has its inherent uniqueness each crisis also shares sufficient commonalities with one or more of the asian 5 1996 97 crises the nordic banking crisis of the early 1990s or the japanese banking crisis of the 1990s thus the extensive knowledge accumulated through these former banking crises can help in designing recovery policies selin sayek and fatma taskin

analysing gasoline demand elasticities a survey this paper is a survey of studies on gasoline demand although there are very many dxerent studies in this eld which sometimes appear to arrive at contradictory results we find that with proper stratification of studies by model and data type much of the contict turns to consensus in this survey we classtfy studies by data type and by ten d erent categories of model and with the exception of estimates on seasonal data which tend to be unstable and of certain inappropriate model formulations we find a fair degree of agreement concerning average short run and even long run income and price elasticities

the european sovereign debt crisis the origin and propagation of the european sovereign debt crisis can be attributed to the flawed original design of the euro in particular there was an incomplete understanding of the fragility of a monetary union under crisis conditions especially in the absence of banking union and other european level buffer mechanisms moreover the inherent messiness involved in proposing and implementing incremental multicountry crisis management responses on the fly has been an important destabilizing factor throughout the crisis after diagnosing the situation we consider reforms that might improve the resilience of the euro area to future fiscal shocks

does inflation targeting really make a difference evaluating the treatment effect of inflation targeting in seven industrial countries abstract we evaluate the treatment effect of inflation targeting in seven industrial countries that adopted this policy in the 1990s to address the self selection problem of policy adoption we make use of a variety of propensity score matching methods recently developed in the treatment effect literature our results show that inflation targeting has no significant effects on either inflation or inflation variability in these seven countries further evidence from long term nominal interest rates and income velocity of money also supports the window dressing view of inflation targeting

monetary policy in a markov switching vector error correction model monetary policy vector autoregressions vars typically presume stability of the long run outcomes we introduce the possibility of switches in the long run equilibrium in a cointegrated var by allowing both the covariance matrix and weighting matrix in the error correction term to switch we find that monetary policy alternates between sustaining long run growth and disinflationary regimes allowing state changes can also help explain the price puzzle and justify the use of commodity prices as a corrective measure finally we show that regime switching has implications for disinflationary monetary policy and can explain the variety of sacrifice ratio estimates that exist in the literature

cointegration and changes in regime the japanese consumption function in this paper we examine a model of cointegration where long run parameters are subject to switching between several different cointegrating regimes these shifts are allowed to be governed by the outcome of an unobserved markov chain with unknown transition probabilities we illustrate this approach using japanese data on consumption and disposable income and find that the data favour a markov switching long run relationship over a standard temporally stable formulation 1997 by john wiley sons ltd

vehicle miles not traveled fuel economy requirements vehicle characteristics and household driving abstract a major concern with addressing the negative externalities of gasoline consumption by regulating fuel economy rather than increasing fuel taxes is that households respond by driving more this paper exploits a discrete threshold in the eligibility for cash for clunkers to show that fuel economy restrictions lead households to purchase vehicles that have lower cost per mile but are also smaller and lower performance whereas the former effect can increase driving the latter effect can reduce it results indicate that these households do not drive more suggesting that behavioral responses do not necessarily undermine the effectiveness of fuel economy restrictions at reducing gasoline consumption

rebound effect of transportation considering additional capital costs and input output relationships the role of subsistence consumption and unmet demand abstract the anticipated carbon mitigation through energy saving technology progress might be partially or even totally offset due to rebound effect a better understanding of rebound effect especially the underling mechanisms has important implications for energy efficiency policies to achieve the goal of sustainability previous studies usually ignore additional capital costs for adopting energy efficient equipment and indirect carbon emissions for providing new consumption bundles also the precise mechanisms of how living standard affects rebound effect are unknown using almost ideal demand system aids model and input output relationships among sectors this paper builds a method to estimate the rebound effect that allows for additional capital costs and carbon emission changes of all other goods and services due to backward forward linkages we find that rebound effect is over 100 for transportation in rural china even though additional capital costs would indeed reduce the magnitude and the results are quite robust to alternative settings as for the mechanisms rebound effect is divided into substitution and income channels by slutsky decomposition here we show that both of these two channels are dependent on living standard because of subsistence consumption and unmet demand carbon emissions of poor households will rebound more through income channel of unmet demand while rich households usually do not restricted by subsistence consumption and thus through substitution channel rebound of carbon emissions would be larger for rich households the opposite directions of mechanisms dig more information about the nonlinearity of rebound effect to income levels furthermore given the estimating results this paper gains several insights in terms of welfare benefits rather than just focuses on carbon reduction

energy efficiency versus gains in consumer amenities an example from new cars sold in sweden technological developments that increase energy efficiency result in net energy saving benefits provided the increased efficiency is not offset by enhanced consumer amenities this paper analyzes the technology development consumer amenities trade off for new cars sold in sweden between 1975 and 2010 we combine lessons learned from the policies in place and interviews with key actors in the car purchasing process with statistical modeling of trends in vehicle attributes and technological development until 2007 consumer amenities were continuously enhanced offsetting most of the efficiency gains of technological development there was no strong policy push toward energy efficiency in recent years two major shifts have occurred first there has been a shift in the majority of new cars sold from gasoline powered engines to diesel engines flex fuel vehicles have also contributed to a decline in the sales share of pure gasoline engines the observed shift of fuels especially to flex fuels has been encouraged by policies second after 2007 there have been major technological improvements while attributes related to consumer amenities have remained flat reversing the trends so that 77 of the technological development resulted in actual reduction of specific fuel consumption eu targets tax reforms and consumer awareness have contributed to this trend change

an empirical study on the behavior of hybrid electric vehicle purchasers abstract this paper empirically examines the factors influencing consumers choices concerning the purchase of hybrid electric vehicles hevs in addition the paper investigates whether purchasing hevs causes a rebound effect through which purchasers of hevs increase their annual vehicle mileage the results suggest that consumers who are more attentive to fuel economy may be inclined to choose hevs moreover the existence of the direct rebound effect is confirmed by the finding that the purchase of an hev leads to an increase in annual mileage per household greater mileage increases future fuel cost savings from using an hev relative to a conventional vehicle and thus potentially leads to increased fuel cost savings that offset the extra cost of choosing an hev however if the purchase of hevs leads to a considerable increase in annual mileage overall annual automotive co2 emissions per household may be significantly increased by using hevs

russian equity market linkages before and after the 1998 crisis evidence from stochastic and regime switching cointegration tests abstract this paper examines the relationships between russian and other equity markets over the period of 1995 2004 to account for potential instability in the market relationships we apply a number of cointegration approaches gregory hansen 1996 residual based tests for cointegration in models with regime shifts journal of econometrics 70 99 126 test which allows for a structural break in the relationships a stochastic cointegration framework by mccabe 2003 testing for stochastic cointegration and evidence for present value models working paper the non parametric test by breitung 2002 nonparametric tests for unit roots and cointegration journal of econometrics 108 2 343 363 and a regime switching cointegration model in the spirit of ho 1999 financial liberalization and international capital mobility of taiwan a regime switching approach asian economic journal 13 4 407 417 the tests point to a significant agreement that the russian equity market remained isolated from the influence by international markets in the long run and that while a structural break might have occurred in august 1998 this did not alter the nature of long run relationships

cap and trade taxes and distributional conflict enacting market based environmental regulation such as emissions taxes and cap and trade programs often create rents that are contested by agents in this paper we create a framework that compares social welfare from alternative market based environmental policy instruments under the presence of rent seeking we show that contrary to the commonly held view non revenue raising instruments nrris are in many cases preferable over revenue raising instruments rris we find that the choice of instrument depends on the size of a potential revenue recycling effect and the level of preassigned rents

how to deal with the rebound effect a policy oriented approach policy makers and environmental agencies have echoed concerns brought forward by academics about the need to address the rebound effect for achieving absolute energy and environmental decoupling however such concerns have generally not been translated into tangible policy action the reasons behind this inaction are not fully understood and much remains unknown about the status of the rebound effect issue on the policy agenda and policy pathways available such knowledge gaps may hamper the development of effective policies to address this issue in this paper we examine the extent to and ways in which the rebound effect is considered in policy documents and analyse thirteen specific policy pathways for rebound mitigation the effectiveness of the pathways is scrutinised and conclusions are offered to mitigate rebound effects the main policy conclusions of the paper are that an appropriate policy design and policy mix are key to avoiding undesired outcomes such as the creation of additional rebound effects and environmental trade offs from the discussion economy wide cap and trade systems as well as energy and carbon taxes when designed appropriately emerge as the most effective policies in setting a ceiling for emissions and addressing energy use across the economy

the economic crisis of the 1990s in finland finland s depression a tale of bad luck and bad policies in the 1990s finland underwent a deep depression as its gdp dropped about 14 and unemployment rose from 3 to almost 20 this is a story of bad luck and bad policies bad luck took the form of external shocks the collapse of trade with the former soviet union in 1991 but also sharp cycles in the oecd area however bad luck is far from being the whole story in the absence of bad policies finland would have experienced a recession not a depression bad policies included a poorly designed financial regulation and mistaken reactions to the onset of the crisis of particular interest is the role of financial factors in triggering the crisis and aggravating the effects of bad policies not only were consumption and investment spending hurt by the credit crunch but there is evidence that the private sector s indebtedness has increased structural unemployment which explains why the recovery is proceeding with few job creations a number of general lessons emerge they concern the deregulation of financial markets the policy reaction to massive capital inflows and the role of employment policies seppo honkapohja and erkki koskela

the effect of standards and fuel prices on automobile fuel economy an international analysis abstract there is an intense debate over whether fuel economy standards or fuel taxation is the more efficient policy instrument to raise fuel economy and reduce co 2 emissions of cars the aim of this paper is to analyze the impact of standards and fuel prices on new car fuel economy with the aid of cross section time series analysis of data from 18 countries we employ a dynamic specification of new car fuel consumption as a function of fuel prices standards and per capita income it turns out that standards have induced considerable fuel savings throughout the world although their welfare impact is not examined here if standards are not further tightened then retail fuel prices would have to remain at high levels for more than a decade in order to attain similar fuel savings finally without higher fuel prices or tighter standards one should not expect any marked improvements in fuel economy under business as usual conditions