business cycle analysis with a markov switching model this article explores the hamilton markov switching model through an analysis of the business cycles of eight developed market economies forecasting and specification tests suggest only marginal improvements over linear autoregressive models yet filtered and smoothed conditional probabilities indicate turning points in business cycles that closely correlate with turning points from traditional methods tests regarding the asymmetry of business cycles reject the null of symmetry for most countries

after hours stock prices and post crash hangovers after hours pricing in foreign equity markets of multiple listed u s securities appeared to be efficient in predicting new york prices in the weeks immediately following the october 1987 crash but relatively uninformative in succeeding months by contrast daily changes in new york prices appear to be efficiently incorporated in after hours trading on both the tokyo and london exchanges throughout the sample period this paper suggests that the asymmetry and temporal variations in cross market correlations are consistent with rational investor behavior in equity markets with nonzero transaction costs and time varying share price volatility in the wake of the october 1987 crash a number of studies have provided evidence of significant international linkages among national equity markets where high frequency movements in the share price indices of national exchanges appear to induce sympathetic price movements in subsequent trading on other national exchanges however the cross market correlations are generally much larger in periods of extreme volatility and appear to subside to modest or even negligible associations during periods of more normal trading activity since the constituent stocks of national exchange indices are not identical it may be that the episodic increases in correlated movements of the indices are due to changes in the actual or perceived relative importance of common factors in periods of unusual volatility the thrust of this paper is to remove the issue of the disparate composition of the price indices of national exchanges by examining the prices of a set of

sovereign default risk and the u s equity market i develop a two country general equilibrium model with firms governments and endogenous default decisions this paper shows that the risk of sovereign default abroad is important in the explanation of the level and the volatility of u s equity returns the intuition is that negative economic shocks deteriorate the fiscal situation of foreign governments thereby increasing the risk of a sovereign default that would trigger a local contraction in economic growth the rise in the risk of an economic slowdown abroad amplifies the direct eect of these shocks on the level and the volatility of equity returns in the u s through i a decrease in the present value of future firm earnings due to the unfavorable adjustment of the real exchange rate for u s exporters and ii a fall in u s equity prices that originates from the investors incentive to rebalance their portfolio towards risk free securities the amplification eect is strongest during periods of financial distress when the risk of corporate default is high in the u s a structural estimation of the model provides strong support for this prediction using monthly data for brazil and the u s over the period 1994 2008

causality in variance and the type of traders in crude oil futures abstract this article examines the causal relationship and in particular informational dependence between crude oil futures return and the trading volume using daily data over a ten year period using a recent econometric methodology the two step procedure developed by cheung and ng 1996 cheung y w ng l k 1996 a causality in variance test and its applications to financial market prices journal of econometrics 72 33 48 is robust to distributional assumption and does not depend on simultaneous modeling of the two variables we find only causality at higher order lags running from return to volume in the mean as well as in conditional variance our result is not in complete agreement with several earlier studies in this area however the result does indicate mild support for noise traders hypothesis in the crude oil futures market

determining discount rates for the evaluation of natural assets in land use planning an application of the equivalency principle one of the most pressing issues when making decisions over long term environmental problems is deciding on an appropriate discount rate this can be a highly technical discussion while some argue in favour of market rates which usually tend to be high others support the use of near zero rates to ensure that both current and future generations are properly accounted for this paper presents an alternative approach to determining the discount rate for environmental assets in the case of land use planning the equivalency principle ep based on the normative proposition that the social value of protected natural land should be at least the same as the market price of an adjacent land with similar environmental characteristics that has been granted permission for development the paper first provides a theoretical overview of the approach followed by an application of the ep at the land plot level across 11 european countries based on the ep pure rates of social time preference that would equate natural and development land values within each administrative unit have been calculated the findings show that the application of the ep usually results in discount rates that are lower than market rates and that are geographically differentiated this implies discount rates that account for preferences of the society where the land or natural resource is located with results ranging between 0 and 11 with an average rate of 1 across study sites

an equilibrium model of asset trading with sequential information arrival in an effort to better understand the dynamic market price adjustment process this paper develops a model which describes the impact of new information on a financial market the primary emphasis is on the price change volume relationship in the presence of a margin requirement we find that the margin requirement significantly affects the relation of price change to volume furthermore this relationship is shown to be affected by the number of investors in the market the degree of information dissemination differences in interpretation of information and the implicit cost of the margin requirement

detecting shift contagion in currency and bond markets abstract this paper investigates why financial market crises often increase the interdependence between assets associated with different countries two sources of increased co movement in asset returns are considered i larger common shocks operating through standard cross country linkages and ii changes in the structural transmission of shocks across countries referred to as shift contagion to examine this issue we develop a method for detecting shift contagion with three notable features first parameters corresponding to the structural transmission of shocks across countries are identified in the presence of changing volatility regimes for the shocks second the timing of changes in volatility is endogenously estimated instead of being exogenously assigned third the countries in which crises originate need not be known or even included in the analysis we apply the method to currency returns for developed countries and bond returns for emerging market countries

the equivalency principle for discounting the value of natural assets an application to an investment project in the basque coast making decisions about optimal investments in green infrastructure necessitates setting social discount rates this paper suggests a practical way for determining the discount rate for projects or programmes in which one of the options is to maintain or improve land in its natural state we propose an a equivalency principlea to derive a simple rule that sets the discount rate the rule is based on the premise that the long term value of a naturally preserved land track ought to be at least the same as the value of an identical land track in the vicinity to which permission has been granted for development we illustrate this principle with various case studies and we apply it to a contentious investment project in the basque country associated with the regeneration of a large scale harbour in the province of gipuzkoa north of spain that involves reclaiming natural land that has important ecological value including for the conservation of a marine ecosystem

interest rate volatility and home mortgage loans the us economy has experienced substantial fluctuations in real and nominal interest rates since the 1970s this article investigates empirically the relationship between home mortgage loans and volatility in mortgage rates for the period 1971 02 to 2003 03 contrary to common wisdom we find a positive relationship between mortgage rate volatility and home mortgage loans further investigation indicates that this is due to volatility in the bond market in times of high interest volatility households disinvest in government securities and invest in real assets which yields a positive relationship between mortgage rate volatility and home mortgage loans

regime switching in the reactions of stock markets in saudi arabia to oil price variations the study revisits the stock oil nexus by examining the reactions of equity markets to oil price shocks at national and sectoral levels for saudi arabia in a time varying framework by employing the markov switching egarch model developed by henry 2009 journal of banking and finance 33 405 based on weekly data the findings reveal that the behaviour of all stock markets switches between an expansion regime and a recession regime with more persistence for the expansion state additionally influential international events associated with stock market drops are clearly identified in the recession regime furthermore there is evidence of asymmetric reactions of the equity index returns and the probabilities of transition from one state to another to oil price variations with heterogeneous impacts across sectors and regimes the stock markets are more sensitive to oil price decreases than to oil price increases although the evidence of relatively slight differences in some findings across weekdays the study allows investors and policymakers to understand well the interactions of stock sector markets vis a vis the world oil market in a regime switching framework in order to make the right decision as regards portfolio diversification and regulation of the stock markets

geography industrial organization and agglomeration this paper makes two contributions to the empirical literature on agglomeration economies first the paper uses a unique and rich database in conjunction with mapping software to measure the geographic extent of agglomerative externalities previous papers have been forced to assume that agglomeration economies are club goods that operate at a metropolitan scale second the paper tests for the existence of organizational agglomeration economies of the kind studied qualitatively by saxenian 1994 this is a potentially important source of increasing returns that previous empirical work has not considered results indicate that localization economies attenuate rapidly and that industrial organization affects the benefits of agglomeration

contagion and banking crisis international evidence for 2007 2009 abstract policy makers aim to avoid banking crises and although they can to some extent control domestic conditions internationally transmitted crises are difficult to tackle this paper identifies international contagion in banking during the 2007 2009 crisis for 54 economies we identify three channels of contagion systematic idiosyncratic and volatility and find evidence for these in 45 countries banking crises are overwhelmingly associated with the presence of both systematic and idiosyncratic contagion the results reveal that crisis shocks transmitted from a foreign jurisdiction via idiosyncratic contagion increase the likelihood of a systemic crisis in the domestic banking system by almost 37 percent whereas increased exposure via systematic contagion does not necessarily destabilize the domestic banking system thus while policy makers and regulatory authorities are rightly concerned with the systematic transmission of banking crises reducing the potential for idiosyncratic contagion can importantly reduce the consequences for the domestic economy

trade unions and regional development abstract we focus on the role that labour unions play in the context of a two region dual economy we show that unskilled unions will increase the wage of unskilled workers and depress growth in both the backward and the advanced regions the growth effects will be felt more strongly in the relatively poor region if skilled workers are allowed to migrate and unions recognize that a more aggressive wage setting policy may foster migration unions will moderate their wage requests however regional unions would then have a strong incentive to coordinate their wage demands across regions this would further raise the unskilled wage and more so in the backward region we conclude that labour market policies designed to foster regional convergence should seek both to discourage centralized wage setting and favour skilled labour mobility

the optimal value at risk hedging strategy under bivariate regime switching arch framework unlike the majority of other hedging literatures in which variance is taken as the risk indicator this article uses the value at risk var as the risk management tool of the hedged portfolio this article adopts a bivariate markov regime switching autoregressive conditional heteroscedastic swarch model to formulate the optimal var hedging strategy and then compares it with the other dynamic futures hedging strategies mentioned in the literature in hedging performance using taiwan stock exchange capitalization weighted stock index taiex futures data the in sample and out of sample results shows that when var is used as the criterion to measure the futures hedging effectiveness the performance of the dynamic hedging strategy is superior to that of the static hedging strategy and the performance of the optimal var hedging strategy is better than that of the minimum variance and mean variance hedging strategies besides from the standpoint that the volatility of hedge ratio and hedged portfolio var

forecasting volatility of crude oil markets abstract this article investigates the efficacy of a volatility model for three crude oil markets brent dubai and west texas intermediate wti with regard to its ability to forecast and identify volatility stylized facts in particular volatility persistence or long memory in this context we assess persistence in the volatility of the three crude oil prices using conditional volatility models the cgarch and figarch models are better equipped to capture persistence than are the garch and igarch models the cgarch and figarch models also provide superior performance in out of sample volatility forecasts we conclude that the cgarch and figarch models are useful for modeling and forecasting persistence in the volatility of crude oil prices

how effective are capital controls a number of authors have recently argued that in order to avoid financial instability emerging countries should rely on capital controls two type of controls have been considered controls on capital outflows and controls on capital inflows in this paper i review the historical evidence on the effectiveness of these two type of controls i argue that controls on outflows have been ineffective they are circumvented and breed corruption i also analyze chile s recent experience with controls on inflows and i argue that their effectiveness has been exaggerated

correlations in price changes and volatility across international stock markets the short run interdependence of prices and price volatility across three major international stock markets is studied daily opening and closing prices of major stock indexes for the tokyo london and new york stock markets are examined the analysis utilizes the autoregressive conditionally heteroskedastic arch family of statistical models to explore these pricing relationships evidence of price volatility spillovers from new york to tokyo london to tokyo and new york to london is observed but no price volatility spillover effects in other directions are found for the pre october 1987 period article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

valuing non market wildlife commodities an evaluation and comparison of benefits and costs this paper compares the benefits and costs of nature conversation at three sites of special scientific interest benefits are estimated by contigent valuation expressed preferences and also the travel cost method revealed preferences oppurtunity costs are assessed from a financial cost viewpoint and also in terms of shadow prices or social costs results indicate that the valuation of wildlife and nature conservation largely depends upon the frame of reference adopted that social costs are considerably less than financial costs due to the effect of the common agricultural policy that user benefits are considerably less than financial costs and non user benefits must be included to cover even the social costs of nature conservation

industrial policy evaluation in the presence of spillovers the shortage of studies on spatial spillovers of capital subsidy policies is rather surprising considering that such policies are usually designed to generate spatial externalities we propose a new framework that allows positive agglomeration effects to be contrasted with the negative cross sectional substitution and the crowding out effect the global evaluation of the att and the spillover parameters shifts the spotlight from the policy effect on subsidised firms to the global effect of capital subsidy policies on the targeted territory the empirical evaluation of a policy in italy mainly directed towards small and medium sized firms shows that the impact on investments turnover and employment is positive and large but is negative on tfp however the employment growth is partially determined to the detriment of the untreated firms

volatility dependence and contagion in emerging equity markets abstract in this paper we use weekly stock market data for a group of latin american countries to analyze the behavior of volatility through time we are particularly interested in understanding whether periods of high volatility are correlated across countries the analysis uses both on univariate and bivariate switching volatility models our results do not rely on the correlation coefficients but on the co dependence of volatility regimes the results indicate that high volatility episodes are in general short lived lasting from 2 to 12 weeks we find strong evidence of volatility co movements across countries especially among the mercosur countries

local economic development agglomeration economies and the big push 100 years of evidence from the tennessee valley authority we study the long run eects of one of the most ambitious place based economic development policies in u s history the tennessee valley authority using a rich panel dataset of counties we conduct an evaluation of the dynamic eects of the tva on local economies in the seventy years following the program s inception we nd that the tva led to short run gains in agricultural employment that were eventually reversed while impacts on manufacturing employment continued to intensify well after the program s subsidies had lapsed a pattern consistent with the presence of strong agglomeration economies in the manufacturing sector economists have long cautioned that the local gains created by place based policies may be oset by losses elsewhere yielding ambiguous eects on the u s as a whole building on the framework in glaeser and gottlieb 2008 we develop a novel approach to assessing the aggregate consequences of shifting the spatial distribution of manufacturing employment our ndings suggest the aggregate productivity gains associated with relocating manufacturing activity to the tva region were probably minimal

sudden spikes in global risk abstract recent episodes october 2008 may 2010 august 2011 have witnessed huge spikes in equity price risk implied volatility apart from their large size several features characterize these risk panics they are global phenomena shared among a broad set of countries there is substantial variation though in the extent to which individual countries are impacted while the impact bears little relation to financial linkages with the epicenter of the crisis in addition there is usually not a large shock to fundamentals that sets off these panics we provide an explanation for these risk panic features in the context of a two country model that allows for self fulfilling shifts in risk

the effectiveness of investment subsidies evidence from a regression discontinuity design this paper analyzes the effects of an investment subsidy program for small and medium sized enterprises in flanders from 2004 to 2009 the subsidies were awarded according to a ranking system that favored young growing and productive firms with a strong cash flow granting subsidies to the highest scoring firms until the depletion of funds the nature of this allocation system creates a sharp cutoff in granting the subsidy according to the score allowing us to estimate the causal impact of the subsidies using a regression discontinuity design we find a positive effect on firm level investment employment output and productivity for the firms that were granted the subsidy but only for the small firms however the effect is small relative to the cost of the subsidy

banking crises and nonlinear linkages between credit and output in this article we analyse the asymmetric causality linkages between credit growth and output growth during banking crises we employ a recently developed procedure based on a bivariate markov switching model to test the hypotheses of independence causality and asymmetric causality between credit and output using a sample of 103 banking crises around the world we find that neither credit nor output takes precedence as a variable in calm and crisis periods although there is evidence of instantaneous interdependence between the banking and real sector during crises the results suggest that shocks propagate mostly within a year between the banking sector and the real economy the linear link between credit growth and output growth is also regime dependent

evaluation of spatial effects of capital subsidies in the south of italy de castris m and pellegrini g evaluation of spatial effects of capital subsidies in the south of italy regional studies the spatial effects of capital subsidies are neglected in the literature even if several industrial policies have a strong spatial dimension this study disentangles the spillovers generated by subsidized firms from the spatial attraction across neighbour s areas that cannot be attributed to incentive the presence of specific spatial effects is tested on the reduced form of a spatial autoregressive model evaluating the implicit common factor restriction the empirical analysis considers the main regional policies in the period 1996 2001 in the south of italy the results suggest the presence of a modest spatial crowding out where subsidized regions attract employment from neighbouring areas de castris m et pellegrini g une evaluation des effets geographiques des subventions d equipement dans le sud de l italie regional studies la documentation ne fait aucune attention aux effe

crude oil prices and sectoral stock returns in jordan around the arab uprisings of 2010 abstract in this paper we test for mean and variance causality between world oil prices and sectoral equity returns in jordan before and after the arab uprisings that started in 2010 the testing methodology is based on the sample of cross correlation functions that are computed from the standardized residuals of a garch process our results show that the influence is not uniform across the equity sectors the oil return shocks significantly impact the financials and the services sectors while its effect is insignificant on the industrials sector this result is more pronounced in the period that follows the arab uprisings in terms of risk transfer we find that oil is a negligible risk factor however there is still a significant evidence of risk transmission to the industrials sector particularly during the arab uprisings period these results represent a unique information transmission mechanism that is useful for risk management and portfolio diversification

investment tax incentives prices and the supply of capital goods using data on the prices of capital goods this paper shows that much of the benefit of investment tax incentives does not go to investing firms but rather to capital suppliers through higher prices the reduction in the cost of capital from a 10 percent investment tax credit increases equipment prices 3 5 7 0 percent this lasts several years and is largest for assets with large order backlogs low import competition or with a large fraction of buyers able to use investment subsidies capital goods workers wages rise too instrumental variables estimates of the short run supply elasticity are around 1 and can explain the traditionally small estimates of investment demand elasticities in absolute value the demand elasticity implied here exceeds 1

disentangling the role of the exchange rate in oil related scenarios for the european stock market abstract the literature has been analysing so far the response of the stock market to a distress scenario for oil prices considering prices in domestic currency this assumption implies merging commodity risk and exchange rate risk this article proposes to generate oil related scenario depending on the source of risk the same distress oil related scenario in euros could generate an opposite impact on the european stock market depending on the source of risk results show higher losses for eurostoxx when oil prices in euros experience a downward movement due to a decrease of oil price in us dollars and when oil prices in euros experience an upward movement due to a depreciation of the euro against the us dollar this framework can improve our understanding of how the exchange rate interacts in global markets also it contributes to the design of tailor made international scenarios for stress testing

measurement of abnormal returns from small firms correction for heteroscedasticity in returns from portfolios long in small firms and short in large firms listed on the new york stock exchange reduces the estimate of market risk and increases the estimated abnormal return greatly improved diagnostic test statistics are obtained strengthening the evidence for the existence of positive average abnormal returns from small firms periodicity of order 6 and 12 months is identified the estimation procedure operates by exploiting the autoregressive pattern of heteroscedasticity in the return data

local multipliers at work we measure the effects of a substantial place based policy shock on the local labor market systems exploiting as an instrumental variable the peculiar information necessary to apply for capital subsidies in italy during the period 1996 2006 the results show the presence of positive multipliers in the south of italy slightly lower than what was previously found for the us but much higher than those identified for european and asian countries the reasons for this finding lie in the greater accuracy of the data in the relevance of the instrument used and in the widespread underutilization of production factors

alternative approaches to evaluation in empirical microeconomics four alternative but related approaches to empirical evaluation of policy interventions are studied social experiments natural experiments matching methods and instrumental variables in each case the necessary assumptions and the data requirements are considered for estimation of a number of key parameters of interest these key parameters include the average treatment effect the treatment on the treated and the local average treatment effect some issues of implementation and interpretation are discussed drawing on the labour market programme evaluation literature

testing for linear and nonlinear granger causality in the stock price volume relation linear and nonlinear granger causality tests are used to examine the dynamic relation between daily dow jones stock returns and percentage changes in new york stock exchange trading volume we find evidence of significant bidirectional nonlinear causality between returns and volume we also examine whether the nonlinear causality from volume to returns can be explained by volume serving as a proxy for information flow in the stochastic process generating stock return variance as suggested by clark s 1973 latent common factor model after controlling for volatility persistence in returns we continue to find evidence of nonlinear causality from volume to returns

do subsidies to private capital boost firms growth a multiple regression discontinuity design approach there is still little consensus among economists on the effectiveness of business support policies the evaluation of such policies requires a reliable identification procedure that is hardly achieved in empirical studies we analyse the impact of a policy instrument law 488 92 l488 the main italian regional policy that allocates subsidies to private firms by a multiple ranking system thanks to the peculiar l488 selection process that creates the conditions for a local random experiment we are able to assess the effectiveness of these types of incentives for a relevant subgroup of firms we propose a nonparametric multiple rankings regression discontinuity design that exploits the sharp discontinuities in the l488 rankings and extends the regression discontinuity design rdd approach to a context where the treatment is assigned by multiple rankings with different cut off points we find that the impact of the subsidies on employment investment and turnover is positive and statistically significant while the effect on productivity is mostly negligible the new subsidised capital is additional but non complementary with the owner financed investment the results are robust to different specifications and not due to intertemporal substitution

speculative behavior and the dynamics of interacting stock markets abstract we develop a simple agent based financial market model in which heterogeneous speculators apply technical and fundamental analysis to trade in two different stock markets speculators strategy market selections are repeated at each time step and depend on predisposition effects herding behavior and market circumstances simulations reveal that our model is able to explain a number of nontrivial statistical properties of and between international stock markets including bubbles and crashes fat tailed return distributions volatility clustering persistent trading volume coevolving stock prices and cross correlated volatilities against this background our model may be deemed to have been validated

hourly volatility spillovers between international equity markets abstract this paper examines the timing of mean and volatility spillovers between new york and london equity markets using an arch model it is found that the evidence of volatility spillovers between these markets is minimal and have a duration which lasts only an hour or so the most significant effects surround the movement of share prices around the new york opening but these results are not strong several new arch models are estimated including an asymmetric or leverage model and a non linear model which allows big shocks to have a different impact from small shocks

credibility and changes in policy regime this paper addresses the issue of credibility from an econometric perspective it develops a rational expectations model of inflation in which the dynamics are driven by the level of government spending and by the effect of past inflation rates on the value of real taxes government expenditure is modeled as an exogenous autoregressive process subject to discrete changes in regime the regimes are defined by whether the level of spending is or is not consistent with the rate of inflation targeted by the government as part of a stabilization program in making their money demand decision the agents need to construct probability inferences regarding the state of the expenditure process credibility is quantified by the agents inferred probability that the joint observation of inflation the nominal interest rate and government spending is generated by the reformed expenditure regime in an application to israel results indicate that the failed stabilization program of november 1984 was less than fully c

interest rate volatility in emerging markets we use high frequency interest rate data for a group of latin american and asian countries to analyze the behavior of volatility through time we focus on volatility comovements across countries our analysis relies on univariate and bivariate switching volatility models we compare the results from the switching models with those from rolling standard deviation models we argue that the switching models are superior our results indicate that high volatility episodes are in general short lived lasting from 2 to 7 weeks we also find some evidence of interest rate volatility comovements across countries

the relation between price changes and trading volume a survey this paper reviews previous and current research on the relation between price changes and trading volume in financial markets and makes four contributions first two empiri cal relations are established volume is positively related to the magnitude of the price change and in equity markets to the price change per se second previous theoretical research on the price volume relation is summarized and critiqued and major insights are emphasized third a simple model ofthe price volume relation is proposed that is consis tent with several seemingly unrelated or contradictory observations and fourth several directions for future research are identified

meteor showers or heat waves heteroskedastic intra daily volatility in the foreign exchange market this paper seeks to explain the causes of volatility clustering in exchange rates careful examination of intra daily exchange rates provides a test of two hypotheses heat waves and meteor showers the heat wave hypothesis is that the volatility has only country specific autocorrelation alternatively the meteor shower is a phenomenon of intra daily volatility spillovers from one market to the next using the garch model to specify the heteroskedasticity across intra daily market segments we find that the empirical evidence is generally against the null hypothesis of the heat wave using a volatility type of vector autoregression we examine the impact of news in one market on the time path of per hour volatility in other markets

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

contingent valuation and social choice the contingent valuation method for estimating the existence value of natural resources is examined for psychophysical robustness statistical reliability and economic sensibility extensions of standard models for willingness to pay and suitable econometric techniques for analyzing these models are developed the analysis is applied to a series of experiments on the value of preserving wilderness areas in the western united states the results call into question the reliability of the cv method for estimating existence values

searching for sustainability the poverty of spontaneous order abstract traditional approaches to sustainability rely on models that depend upon judgments of welfare across future generations right prices and some sense as to what future persons will find giving of utility these models both accept the spontaneous order of market processes and rely on that order to derive optimal consumption paths into the future sustainability is however not a problem of divining optimal paths predicated upon right prices rather sustainability to be operational requires a prior constructed order predicated upon rights for future persons and duties for those now living who sit in a position as dictator over the settings and circumstances that will be passed on to future persons rights based approaches to sustainability do not rely upon unknowable preferences of future persons but rather upon an environmental regency in which those now living agree to preserve settings and circumstances for the future this reminds us that the issue of sustainability concerns not how much to preserve but what to preserve

spatial agglomeration and firm exit a spatial dynamic analysis for italian provinces the paper investigates the effect of spatial agglomeration on firm exit in a dynamic framework using a large dataset at the industry province level for italy 1998 2007 we estimate a spatial dynamic panel model via a gmm estimator and analyze the short run impact of specialization and variety on firm exit specialization negatively affects firm exit rates in the short run the effect is particularly significant for low tech firms the impact of variety on firm mortality rates at the industry level is instead less clear although still negative and significant for low tech firms

volatility spillovers in east asian financial markets a mem based approach abstract we model the interrelations of equity market volatility in eight east asian countries before during and after the asian currency crisis using a new class of asymmetric volatility multiplicative error models based on the daily range we find that dynamic propagation of volatility shocks occurs through a network of interdependencies and shocks originating in hong kong may be amplified in their transmission throughout the system posing greater risks to the region than shocks originating elsewhere although this partly explains the severity of the currency crisis we also find evidence that parameters shifted making the system more unstable during the crisis

using a choice experiment to account for preference heterogeneity in wetland attributes the case of cheimaditida wetland in greece abstract this paper aims to assist policy makers in formulating efficient and sustainable wetland management policies in accordance with the ramsar convention and the european union water framework directive 2000 60 ec by providing results of a valuation study on the cheimaditida wetland in greece a choice experiment is employed to estimate the values of changes in several ecological social and economic functions that cheimaditida wetland provides to the greek public in addition to the conditional logit model a random parameter logit model a random parameter logit model with interactions and a latent class model are estimated to account for heterogeneity in the preferences of the public for the various functions of the wetland the results reveal that there is considerable preference heterogeneity across the public and on average they derive positive and significant values from sustainable management of this wetland the estimated economic benefits of sustainable wetland management are weighed against the costs of alternative wetland management scenarios results of this cost benefit analysis can aid in the design of socially optimal policies for sustainable management of the cheimaditida wetland with possible implications for other similar wetlands in greece and the rest of europe

government programs can improve local labor markets evidence from state enterprise zones federal empowerment zones and federal enterprise communities 1 abstract federal and state governments spend well over a billion dollars a year on programs that encourage employment development in disadvantaged labor markets through the use of subsidies and tax credits in this paper we use an estimation approach that is valid under relatively weak assumptions to measure the impact of state enterprise zones entzs federal empowerment zones empzs and federal enterprise community entc programs on local labor markets we find that all three programs have positive statistically significant impacts on local labor markets in terms of the unemployment rate the poverty rate the fraction with wage and salary income and employment further the effects of empz and entc designation are considerably larger than the impact of entz designation we find that our estimates are robust to allowing for a regression to the mean effect we also find that there are positive but statistically insignificant spillover effects to neighboring census tracts of each of these programs thus our positive estimates of these program impacts do not simply represent a transfer from the nearest non treated census tract to the treated census tract our results are noteworthy for several reasons first our study is the first to jointly look at these three programs thus allowing policy makers to compare the impacts of these programs second our paper along with a concurrent study by neumark and kolko 2008 is the first to carry out the estimation accounting for overlap between the programs third our estimation strategy is valid under weaker assumptions than those made in many previous studies we consider three comparison groups and let the data determine the appropriate group fourth in spite of our conservative estimation strategy by looking at national effects with disaggregated data we show that entz designation generally has a positive effect on the local labor market while most previous research on entzs much of which used more geographically aggregated data to look at state specific effects did not find any significant impacts fifth we note that there is little or no previous work on entcs overall our results strongly support the efficacy of these labor market interventions

a novel market efficiency index for energy futures and their term structure risk premiums abstract this paper proposes a novel futures market efficiency index which aggregates the efficiencies of futures contracts across their term structure spanning from one month to 12 months the index measures the ability for price discovery of a long term futures contract on its nearby short term contract consistently across its terms the index uses a recently developed futures market efficiency test which accounts for heteroscedastic prices and time varying risk premiums it simultaneously estimates the term premiums of futures providing valuable information for the investor the proposed index is employed to investigate the efficiencies of four major energy commodities namely crude oil natural gas heating oil and gasoil during the sample period 1990 2016 numerical results indicate that the market efficiencies vary across terms and across energy commodities gasoil futures traded on the intercontinental exchange ice are the most efficient and natural gas futures are the least efficient in prices the spillover dynamics of market risk information across futures markets are investigated using conditionally heteroscedastic common factors chcfs extracted for each commodity using the estimated term premiums there exist significant delayed contemporaneous and potential information spillovers among term premiums of the energy commodities in our sample our findings are robust and they can help investors to optimally diversify their portfolios

the relationship between the income elasticities of demand and willingness to pay abstract the relationship between income and willingness to pay for collectively provided public environmental goods is investigated we show that while the income elasticity of willingness to pay and the ordinary income elasticity of demand are related knowledge of one is insufficient to determine the magnitude or even the sign of the other the income elasticity of willingness to pay is influenced by additional factors which are generally unobservable examples are provided to illustrate the degree to which the two income elasticities may diverge our results indicate that even when goods are demand luxuries they may or may not have income elasticities of willingness to pay which are greater than one

a review of the stern review on the economics of climate change how much and how fast should we react to the threat of global warming the stern review argues that the damages from climate change are large and that nations should undertake sharp and immediate reductions in greenhouse gas emissions an examination of the review s radical revision of the economics of climate change finds however that it depends decisively on the assumption of a near zero time discount rate combined with a specific utility function the review s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today s marketplace real interest rates and savings rates

ethics of the discount rate in the stern review on the economics of climate change any comparison of the costs and benefits of climate change is dominated by the chosen discount rate but although the stern review emphasises the ethical nature of the parameters entering into its choice of a relatively low discount rate its discussion of the pure time preference parameter is unbalanced in particular no consideration is given to the role of agent relative ethics which i has a wellestablished philosophical pedigree going back to david hume ii is likely to correspond closely to world wide public attitudes towards intergenerational welfare and iii would entail discounting a unit of welfare accruing to future generations compared to an equal unit accruing to people alive today at a positive rate the authors also discuss the other ethical parameter upon which the discount rate depends namely the elasticity of marginal utility with respect to consumption in the conventional model this simultaneously reflects different aspects of inequality aversion as well as risk aversion which complicates its interpretation finally they discuss the divergence between market rates of discount and the low rate chosen in the review and the limitations on the one hand on the normative significance of market rates as well as the danger on the other hand of relying on rates chosen by elites or philosopher kings

financial markets in times of stress abstract in this paper we examine which markets are most synchronized internationally and exhibit the greater extent of co movement we focus on daily data for four asset markets bonds equities foreign exchange and domestic money market our sample covers 35 developed and emerging market countries during 1997 1999 the extent of co movement and responsiveness to external shocks is examined in different ways to measure the response of these markets to adverse external shocks we date the peaks in domestic interest rates and bond spreads and the largest daily declines in equity prices and assess the extent of clustering around the same period we also analyze which markets show evidence of greatest co movement in general irrespective of whether there are adverse shocks or not

persistence in variance structural change and the garch model this article examines the persistence of the variance as measured by the generalized autoregressive conditional heteroskedasticity garch model in stock return data in particular we investigate the extent to which persistence in variance may be overstated because of the existence of and failure to take account of deterministic structural shifts in the model both an analysis of daily stock return data and a monte carlo simulation experiment confirm the hypothesis that garch measures of persistence in variance are sensitive to this type of model misspecification

the roles of inter fuel substitution and inter market contagion in driving energy prices evidences from china s coal market abstract coal has been dominating energy supply and consumption in china with the country becoming the largest energy supplier and consumer worldwide due to inter fuel substitution of crude oil and inter market contagion of international coal market china s coal price might be interrelated with crude oil price and international coal price however the precise roles of these two effects in determining china s coal price are unknown this paper contributes to previous literature by investigating this issue we find that co movements between china s coal price and crude oil price largely hinge on the shares of oil and coal in china s energy mix while its co movements with international coal price depend on scales of coal trade inter fuel substitution dominated the interaction of china s coal market with other energy types but the importance of inter market contagion has been increasing we also find that china might have become an originator for driving the returns of crude oil and international coal in particular after 2008 furthermore china s coal market is still a net volatility recipient for shocks from both crude oil market and international coal market given the increased integration of global energy markets we anticipate this paper to provide a better understanding on the dynamic changes in china s coal prices

on modeling and interpreting the economics of catastrophic climate change with climate change as prototype example this paper analyzes the implications of structural uncertainty for the economics of low probability high impact catastrophes even when updated by bayesian learning uncertain structural parameters induce a critical tail fattening of posterior predictive distributions such fattened tails have strong im plications for situations like climate change where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages this paper shows that the economic consequences of fat tailed structural uncertainty along with unsureness about high temperature damages can readily outweigh the effects of discounting in climate change policy analysis

intra day and inter market volatility in foreign exchange rates four foreign exchange spot rate series recorded on an hourly basis for a six month period in 1986 are examined a seasonal garch model is developed to describe the time dependent volatility apparent in the percentage nominal return of each currency hourly patterns in volatility are found to be remarkably similar across currencies and appear to be related to the opening and closing of the worlds major markets robust lm tests designed to deal with the extreme leptokurtosis in the data fails to uncover any evidence of misspecification or the presence of volatility spillover effects between the currencies or across markets

stock returns and volatility most asset pricing models postulate a positive relationship between a stock portfolio s expected returns and risk which is often modeled by the variance of the asset price this paper uses garch in mean models to examine the relationship between mean returns on a stock portfolio and its conditional variance or standard deviation after estimating a variety of models from daily and monthly portfolio return data we conclude that any relationship between mean returns and own variance or standard deviation is weak the results suggest that investors consider some other risk measure to be more important than the variance of portfolio returns

firm location decisions regional grants and agglomeration externalities we examine whether discretionary government grants influence where domestic and multinational firms locate new plants and how the presence of agglomeration externalities interacts with these policy instruments we find that a region s existing industrial structure has an effect on the location of new entrants grants do have a small effect in attracting plants to specific geographic areas but importantly we find that firms are less responsive to government subsidies in areas where there are fewer existing plants in their industry this suggests that these subsidies are less effective in influencing firms location decisions in the face of countervailing co location benefits