forecasting day ahead electricity load using a multiple equation time series approach the quality of short term electricity load forecasting is crucial to the operation and trading activities of market participants in an electricity market in this paper it is shown that a multiple equation time series model which is estimated by repeated application of ordinary least squares has the potential to match or even outperform more complex nonlinear and nonparametric forecasting models the key ingredient of the success of this simple model is the effective use of lagged information by allowing for interaction between seasonal patterns and intra day dependencies although the model is built using data for the queensland region of australia the method is completely generic and applicable to any load forecasting problem the model s forecasting ability is assessed by means of the mean absolute percentage error mape for day ahead forecast the mape returned by the model over a period of 11 years is an impressive 1 36 the forecast accuracy of the model is compared with a number of benchmarks including three popular alternatives and one industrial standard reported by the australia energy market operator aemo the performance of the model developed in this paper is superior to all benchmarks and outperforms the aemo forecasts by about a third in terms of the mape criterion

the consumption real exchange rate anomaly with extensive margins abstract this paper investigates a consumption real exchange rate anomaly from the open macroeconomics literature known as the backus smith puzzle we both analytically and quantitatively examine how an expansion of trade along extensive margins can contribute to the puzzle s resolution our argument is based on 1 a wealth effect due to changes in the number of product varieties 2 statistical inefficiency in measuring the number of product varieties and 3 market incompleteness contrary to complete asset markets which in general feature overly strong risk sharing properties changes in the number of product varieties under incomplete markets may produce a wealth effect under high trade elasticity since statistical agencies systematically fail to capture the welfare impact arising from that changes data consistent terms of trade and real exchange rates tend to appreciate due to this positive wealth effect this provides a realistic correlation between data consistent real exchange rates and consumption

evaluating interval forecasts a complete theory for evaluating interval forecasts has not been worked out to date most of the literature implicitly assumes homoskedastic errors even when this is clearly violated and proceed by merely testing for correct unconditional coverage consequently i set out to build a consistent framework for conditional interval forecast evaluation which is crucial when higher order moment dynamics are present the new methodology is demonstrated in an application to the exchange rate forecasting procedures advocated in risk management

commodity trade and international risk sharing how much do financial markets matter abstract this paper evaluates the social gains from international risk sharing in some simple general equilibrium models with output uncertainty a simulation model calibrated to selected moments of u s and japanese data estimates the incremental loss from a ban on international portfolio diversification to be on the order of 0 20 percent of output per year even the theoretical gains from asset trade may disappear under alternative sets of assumptions on preferences and technology the paper argues that the small magnitude of potential trade gains may help explain the apparently inconsistent findings of empirical studies on the degree of international capital mobility

carbon pricing and electricity markets the case of the australian clean energy bill abstract we examine the impact of the clean energy bill on the price behavior of electricity futures contracts in the australian national electricity market first we compute ex ante forward risk premiums in the pre tax period until june 2012 then derive market implied expectations about additional costs of the carbon pricing mechanism cpm on generators as well as pass through rates during the carbon tax july 2012 june 2014 and post tax after july 2014 periods our results suggest that the observed carbon premiums became increasingly higher once the carbon tax had been proposed and subsequently legislated in 2011 during periods where market participants could be relatively certain that the tax would be effective we find expected carbon pass through rates between 67 and 150 which seem to be inversely related to emission intensities in the regional markets our results are also a clear indication of strong policy uncertainty with regards to the cpm and suggest that in the future a stable and long term policy framework would be required for a carbon pricing mechanism to have its full effect

predicting price spikes in electricity markets using a regime switching model with time varying parameters this paper shows that a stochastic regime switching model can represent the volatile behavior of wholesale electricity prices associated with price spikes effectively the structure of the model is very flexible because the mean prices in the two regimes and the two transition probabilities are functions of the load and or the implicit reserve margin using price data from the single settlement market in pjm may 1999 to may 2000 the results show that the estimated switching probability from the low to the high regime predicts price spikes well if the reserve margin is measured accurately

enhanced operational reserve as a tool for development of optimal energy mix abstract the aim of this article is to present a novel capacity remuneration mechanism concept that differentiates the level of financial support according to the technology and parameters of the new power plants new power plants that are to be constructed should guarantee the highest level of security of electricity supply and be consistent with actual energy policy carried out by a country thus the proposed remuneration system is based on an operational reserve system which is currently implemented in poland the proposed system distinguishes new power generating assets according to a total assessment based on three factors type of technology including emission benchmark flexibility and location addressing issue of brown or green field investment and conditions of power system operation existing power plants are also subsidized by the proposed mechanism however their remuneration is not based on their characteristics the details of the proposed mechanism a cost analysis and a standardized evaluation procedure are described in the paper the concept itself is universal and can be intruded in every power system that must overcome capacity problem

taste for variety and optimum production patterns in monopolistic competition abstract many positive and normative results in models using the monopolistic competition framework of the dixit stiglitz spence type depend on the value of an important parameter the taste for variety in these models however the taste for variety is linked in a close but arbitrary manner to the degree of market power of monopolistic competitors in this paper we make a simple modification to the basic model which clearly disentangles taste for variety and market power we then show how this changes the usual comparisons between social optimum and market outcomes

equilibrium models displaying endogenous fluctuations and chaos abstract this paper surveys current developments in dynamic general equilibrium theory concerned with conditions under which endogenous fluctuations are possible existing contributions are divided into two classes the larger one consists of models with a unique perfect foresight equilibrium while the second includes models where equilibrium is indeterminate and the set of equilibria involving endogenous fluctuations includes sunspots equilibria while the two classes of models involve oscillations of different natures and with different policy implications we show that both are consistent with optimizing behavior and competitive equilibrium

spot and derivative pricing in the eex power market using spot and futures price data from the german eex power market we test the adequacy of various one factor and two factor models for electricity spot prices the models are compared along two different dimensions 1 we assess their ability to explain the major data characteristics and 2 the forecasting accuracy for expected future spot prices is analyzed we find that the regime switching models clearly outperform its competitors in almost all respects the best results are obtained using a two regime model with a gaussian distribution in the spike regime furthermore for short and medium term periods our results underpin the frequently stated hypothesis that electricity futures quotes are consistently greater than the expected future spot a situation which is denoted as contango

renewables diffusion and contagion effect in italian regional electricity markets assessment and policy implications abstract in the electricity market sudden price jumps occur more frequently than in other markets due to the peculiarity of electricity furthermore the structural spot characteristics of the electricity market determine high price variability all these characteristics have been accentuated by the dramatic increase of renewable energy supply in italy starting in 2010 these features suggest the possibility of contagion effects across italian regional electricity markets considering contagion such as a sudden and significant increase in cross market links arising from a shock to a specific market in this paper we investigate whether such a renewable energy increase has affected the contagion behavior in the italian electricity spot market taking into account both the difference between interdependence and contagion and the direction of the shock we find empirical evidence with significant tests that no changes have occurred in interdependence mechanism nor in contagion effects due to renewable energy sources development in italy

on the outcome of inconsistent programs under exchange rate and monetary rules abstract this paper studies the case of inconsistent programs of monetary policy that is programs incompatible in the long run with a given budget deficit so that at some point in the future there is an eventual crisis and demise of the program all of which is from the outset anticipated by the public the context is one of a small open economy with perfect foresight in which two sets of possibilities are analyzed i a monetary or an exchange rule for the conduct of monetary policy and ii presence or absence of capital mobility it is found that while the choice of the rule is unimportant restrictions on capital mobility determine a very different response for the case of either rule concerning side effects of the program on non monetary variables and on the post crisis level of country indebtedness

stochastic price modeling of high volatility mean reverting spike prone commodities the australian wholesale spot electricity market it is commonly known that wholesale spot electricity markets exhibit high price volatility strong mean reversion and frequent extreme price spikes this paper employs a basic stochastic model a mean reverting model and a regime switching model to capture these features in the australian national electricity market nem comprising the interconnected markets of new south wales queensland south australia and victoria daily spot prices from 1 january 1999 to 31 december 2004 are employed the results show that the regime switching model outperforms the basic stochastic and mean reverting models electricity prices are also found to exhibit stronger mean reversion after a price spike than in the normal period and price volatility is more than fourteen times higher in spike periods than in normal periods the probability of a spike on any given day ranges between 5 16 in nsw and 9 44 in victoria

modelling interregional links in electricity price spikes abnormally high price spikes in spot electricity markets represent a significant risk to market participants as such a literature has developed that focuses on forecasting the probability of such spike events moving beyond simply forecasting the level of price many univariate time series models have been proposed to dealwith spikes within an individual market region this paper is the first to develop a multivariate self exciting point process model for dealing with price spikes across connected regions in the australian national electricity market the importance of the physical infrastructure connecting the regions on the transmission of spikes is examined it is found that spikes are transmitted between the regions and the size of spikes is influenced by the available transmission capacity it is also found that improved risk estimates are obtained when inter regional linkages are taken into account

temporary stabilization policy abstract the effects of a temporary slowdown in the rate of expansion of money supply are studied under ramsey lucas and money superneutrality assumptions it is shown that such a policy expands consumption and leads to capital decumulation and current account deficits in the short run the model is a benchmark case in which temporary policy is always detrimental to welfare connection with the policy credibility issue is briefly discussed

the international transmission of economic fluctuations abstract this paper suggests that for a wide class of international real business cycle models including models with imperfect competition the traditional channels of international transmission of business cycles through world interest rate and terms of trade variations cannot explain the cyclical response of the canadian economy to innovations in u s output empirically testable quantitative models of the effects on canadian economic activity of shocks to the u s economy are developed and their empirical relevance is tested by comparing impulse responses estimated from vector autoregressions to the quantitative predictions of the theoretical models

a smooth transition logit model of the effects of deregulation in the electricity market summary this paper introduces the smooth transition logit stl model that is designed to detect and model situations in which there is structural change in the behaviour underlying the latent index from which the binary dependent variable is constructed the maximum likelihood estimators of the parameters of the model are derived along with their asymptotic properties together with a lagrange multiplier test of the null hypothesis of linearity in the underlying latent index the development of the stl model is motivated by the desire to assess the impact of deregulation in the queensland electricity market and ascertain whether increased competition has resulted in significant changes in the behaviour of the spot price of electricity specifically with respect to the occurrence of periodic abnormally high prices the model allows the timing of any change to be endogenously determined and also market participants behaviour to change gradually over time the main results provide clear evidence in support of a structural change in the nature of price events and the endogenously determined timing of the change is consistent with the process of deregulation in queensland copyright 2015 john wiley sons ltd

endogenous real exchange rate fluctuations in an optimizing open economy model abstract this paper constructs a simple intertemporal model of a small open economy inhabited by forward looking agents in which endogenous fluctuations in the real exchange rate can arise in equilibrium i e fluctuations that are not linked to movements in economic fundamentals the key condition for the main results is the assumption that the marshall lerner condition does not hold i e that the country s exports and imports are inelastic to its real exchange rate it is shown that given that the marshall lerner condition fails there exist periodic equilibria and or stationary sunspot equilibria in the neighborhood of the stationary state

a model for the federal funds rate target this paper is a statistical analysis of the manner in which the federal reserve determines the level of the federal funds rate target one of the most publicized and anticipated economic indicators in the financial world the paper introduces new statistical tools for forecasting a discrete valued time series such as the target and suggests that these methods in conjunction with a focus on the institutional details of how the target is determined can significantly improve on standard vector autoregression forecasts of the effective federal funds rate we further show that the news that the fed has changed the target has statistical content substantially different from the news that the fed failed to make an anticipated target change causing us to challenge some of the conclusions drawn from standard linear var impulse response functions

a garch forecasting model to predict day ahead electricity prices price forecasting is becoming increasingly relevant to producers and consumers in the new competitive electric power markets both for spot markets and long term contracts price forecasts are necessary to develop bidding strategies or negotiation skills in order to maximize profits this paper provides an approach to predict next day electricity prices based on the generalized autoregressive conditional heteroskedastic garch methodology that is already being used to analyze time series data in general a detailed explanation of garch models is presented and empirical results from the mainland spain and california deregulated electricity markets are discussed

consumption and real exchange rates in dynamic economies with non traded goods abstract we examine the possibility that non traded goods may account for several striking features of international macroeconomic data large persistent deviations from purchasing power parity small correlations of aggregate consumption fluctuations across countries and substantial international real interest rate differentials a dynamic exchange economy is used to show that non traded goods in principle can account for each of these phenomena in the theory there is a close relation between fluctuations in consumption ratios and those in bilateral real exchange rates but we find little evidence for this relation in time series data for eight oecd countries

variety growth and world welfare economists since john richard hicks have known that one of the principal means if not the principal means through which countries benefit from international trade is by the expansion of varieties the seminal work of paul r krugman 1979 brought the study of varieties into sharp focus by presenting a simple generalequilibrium model in which countries gain from trade through the import of new varieties since then economists have been hampered in their ability to quantify the impact of new varieties on national welfare by the econometric and data hurdles that need to be surmounted in this paper we document some stylized facts about the growth in global varieties which suggest that there may have been substantial welfare gains through the import of new varieties moreover we calculate the impact of increased variety on import prices and find that conventional measures of import price inflation may be dramatically biased upward classical international trade theory postulates that the elimination of trade barriers improves welfare by reducing the wedge between domestic and import prices as well as the ensuing deadweight loss an entirely different reason for the gains from trade arises from models of monopolistic competition if consumers value variety and countries cannot produce all varieties due to a fixed cost in the production of each variety countries stand to gain from trade because it expands the set of available varieties in these models the gains hinge crucially on a number of parameters and variables the first is the elasticity of substitution among varieties if varieties are highly substitutable as might be true for varieties of gasoline then increasing the number of varieties is unlikely to have much of an effect on prices and welfare second quality variation across varieties may matter presumably most americans care more about having access to french red wine than to japanese red wine finally import quantities matter as ceteris paribus one cares more about variety growth in big sectors than in small sectors in broda and weinstein 2004 we carefully estimate the impact of increased variety in the united states over the period from 1972 to 2001 using the most disaggregated import data available we document that the number of varieties imported by the united states defined as the number of import categories multiplied by the average number of source countries for each category quadrupled about half of this increase was due to increases in the number of categories and half due to a doubling of the number of countries from which the united states imported each good measuring the impact of this increase on u s import prices and welfare is a complex process that we will only discuss briefly here essentially we used robert c feenstra s 1994 methodology to estimate 30 000 elasticities and then construct an aggregate price index that is robust to common changes in quality variation the arbitrary splitting of categories the introduction of new goods and a host of other data problems after reconstructing the u s import price index we found that the price of u s imports has been falling at a rate 1 2 percent per year faster than one would have thought without taking new varieties into account to get some sense of the enormity of this bias consider that the impact of quality adjustments on the consumer price index is estimated to be 0 6 percent per year using this adjusted import price index we estimate the impact of new imported varieties on broda research department federal reserve bank of new york 33 liberty street new york ny 10045 weinstein economics department columbia university 420 w 118th street new york ny 10027 and nber we thank joshua greenfield for excellent research assistance we thank robert feenstra and peter klenow for excellent comments 1 the extension of trade does not primarily imply more goods the variety of goods available is also increased with all the widening of life that that entails there can be little doubt that the main advantage that will accrue to those with whom our merchants are trading is a gain of precisely this kind this is a gain which quantitative economic history which works with index numbers of real income is ill fitted to measure or even to describe hicks 1969 p 56

modelling price and volatility inter relationships in the australian wholesale spot electricity markets this paper examines the inter relationships of wholesale spot electricity prices among the four regional electricity markets in the australian national electricity market nem namely new south wales queensland south australia and victoria using the constant conditional correlation and tse and tsui s tse y k tsui a k c 2002 a multivariate generalised autoregressive conditional heteroscedasticity model with time varying correlations journal of business and economic statistics 20 3 351 362 and engle s engle r 2002 dynamic conditional correlation a sample class of multivariate generalized autoregressive conditional heteroskedasticity models journal of business and economic statistics 20 3 339 350 dynamic conditional correlation multivariate garch models tse and tsui s tse y k tsui a k c 2002 a multivariate generalised autoregressive conditional heteroscedasticity model with time varying correlations journal of business and economic statistics 20 3 351 362 dynamic conditional correlation multivariate garch model which takes account of the student t specification produces the best results at the univariate garch 1 1 level the mean equations indicate the presence of positive own mean spillovers in all four markets and little evidence of mean spillovers from the other lagged markets in the dynamic conditional correlation equation the highest conditional correlations are evident between the well connected markets indicating the presence of strong interdependence between these markets with weaker interdependence between the not so well interconnected markets

predicting u s recessions with dynamic binary response models abstract we develop dynamic binary probit models and apply them for predicting u s recessions using the interest rate spread as the driving predictor the new models use lags of the binary response a recession dummy to forecast its future values and allow for the potential forecast power of lags of the underlying conditional probability we show how multiperiod ahead forecasts are computed iteratively using the same one period ahead model iterated forecasts that apply specific lags supported by statistical model selection procedures turn out to be more accurate than previously used direct forecasts based on horizon specific model specifications

arima models to predict next day electricity prices price forecasting is becoming increasingly relevant to producers and consumers in the new competitive electric power markets both for spot markets and long term contracts price forecasts are necessary to develop bidding strategies or negotiation skills in order to maximize benefit this paper provides a method to predict next day electricity prices based on the arima methodology arima techniques are used to analyze time series and in the past have been mainly used for load forecasting due to their accuracy and mathematical soundness a detailed explanation of the aforementioned arima models and results from mainland spain and californian markets are presented

differences in income elasticities and trends in real exchange rates abstract one might expect that differences in income elasticities in trade and or differences in growth rates among countries would give rise to strong secular trends in real exchange rates for example fast growing countries might need steady depreciation to get the world to accept their growing exports in fact however income elasticities are systematically related to growth rates by the 45 degree rule under which fast growing countries appear to face high income elasticities of demand for their exports while having low income elasticities of import demand the net effect of this relationship between elasticities and growth rates is that secular trends in real exchange rates are much smaller than one might otherwise have expected relative ppp holds fairly well this paper documents the existence of a 45 degree rule and suggests an explanation in terms of increasing returns and product differentiation

limited asset market participation and the consumption real exchange rate anomaly under efficient consumption risk sharing as assumed in standard international business cycle models a country s aggregate consumption rises relative to foreign consumption when the country s real exchange rate depreciates yet empirically relative consumption and the real exchange rate are essentially uncorrelated i show that this consumption real exchange rate anomaly can be explained by a simple model in which a subset of households trade in complete financial markets while the remaining households lead hand to mouth htm lives htm behavior also generates greater volatility of the real exchange rate and of net exports which likewise brings the model closer to the data

currency substitution foreign inflation and terms of trade dynamics this paper incorporates rational expectations full price flexibility and currency substitution into the usual small economy model taking explicit account of inflation abroad not only will the steady state terms of trade be affected by an increase in the rate of monetary expansion when the inflation rate abroad is assumed to be nonzero but its dynamic path may also be different from the usual case in which inflation abroad is ignored it has been shown that if the import demands are relatively inelastic the terms of trade will undershoot their equilibrium value if the import demands are elastic the terms of trade will overshoot the key to these diametrically opposite results is the degree of ultimate deterioration in the terms of trade which in turn turn on the size of the two import demand elasticities

energy risk management through self exciting marked point process abstract crude oil is a dynamically traded commodity that affects many economies we propose a collection of marked self exciting point processes with dependent arrival rates for extreme events in oil markets and related risk measures the models treat the time among extreme events in oil markets as a stochastic process the main advantage of this approach is its capability to capture the short medium and long term behavior of extremes without involving an arbitrary stochastic volatility model or a prefiltration of the data as is common in extreme value theory applications we make use of the proposed model in order to obtain an improved estimate for the value at risk in oil markets empirical findings suggest that the reliability and stability of value at risk estimates improve as a result of finer modeling approach this is supported by an empirical application in the representative west texas intermediate wti and brent crude oil markets

on transition probabilities of regime switching in electricity prices we analyze the transition probabilities of regime switching in electricity prices by explicitly incorporating the underlying demand supply structure we show that the transition probabilities of electricity prices cannot be constant and depend on both the current demand level relative to the supply capacity and the trends of demand fluctuation these results not only contrast with the assumption of constant transition probabilities on which many regime switching models are built but also provide new insights on the determinants of the state dependent transition probabilities of regime switching

on demand shocks and international business cycle puzzles abstract this note studies a parsimonious dynamic stochastic general equilibrium model driven by demand shocks to explain two central puzzles in open economy macroeconomics the comovement puzzle backus et al 1992 and the backus smith puzzle backus and smith 1993 while matching a large set of domestic and international business cycle properties observed in the industrialized countries features such as non separable preferences non tradable sector or market incompleteness do not appear to be preconditions for resolving these long standing puzzles

transmission of prices and price volatility in australian electricity spot markets a multivariate garch analysis this paper examines the transmission of spot electricity prices and price volatility among the five regional electricity markets in the australian national electricity market namely new south wales queensland south australia the snowy mountains hydroelectric scheme and victoria a multivariate generalised autoregressive conditional heteroskedasticity model is used to identify the source and magnitude of price and price volatility spillovers the results indicate the presence of positive own mean spillovers in only a small number of markets and no mean spillovers between any of the markets this appears to be directly related to the physical transfer limitations of the present system of regional interconnection nevertheless the large number of significant own volatility and cross volatility spillovers in all five markets indicates the presence of strong autoregressive conditional heteroskedasticity and generalised autoregressive conditional heteroskedasticity effects this indicates that shocks in some markets will affect price volatility in others finally and contrary to evidence from studies in north american electricity markets the results also indicate that australian electricity spot prices are stationary

monetary expansion and real exchange rate dynamics this paper examines the effect of a change in the rate of monetary expansion on the dynamics of the real exchange rate under fully flexible domestic prices and a floating exchange rate the model is similar in structure to an ealier paper by calvo and rodriguez the main difference being that in our model consumers have an infinite planning horizon and long run perfect foresight one of the main findings is that an increase in the rate of monetary expansion has the impact effect of creating a real appreciation of the exchange rate and a deterioration of the balance of payments contrary to the results of calvo and rodriguez

the emergence of equilibrium cycles in a monetary economy with a separable utility function abstract this paper analyzes the dynamic properties of the monetary economy when money held during the period induces some utility it is shown that the price level and real money balances may have chaotic dynamic paths even if the utility function is separable in real money balances and consumption a crucial point is that a constraint on the utility of money yields the wealth effect that inflation will reduce the real value of assets hence as in the overlapping generations model the conflict between substitution and wealth effects may cause globally stable periodic orbits as well as the complicated dynamics

consumption real exchange rates and the structure of international asset markets abstract international real business cycle irbc models that assume complete asset markets yield strong restrictions for consumption and bilateral real exchange rate series empirical tests with data for the us japan france uk italy canada and sweden suggest that neither the trend behavior nor high frequency movements of consumption and real exchange rates are well explained by irbc models with complete markets it appears however that high frequency fluctuations of consumption and real exchange rates are consistent with unrestricted international trade in risk free bonds

anticipated devaluations currency flight and direct trade controls in a monetary economy mendation for a country facing a balance of payments deficit this advice is often resisted by country governments instead direct trade controls such as tariffs quotas and subsidies are frequently used in this paper i propose an economic explanation for the reluctance to devalue and the use of trade controls namely the currency flight that can be expected to occur if the devaluation is anticipated in an effort to avoid or offset the effects of this currency flight countries may use direct controls i shall analyze the properties of using import tariffs and export subsidies with or without an anticipated devaluation to affect the balance of payments and obtain the social optimum

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

modeling and forecasting multivariate electricity price spikes abstract we consider the problem of forecasting the occurrence of extreme prices in the australian electricity markets from high frequency spot prices in particular we are interested in the simultaneous occurrence of such so called spikes in two or more markets our approach is based on a novel dynamic model for multivariate binary outcomes which allows the latent variables driving these observed outcomes to follow a vector autoregressive process furthermore the model is constructed using a copula representation for the joint distribution of the resulting innovations this has several advantages over the standard multivariate probit model first it allows for nonlinear dependence between the error terms second the distribution of the latent errors can be chosen freely third the computational burden can be greatly reduced making estimation feasible in higher dimensions and for large samples the model is applied to spikes in half hourly electricity prices in four interconnected australian markets the multivariate model provides a superior fit compared to single equation models and generates better forecasts for spike probabilities furthermore evidence of spillover dynamics between the markets is revealed

real business cycles and the animal spirits hypothesis abstract we calibrate a quantitative equilibrium macroeconomic model with an aggregate technology that is subject to increasing returns and show that this model may display fluctuations at business cycle frequencies even when there are no shocks to the fundamentals of the economy these fluctuations are due to the self fulfilling beliefs of investors which we call animal spirits we compare the impulse response functions predicted by our model and by two other more standard models with a four variable vector autoregression on u s data our animal spirits economy is the most successful of the three at matching broad features of the dynamic responses in the data journal of economic literature classification numbers e00 e3 e32

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

caviar conditional autoregressive value at risk by regression quantiles value at risk var has become the standard measure of market risk employed by financial institutions for both internal and regulatory purposes var is defined as the value that a portfolio will lose with a given probability over a certain time horizon usually one or ten days despite its conceptual simplicity its measurement is a very challenging statistical problem and none of the methodologies developed so far give satisfactory solutions interpreting the var as the quantile of future portfolio values conditional on current information we propose a new approach to quantile estimation which does not require any of the extreme assumptions invoked by existing methodologies such as normality or i i d returns the conditional autoregressive value at risk or caviar model moves the focus of attention from the distribution of returns directly to the behavior of the quantile we specify the evolution of the quantile over time using a special type of autoregressive process and use the regression quantile framework introduced by koenker and bassett to determine the unknown parameters since the objective function is not differentiable we use a differential evolutionary genetic algorithm for the numerical optimization utilizing the criterion that each period the probability of exceeding the var must be independent of all the past information we introduce a new test of model adequacy the dynamic quantile test applications to simulated and real data provide empirical support to this methodology and illustrate the ability of these algorithms to adapt to new risk environments

a dynamic network analysis of spot electricity prices in the australian national electricity market abstract this study applies dynamic network analysis to the power sector examining the relationship between regional spot electricity prices in the australian national electricity market nem in particular we employ principal component analysis and generate granger causality networks to examine the degree of interconnectedness of the nem in a time varying setting we find that the derived measures of interdependence can be related to actual market events such as price spikes unexpected high demand for electricity sudden increases in price volatility rebidding of dominant generators the temporary or permanent outage of major power stations and upgrades and limitations in transmission capacity in the analysed network we find that stronger dependence is exhibited by regional markets that are linked through interconnectors while the direction of granger causality can be related to interregional trade we further examine the usefulness of the derived measures for forecasting distributional characteristics of spot prices such as the maximum price volatility price spreads or upcoming periods of price spikes our results suggest that the derived network measures have predictive power albeit limited for the behaviour of spot electricity prices in the nem