nonconvexities in the production of timber biodiversity and carbon sequestration abstract fixed logging costs and administrative constraints on logging regulations can create nonconvexities in forestry production sets that include timber and nontimber products managing forests to produce multiple values at a landscape level through the aggregation of stands that are completely or partially specialized in the production of timber or nontimber products can consequently be superior to management systems that treat all stands uniformly even when all stands are identical both fixed costs and administrative constraints are empirically important sources of nonconvexity in tropical rainforests the former is more important when the nontimber product is carbon sequestration while the latter is more important when the nontimber product is biodiversity protection uniform management appears to be superior for the joint production of timber and carbon sequestration while specialized management might often be superior for the joint production of timber and biodiversity at least at low discount rates

spatial distribution of species populations relative economic values and the optimal size and number of reserves we examine the tradeoff between the number and average size of nature reserves when the costs of enforcing reserve boundaries are negligible we find analytically that the relative price of biodiversity has a positive impact on the optimal total reserved area but an ambiguous impact on the optimal number of reserves simulation modeling of floral diversity in a tropical timber concession reveals that the resolution of this ambiguity depends on spatial distributions of the populations of tree species whether or not they are spatially aggregated clumped the impact of biodiversity price on optimal reserve number remains analytically ambiguous when enforcement costs are not negligible multiple reserves being economically superior to a single reserve now requires in addition to aggregation a biodiversity price that is sufficiently high to offset the effects of enforcement costs most of our simulation scenarios generate threshold biodiversity prices that do not exceed a leading estimate of the marginal value of a higher plant species in the bioprospecting literature several smaller reserves evidently can be economically superior to a single larger one even in the presence of enforcement costs

does central bank transparency impact financial markets a cross country econometric analysis blinder et al 2001 argues that more open public disclosure of central bank policies may enhance the efficiency of markets we examine this claim by studying for a set of seven industrialized countries whether selected central banks moves toward more open disclosure during the 1990s improved or worsened the predictability of the corresponding national financial markets employing methodologies analogous to campbell and schiller 1991 we find that for all countries the forecasting error has decreased for interest rates on the respective government bonds across most maturity lengths and that the expectations hypothesis has generally performed better at the short end of the yield curve our results also tentatively show that the effects are stronger for central banks that made the move to greater disclosure compared to those banks that resisted increasing the public s information set these findings are consistent with tabellini s 1987 view that central bank secrecy will hinder the smooth functioning of financial markets

policy relevant nonconvexities in the production of multiple forest benefits abstract this paper challenges common assumptions about convexity in forest rotation models which optimize timber plus nontimber benefits if a local optimum occurs earlier than the globally optimal age policy based on marginal incentives may achieve suboptimal results policy relevant nonconvexities are more likely if i nontimber benefits dominate for young stands while the optimal age depends primarily on timber benefits or ii nontimber benefits dominate for mature stands and also determine the optimal age nonconvexities may create either temporary or persistent difficulties policymakers may improve efficiency by exploiting the relationship between the timber only optimum and the global optimum

central bank transparency and the crowding out of private information in financial markets we use an asset market model based on diamond 1985 to demonstrate that increased central bank transparency may lead to crowding out of costly private information which can result in a market that is less able to predict monetary policy consequently for intermediate levels of public information precision it is optimal for the central bank to actually disclose less than it knows we show that such crowding out can occur even in the likely scenario that public information is more precise than private information under the plausible assumption that traders are nearly risk

spatial interactions in multiple use forestry and substitution and wealth effects for the single stand abstract forestry models often ignore spatial relationships between forest stands this paper isolates the effects of stand interactions in multiple use forestry through a straightforward extension of the single stand model effects of stand interactions decompose into wealth and substitution effects and may cause time varying patterns of resource use for a forest stand simulations illustrate that a stand s role even in steady state may alternate an emphasis on timber with an emphasis on nontimber optimal management plans differ substantially depending on whether the manager values nonmarket goods from neighboring stands the model offers insights for improving heuristic forest level optimization models in current usage

the imperfect price reversibility of non transport oil demand in the oecd abstract this paper examines the price reversibility of oecd non transport oil demand and its components residual heavy fuel oil non transport distillates and other non transport oil products our purpose is to determine the extent to which the reductions in demand following the oil price increases of the 1970s have been and will be reversed by the price cuts of the 1980s the analysis is based on an econometric model which utilizes price decomposition methods to measure separately the effects of price increases and price decreases these methods allow empirical testing of irreversibility and hysteresis and should be applicable in other areas of economics where asymmetry of response or persistence of effect are evident based on the statistical evidence we reject the conventional specification of demand being perfectly price reversible we conclude that the response to the price cuts of the 1980s has been significantly smaller than to the price increases of the 1970s demand has followed a ratchet process price increases reduced demand substantially when demanders conserved and switched away from oil but price cuts did not reverse this process completely if at all this has important implications for projections of oil demand especially under low price assumptions the oecd s dependency on oil will not increase as much as some analysts may have feared there is however another aspect of imperfect price reversibility the possibilities of adjusting to future price rises may not be as great as they have been in the past the easiest and least costly demand savings have already been made and oil has been replaced by other energy sources in many uses what s done is done

world oil market or mayhem the world oil market is regarded by many as a puzzle why are oil prices so volatile what is opec and what does opec do where are oil prices headed in the long run is peak oil a genuine concern why did oil prices spike in the summer of 2008 and what role did speculators play any attempt to answer these questions must be informed and disciplined by economics such is the purpose of this essay to illuminate recent developments in the world oil market from the perspective of economic theory

differences and similarities between ecological and economic models for biodiversity conservation abstract in this paper we investigate an important obstacle which substantially complicates co operation between ecologists and economists but which has received little attention so far differences between the modelling approaches in economics and ecology to understand these differences 60 models addressing issues relevant to biodiversity conservation have been selected randomly from eight international economic and ecological journals the models have been compared according to a number of criteria including the models level of generality the mathematical techniques employed for formulation and solution of the models the level of complexity and the way time space and uncertainty are taken into account the economic models sampled are formulated and analysed analytically tend to be relatively simple and are mostly used to investigate general questions furthermore they often ignore space dynamics and uncertainty although some ecological models have similar properties there is also a substantial number of another type of ecological models that are relatively complex and analysed by simulation these models tend to be rather specific and often explicitly consider dynamics space and uncertainty the integrated ecological economic models are observed to lie in the middle between ecological and economic models an unexpected result is that they are not more complex than ecological and economic models as one could have expected from a simple merger of models from both disciplines but have an intermediate complexity

rent capture and the feasibility of tropical forest management hyde amacher and magrath 1996 imply that deforestation and timber rents logging revenue minus logging costs other than timber fees are not subjects that justify policymakers attention arguing that market responses limit the scope of deforestation

have increases in federal reserve transparency improved private sector interest rate forecasts yes this paper shows that since the late 1980s u s financial markets and private sector forecasters have become 1 better able to forecast the federal funds rate at horizons out to several months 2 less surprised by federal reserve announcements 3 more certain of their interest rate forecasts ex ante as measured by interest rate options and 4 less diverse in the cross sectional variety of their interest rate forecasts we also present evidence that strongly suggests increases in federal reserve transparency played a role for example private sector forecasts of gdp and inflation have not experienced similar improvements over the same period indicating that the improvement in interest rate forecasts has been special

information aggregation in a noisy rational expectations economy abstract this paper analyzes a general equilibrium model of a competitive security market in which traders possess independent pieces of information about the return of a risky asset each trader conditions his estimate of the return both on his own private source of information and price which in equilibrium serves as a noisy aggregator of the total information observed by all traders a closed form characterization of the rational expectations equilibrium is presented a counter example to the existence of fully revealing equilibrium is developed

fomc forecasts as a focal point for private expectations we explore empirically the theoretical prediction that public information acts as a focal point in the context of the u s monetary policy we aim at establishing whether the publication of federal open market committee fomc inflation forecasts affects the cross sectional dispersion of private inflation expectations our main finding is that publishing fomc inflation forecasts has a negative effect on the cross sectional dispersion of private current year inflation forecasts this effect is found to be robust to another survey data set and to various macroeconomic controls moreover we find that the dispersion of private inflation forecasts is not affected by the dispersion of views among fomc members

modelling oecd industrial energy demand asymmetric price responses and energy saving technical change abstract the industrial sector embodies a multifaceted production process consequently modelling the derived demand for energy is a complex issue made all the more difficult by the need to capture the effect of technical progress of the capital stock this paper is an exercise in econometric modelling of industrial energy demand using panel data for 15 oecd countries over the period 1962 2003 exploring the issue of energy saving technical change and asymmetric price responses although difficult to determine precisely it is tentatively concluded that the preferred specification for oecd industrial energy demand incorporates asymmetric price responses but not exogenous energy saving technical change

efficient multiple use forestry may require land use specialization considered at the landscape scale economically efficient multiple use of forests may require land use specialization if managers attempt to satisfy legitimate multiple use demands from society by managing all lands for all outputs both commodity and amenity values of the forest may be inappropriately supplied and management inputs may be inefficiently deployed these results run counter to some of the prescriptions called new forestry

targeting incentives to reduce habitat fragmentation the fragmentation of wildlife habitat has long been recognized as a principal threat to terrestrial biodiversity in this paper we develop a theoretical model to analyze the spatial targeting of incentives for the restoration of forested landscapes when land quality is spatially heterogeneous and wildlife habitat can be enhanced by reducing fragmentation we consider a regulator who uses subsidies to encourage the conversion of private agricultural land to forest on a pre defined set of landscapes the regulator can observe land use choices but not the opportunity costs on individual land parcels the important insight to emerge from the theoretical analysis is that solutions at or near corners are a strong possibility on each landscape either none or all of the agricultural land should be converted to forest corner solutions are directly linked to the spatial process determining habitat benefits to verify the theoretical insight we present a simulation of the effects of incentive based policies on the spatial distribution of forests in south carolina the empirical methodology integrates an econometric model of land use change with gis based landscape simulations the empirical findings strongly support our conjecture regarding corner solutions and the optimal targeting policy is shown to produce substantial welfare gains over a spatially uniform incentive

environmental efficiency and labour productivity trade off or joint dynamics a theoretical investigation and empirical evidence from italy using namea in this paper we test an adapted ekc hypothesis to verify the relationship between environmental efficiency namely emissions per unit of value added and labour productivity value added per employee we exploit namea data on italy for 29 sector branches and 6 categories of air emissions for the period 1991 2001 we employ data on capital stock and trade openness to test the robustness of our results on the basis of the theoretical and empirical analyses focusing on innovation firm performances and environmental externalities we would expect a positive correlation between environmental efficiency and labour productivity a negative correlation between the emissions intensity of value added and labour productivity which departs from the conventional mainstream view the hypothesis tested is a critical one within the longstanding debate on the potential trade off or complementarity between environmental preservation and economic performance which is strictly associated with the role of technological innovation we find that for most air emission categories there is a positive relationship between labour productivity and environmental efficiency labour productivity dynamics then seem to be complementary to a decreasing emissions intensity in the production process taking a disaggregate sector perspective we show that the macro aggregate evidence is driven by sector dynamics in a non homogenous way across pollutants services tend always to show a complementary relationship while industry seems to be associated with inverted u shape dynamics for greenhouse gases and nitrogen oxides this is in line with our expectations in any case ekc shapes appear to drive such productivity links towards complementarity the extent to which this evidence derives from endogenous market forces industrial and structural change and policy effects is discussed by taking an evolutionary perspective to innovation and by referring to impure public goods arguments

world oil demand s shift toward faster growing and less price responsive products and regions abstract using data for 1971 2008 we estimate the effects of changes in price and income on world oil demand disaggregated by product transport oil fuel oil residual and heating oil and other oil for six groups of countries most of the demand reductions since 1973 74 were due to fuel switching away from fuel oil especially in the oecd in addition the collapse of the former soviet union fsu reduced their oil consumption substantially demand for transport and other oil was much less price responsive and has grown almost as rapidly as income especially outside the oecd and fsu world oil demand has shifted toward products and regions that are faster growing and less price responsive in contrast to projections to 2030 of declining per capita demand for the world as a whole by the u s department of energy doe international energy agency iea and opec we project modest growth our projections for total world demand in 2030 are at least 20 higher than projections by those three institutions using similar assumptions about income growth and oil prices because we project rest of world growth that is consistent with historical patterns in contrast to the dramatic slowdowns which they project

short and long run adjustments in u s petroleum consumption long run adjustments in petroleum consumption are not only larger than short run adjustments they may also be motivated by entirely different price events this analysis shows that new price peaks have both short run and long run consumption responses a result that is starkly different than price changes that track previous price paths it also establishes significant trend effects where gasoline and residual fuel oil consumption decline over time the analysis explores these adjustments by establishing long run cointegrating relationships for different petroleum product groupings an important implication is that price increases above historical levels may be providing substantially greater incentives for significant long run demand adjustments than would be the case otherwise

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

anticipations of monetary policy in financial markets in recent years financial markets appear better able to anticipate federal open market committee fomc policy changes beginning in the late 1980s and early 1990s longer term interest rates and futures rates have tended to incorporate movements in the federal funds rate several months in advance in contrast to the largely contemporaneous response typically observed before that time after identifying these emerging trends the paper parses the enhanced predictability into a component that can be attributed to the autoregressive behavior of the funds rate and a nonautoregressive component the paper considers institutional developments in fomc policy making that may have contributed to each of these components including gradualism in adjusting the federal funds rate target and transparency regarding the setting of the target and future policy intentions

underlying trends and seasonality in uk energy demand a sectoral analysis this paper demonstrates the importance for energy demand modelling of allowing for trends and seasonal effects that are stochastic in form inherent underlying trends may be non linear and reflect not only technical progress which usually produces greater energy efficiency but also other factors such as changes in consumer tastes and the economic structure that may be working in the opposite direction using quarterly unadjusted data for various sectors in the uk it is shown that unless energy demand models are formulated so as to allow for stochastic trends and seasonals estimates of price and income elasticities could be seriously biased

the implications of central bank transparency for uncertainty and disagreement abstract using survey data from 25 economies we provide evidence that greater transparency surrounding monetary policy reduces uncertainty of interest rates and inflation primarily by reducing uncertainty that is common to agents rather than disagreement between agents this suggests that studies that focus on disagreement as a proxy for uncertainty understate the benefits of monetary policy transparency the adoption of inflation targets and forward guidance are both associated with lower uncertainty although inflation targets have a stronger impact on reducing uncertainty than forward guidance moreover there are diminishing benefits from ever higher levels of transparency taken as a whole our results support the contention that clarity of communication is as important as the magnitude of transparency

the effect of central bank transparency on exchange rate volatility abstract the increase in central bank transparency has been one of the main developments in central banking in the past two decades this leads to the question of the effect of central bank transparency on the volatility of exchange rates according to theoretical considerations more information could lead to either more precise forecasts or more noise trading this raises the need for an empirical estimation of the relationship the present study shows that the effect of central bank transparency on exchange rate volatility depends on a country s development while there is no effect of central bank transparency in the full sample and for developing countries transparency increases exchange rate fluctuations in developed countries

energy consumption and economic activity in industrialized countries the dynamic aggregate time series relationship abstract most econometric studies suggest that the income elasticity of demand for energy is approximately unity for the developed market economies it is shown that over the period 1950 1978 the long run income elasticity is substantially higher than unity in terms of a ces energy demand function this result reflects the application of a generalized dynamic estimation methodology where serial correlation is regarded as a diagnostic guide to distributed lag fitting price elasticities are also estimated but these are in line with conventional estimates

backcasting u s oil demand over a turbulent decade abstract this paper compares 10 year backcast projections of u s petroleum consumption for the 2000 2009 period based upon a range of functional forms although a univariate specification based upon only lagged consumption performed better than most approaches it provides little value to the policymaker who wants to understand the factors that influence oil consumption and by how much one structural approach performed considerably better than all other approaches including the univariate model this specification is the autoregressive distributed lag adl model that allowed oil demand to respond differently asymmetrically to price increases and decreases certain forms of this equation however do well while others perform poorly evaluations of backcast projections over different periods and updated frequently can be important byproducts of energy modeling

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

a single equation study of u s petroleum consumption the role of model specification the price responsiveness of u s petroleum consumption began to attract a great deal of attention following the unexpected and substantial oil price increases of 1973 74 there have been a number of large multi equation econometric studies of u s energy demand since then which have focused primarily on estimating short run and long run price and income elasticities of individual energy resources coal oil natural gas electricity for various consumer sectors residential industrial commercial following these early multi equation studies there have been several single equation studies of aggregate u s petroleum consumption 4 3 9 5 6 these singleequation studies have found that u s demand for petroleum products can be quite price inelastic in the short run estimates range from 0 04 to 0 08 but exhibits long lags of anywhere from 6 to 10 years that yield long run price elasticities ranging from 0 25 to 0 56 income or gnp elasticities are usually found to be much higher 0 69 to 1 13 with the complete response often assumed to occur in the current period single equation studies are often justified as efficient shortcuts or reduced forms for identifying the central behavioral aspects of a particular market the main issue addressed in this paper is the extent to which the existing empirical results from single equation studies of aggregate u s petroleum consumption have been influenced by the researchers choice of dynamic model specification this question is relevant because the econometric methodology usually followed in such studies is to start with a relatively simple specification such as a partial adjustment model or some kind of a distributed lag structure on price alone this initial specification choice is rarely justified except possibly to cite its previous success in similar work given that models which produce insignificant or perverse coefficient estimates are not usually publishable the reported specification is almost certain to provide reasonable statistically significant estimates with the correct signs the primary diagnostic test of the chosen specification is the durbin watson test statistic or perhaps durbin s h statistic in the presence of lagged dependent variables when this test gives evidence of serial correlation in the residuals the usual response is to correct for this by estimating a first or second order autoregressive model ar 1 or ar 2 should this easilyimplemented correction not solve the problem there is a tendency to chalk it up to some kind 1 an excellent survey of these results may be found in bohi 2 159

opportunity cost estimation of ecosystem services land use changes rank among the most significant drivers of change in ecosystem services worldwide the enhancement of important services such as biodiversity and carbon sequestration requires modifications in land use that can lead to the decline in other ecosystems services targeting the most suitable areas for particular land uses based on comparative advantages requires opportunity cost information across large regions this is a demanding task because the input output relations are ill defined and determined by spatially heterogeneous operational and environmental conditions to address this methodological challenge this paper presents a two stage semiparametric technique that enables multi dimensional production possibility frontiers to be estimated from data provided by biophysical models specific advantages of the proposed frontier approach are its flexibility with regard to assumptions on the convexity of the production possibility set and its freedom from any separability assumptions for the input output space and the space of the heterogeneous background variables the method is illustrated for a case study of 18 central and eastern european countries results show that opportunity costs of changes in ecosystem services provision differ substantially between regions those areas having already relatively high levels of carbon sequestration have a comparative advantage in sequestering carbon opportunity costs of biodiversity are generally positively related with the level of biodiversity up to a turning point after which they are negatively related to illustrate the policy consequences of the observed economies and diseconomies of scope we compare two management regimes to illustrate the potential gains from smart land management

forward guidance with an escape clause when half a promise is better than a full one abstractusing a three equation new keynesian model we find that incorporating an escape clause ec into forward guidance fg is welfare improving as it allows the monetary authority to avoid cases in which the cost of reduced flexibility is too high the ec provides the central bank with another instrument additional to the promised policy rate the announced threshold the greater the size of the recessionary shock the lower the optimal promised rate and the higher the optimal threshold i e the higher the probability of delivering the promised rate while fg with an ec is better than discretion for facing any zero lower bound zlb situation unconditional fg performs better than discretion only in the most extreme 16 of zlb events furthermore even for very large recessionary shocks it is not optimal to make unconditional promises

an evaluation of errors in us energy forecasts 1982 2003 planners policy makers and the private sector rely on energy forecasts to help make policy and investment decisions in the us the federal department of energy through the energy information administration and its predecessors has conducted national forecasts of energy production and consumption for decades this paper explores us energy forecasts in order to uncover potential systemic errors in us forecasting models we apply an error decomposition technique to forecasts within each major energy sector commercial industrial residential and transportation made during the period 1982 to 2003 we find that low errors for total energy consumption are concealing much larger sectoral errors that cancel each other out when aggregated for example 5 year forecasts made between 1982 and 1998 demonstrate a mean percentage error for total energy consumption of 0 1 yet this hides the fact that the industrial sector was overestimated by an average of 5 9 and the transportation sector was underestimated by an average of 4 5 we also find no evidence that forecasts within each sector have improved over the two decades studied here