tax distortions and global climate policy abstract we consider the efficiency implications of policies to reduce global carbon emissions in a world with pre existing tax distortions we first note that the weak double dividend the proposition that the welfare improvement from a tax reform where environmental taxes are used to lower distorting taxes must be greater than the welfare improvement from a reform where the environmental taxes are returned in a lump sum fashion need not hold in a world with multiple distortions we then present a large scale computable general equilibrium model of the world economy with distortionary taxation we use this model to evaluate a number of policies to reduce carbon emissions we find that the weak double dividend is not obtained in a number of european countries results also demonstrate the point that the interplay between carbon policies and pre existing taxes can differ markedly across countries thus one must be cautious in extrapolating the results from a country specific analysis to other countries

heterogeneous information arrivals and return volatility dynamics uncovering the long run in high frequency returns recent empirical evidence suggests that the interdaily volatility clustering for most speculative returns are best characterized by a slowly mean reverting fractionally integrated process meanwhile much shorter lived volatility dynamics are typically observed with high frequency intradaily returns the present article demonstrates that by interpreting the volatility as a mixture of numerous heterogeneous short run information arrivals the observed volatility process may exhibit long run dependence as such the long memory characteristics constitute an intrinsic feature of the return generating process rather than the manifestation of occasional structural shifts these ideas are confirmed by our analysis of a one year time series of fiveminute deutschemark u s dollar exchange rates among the most puzzling issues is the behavior of volatility while the general properties of volatility remain elusive perhaps the most intriguing feature revealed by empirical work on volatility is its long persistence such behavior has sparked a search almost akin to that for the holy grail for the perfect garch model but the underlying question of why such volatility persistence endures remains unanswered we conjecture that the ability to analyze higher frequency data may be particularly useful in pursuing this issue goodhart and o hara 1997 the pronounced volatility clustering is arguably one of the most striking features of financial price series recorded at daily or weekly intervals and a large body of literature seeking to characterize this aspect of speculative returns has emerged over the past decade 1 at the same time convincing theoretical explanations for the underlying sources of long run persistence in volatility remain elusive the recent advent of comprehensive high frequency andersen is from the j l kellogg graduate school of management of northwestern university bollerslev is from the university of virginia and is a research associate at the national bureau of economic research we gratefully acknowledge the financial support provided by a research grant from the institute for quantitative research in finance the q group special thanks are due to olsen and associates for making the intradaily exchange rate quotes and reuter s news tape available we have received valuable comments from wake epps clive w j granger stephen f gray j huston mcculloch as well as seminar participants at the december 1996 triangle econometrics workshop the 1997 afa meetings in new orleans academia sinica the wharton school usc and georgetown and york universities we remain fully responsible for the content 1 see bollerslev chou and kroner 1992 for a survey of this literature using arch type

answering the skeptics yes standard volatility models do provide accurate forecasts a voluminous literature has emerged for modeling the temporal dependencies in financial market volatility using arch and stochastic volatility models while most of these studies have documented highly significant in sample parameter estimates and pronounced intertemporal volatility persistence traditional ex post forecast evaluation criteria suggest that the models provide seemingly poor volatility forecasts contrary to this contention we show that volatility models produce strikingly accurate interdaily forecasts for the latent volatility factor that would be of interest in most financial applications new methods for improved ex post interdaily volatility measurements based on high frequency intradaily data are also discussed

a general equilibrium analysis on the impacts of regional and sectoral emission allowance allocation at carbon trading market abstract it is critical to adapt to climate change and reduce the overall carbon emissions china announced its nationally determined contributions ndc at the paris climate conference in 2015 the carbon cap and trade scheme which plays a key role in carbon emissions abatement is an effective policy for china to achieve its ndc this study focuses on the allocation of regional and sectoral initial carbon emission allowances in shanghai an impact evaluation on the macro economy carbon trading markets and participating sectors for the year 2030 was conducted by applying a computable general equilibrium cge model the results show that the carbon cap and trade scheme would cause a 3 4 gdp loss and an 8 9 welfare loss in 2030 the carbon price would be 161 2 usd t and 147 2 usd t under the two representative scenarios the allocation of initial allowances would have a significant impact on both carbon market scale and sectoral trading behaviors the power generation sector and the petrol oil sector would undertake the greatest output loss while the metal smelting sector would become the main seller furthermore the initial allowances allocation under a certain abatement target would hardly affect sectoral production but remarkably affect trade behaviors at the carbon trading markets

is volatility clustering of asset returns asymmetric abstract volatility clustering is a well known stylized feature of financial asset returns this paper investigates asymmetric pattern in volatility clustering by employing a univariate copula approach of chen and fan 2006 using daily realized kernel volatilities constructed from high frequency data from stock and foreign exchange markets we find evidence that volatility clustering is highly nonlinear and strongly asymmetric in that clusters of high volatility occur more often than clusters of low volatility to the best of our knowledge this paper is the first one to address and uncover this phenomenon in particular the asymmetry in volatility clustering is found to be more pronounced in the stock markets than in the foreign exchange markets further the volatility clusters are shown to remain persistent for over a month and asymmetric across different time periods our findings have important implications for risk management a simulation study indicates that models which accommodate asymmetric volatility clustering can significantly improve the out of sample forecasts of value at risk

planning under incomplete information and the ratchet effect abstract central planning of production is usually performed under asymmetric information the firm in general has more information about its productive possibilities than the central planner from now on for short cp this justifies the use of incentives schemes in which the cp does not directly fix activity levels casual observation of such existing schemes suggests that the time dimensions is crucial for their working typically the cp revises the incentive scheme over time to take into account the information provided by the firm s performance managers of centrally planned economies as well as economists have long recognized that this revision induces firms to underproduce in order to avoid demanding schemes in the future this is the ratchet effect it is purpose of the present paper to study the ratchet effect under the non commitment assumption which we believe to be more realistic the inadequacy of conceptual tools made if difficult in the past to consider such an assumption now basic research on dynamic games with incomplete information recently resulted in new ideas which look particularly relevant for a theoretical analysis of the problem

a multi criteria decision analysis model for carbon emission quota allocation in china s east coastal areas efficiency and equity abstract the allocation of carbon emission quotas is recognized as a fundamental and critical step towards the establishment of an effective nationwide carbon emissions trading cet market in china this paper aims to examine the quota allocation pertaining to china s east coastal areas these regions are pioneers in reformation and the domestic heavy emitters in this paper a multi criteria decision analysis model is proposed this model is based on the principles of efficiency and equity in order to reflect the true efficiency of carbon emissions a weighted russell direction distance model is employed three criteria namely capacity responsibility and potential are used to evaluate the degrees of equity furthermore different situations are set to evaluate the related indicators the results indicate the following 1 industrial provinces have less carbon emission quota increments 2 the yangtze river delta economic zone has notably improved energy efficiency and future quota increments correspond with the zone s current carbon emissions 3 circum bohai sea economic zone will be a major buyer of carbon emission quotas while pan pearl river delta economic zone currently receives surplus quota 4 the overall allocation of quotas converts from uneven to even as a result of gdp growth these results provide a reference for collaborative regional reductions in carbon emissions and for the construction of a cet market

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

fiscal interactions and the case for carbon taxes over grandfathered carbon permits this paper provides simple formulas for adjusting the costs of carbon taxes and tradable carbon permits to account for interactions with pre existing tax distortions in the labour market both policies reduce labour supply as they increase product prices and reduce real household wages the resulting efficiency losses in the labour market can be substantial relative to partial equilibrium abatement costs however much of this added cost can be offset and perhaps more than offset when additional distortions from the tax system are considered if revenues from carbon taxes or auctioned permits are used to reduce distortionary taxes consequently there can be a strong case on efficiency grounds for using carbon taxes or auctioned permits over grandfathered carbon permits copyright 2003 oxford university press

development of method for estimation of world industrial energy consumption and its application abstract the energy balances published by the international energy agency iea are one of the most valuable sources of energy statistics covering world energy supply and demand however some issues arise when these data are analyzed or used directly even when industrial energy consumption alone is examined at least three types of issues are encountered missing data large amounts of misallocated data in some countries and numerous unrealistic outliers in the time series variations when we deal with only a few regions we can look at data one by one and modify them in this case we are going to overcome these issues with a systematic method because the data covers world including more than a hundred regions this paper proposes a data reconciliation method to treat these issues and describes its application to world industrial energy consumption as a result of its application we found that the three issues mentioned above seemed to be overcome the degree of the reconciliation by region showed that oecd countries degree tends to be smaller than those of non oecd countries however not all of the oecd countries have low values and some countries such as the united states have high values

environmental taxation and unemployment some evidence on the double dividend hypothesis in europe abstract the employment double dividend hypothesis suggests that an appropriately designed fiscal reform in which emission charges are used to subsidize employers social security contributions may realize at least two relevant policy goals a better quality of the environment and at the same time an increase in employment levels this paper uses a newly developed econometric general equilibrium model for the european union as well as for each member country and presents simulation results up to the year 2010 of the effects of a european carbon tax the revenues from which are recycled to reduce employers social security contributions the results show that recycling carbon tax revenues may provide an employment double dividend only in the short run

on the analysis of asymmetric first price auctions we provide a new set of tools for studying asymmetric rst price auctions connecting their equilibria to the concavity of the underlying type distributions and showing how one can use surplus expressions related to symmetric auctions to bound equilibrium behavior in asymmetric auctions we apply these tools to studying procurement auctions in which as is common in practice one seller is given an advantage re ecting for example better reliability or quality we show conditions under which for any given rst price handicap auction there is a second price auction with bonuses that outperforms it with most of our results involving ex post dominance

the impacts of carbon pricing on coastal megacities a cge analysis of singapore abstract pricing carbon is a widely used policy instrument for climate change mitigation quantitative analysis of carbon pricing are mainly conducted at the regional and national level rarely at the city level due to data availability as a representative of coastal megacities that are vulnerable to both climate change and climate policies singapore has announced to impose carbon tax on large direct emitters as a complementary mitigation option to technical measures a city level computable general equilibrium cge model is developed to simulate potential impacts of carbon pricing on the city including paying border carbon adjustment bca on exports or introducing a domestic carbon tax different sector coverages and carbon tax revenue recycling schemes are investigated for domestic carbon tax the simulation results show that a domestic carbon tax is a more cost effective option than paying bca given an identical carbon price at s 10 t co 2 gdp total exports and household consumption would decline less and average abatement cost is much smaller in the carbon tax scenarios compared to the bca scenario in terms of absolute emissions reduction a carbon tax that covers energy manufacturing and land transport sectors would be preferred making emissions around 2 7 lower than 2010 baseline level

roughing it up including jump components in the measurement modeling and forecasting of return volatility a rapidly growing literature has documented important improvements in financial return volatility measurement and forecasting via use of realized variation measures constructed from high frequency returns coupled with simple modeling procedures building on recent theoretical results in barndorff nielsen and shephard 2004a 2005 for related bi power variation measures the present paper provides a practical and robust framework for non parametrically measuring the jump component in asset return volatility in an application to the dm exchange rate the s p500 market index and the 30 year u s treasury bond yield we find that jumps are both highly prevalent and distinctly less persistent than the continuous sample path variation process moreover many jumps appear directly associated with specific macroeconomic news announcements separating jump from non jump movements in a simple but sophisticated volatility forecasting model we find that almost all of the predictability in daily weekly and monthly return volatilities comes from the non jump component our results thus set the stage for a number of interesting future econometric developments and important financial applications by separately modeling forecasting and pricing the continuous and jump components of the total return variation process

a comparability analysis of global burden sharing ghg reduction scenarios the distribution of the mitigation burden across countries is a key issue regarding the post 2012 global climate policies this article explores the economic implications of alternative allocation rules an assessment made in the run up to the cop15 in copenhagen december 2009 we analyse the comparability of the allocations across countries based on four single indicators gdp per capita ghg emissions per gdp ghg emission trends in the recent past and population growth the multi sectoral computable general equilibrium model of the global economy gem e3 is used for that purpose further the article also compares a perfect carbon market without transaction costs with the case of a gradually developing carbon market i e a carbon market with gradually diminishing transaction costs

does climate policy make the eu economy more resilient to oil price rises a cge analysis abstract the european union has committed itself to reduce greenhouse gas ghg emissions by 20 in 2020 compared with 1990 levels this paper investigates whether this policy has an additional benefit in terms of economic resilience by protecting the eu from the macroeconomic consequences due to an oil price rise we use the gem e3 computable general equilibrium model to analyse the results of three scenarios the first one refers to the impact of an increase in the oil price the second scenario analyses the european climate policy and the third scenario analyses the oil price rise when the european climate policy is implemented unilateral eu climate policy implies a cost on the eu of around 1 0 of gdp an oil price rise in the presence of eu climate policy does imply an additional cost on the eu of 1 5 of gdp making a total loss of 2 5 of gdp but this is less than the 2 2 of gdp that the eu would lose from the oil price rise in the absence of climate policy this is evidence that even unilateral climate policy does offer some economic protection for the eu

on the design of optimal grandfathering schemes for emission allowances to meet its commitment under the kyoto protocol the eu plans to implement an emissions trading system whith grandfathering of allowances besides having distributional impacts the choice of the grandfathering scheme may affect efficiency if firms anticipate how future allocations depend on upcoming decisions in this paper we determine central design rules for optimal grandfathering within a simple two period model we find that for small open trading systems where allowance prices are exogenous first best second period grandfathering schemes must not depend on firm specific decisions in the first period second best schemes correspond to a ramsey rule of optimal tax differentiation and are generally based on both previous emissions and output however ofr closed emissions trading systems i e endogeneous allowance prices firstand second best rules coincide and must not depend on previous output levels they consist of an assignment proportional to the emissions in the first period plus a term which does not depend on firm specific decisions in either of the two periods

eu climate policy up to 2020 an economic impact assessment in its fight against climate change the eu is committed to reducing its overall greenhouse gas emissions to at least 20 below 1990 levels by 2020 to meet this commitment the eu builds on segmented market regulation with an eu wide cap and trade system for emissions from energy intensive installations ets sectors and additional measures by each eu member state covering emission sources outside the cap and trade system the non ets sector furthermore the eu has launched additional policy measures such as renewable energy subsidies in order to promote compliance with the climate policy target basic economic reasoning suggests that emission market segmentation and overlapping regulation can create substantial excess costs if we focus only on the climate policy target in this paper we evaluate the economic impacts of eu climate policy based on numerical simulations with a computable general equilibrium model of international trade and energy use our results highlight the importance of initial market distortions and imperfections as well as alternative baseline projections for the appropriate assessment of eu compliance cost

jamming a rival s learning abstract can a firm f cause a rival r to learn less about r does f care i explore f s ability and incentive to affect or jam r s private learning about r the model developed does not have unobserved actions or ex ante asymmetric information which previous jamming models require i find the f wants r not to learn and the more uncertain f believes r is the more f wants to jam r s learning entry deterrence increases with an entrant s uncertainty causing r to want f to believe that r is more certain about r s beliefs than r really is journal of economic literature d82 d83 l13

strategic information manipulation in duopolies abstract this paper studies a duopoly market in which firms can draw inferences concerning uncertain market demand from observations of their outputs and market price firms may adjust their outputs away from myopically optimal levels to affect the informativeness of the market price because firms quantities are observed firms can manipulate the extent to which belief revision occurs rather than the direction in which beliefs are revised as in signal jamming models we develop conditions and present examples under which the value of information is positive and negative and under which firms will increase or decrease quantity to manipulate information journal of economic literature classification numbers d80 l13

price competition for an informed buyer abstract this paper investigates price competition with private information on the demand side two sellers each offer a different variety of a good to a buyer endowed with a private binary signal on their relative quality the model provides an informational foundation to differentiation in hotelling s price competition game equilibrium comparative statics is performed with respect to the prior belief and the precision of the private information competition is fierce when the prior strongly favors one seller and private signals are relatively uninformative sellers equilibrium profits may fall with the revelation of public information and are nonmonotonic in the prior belief journal of economic literature classification numbers c72 d43 d82 l15

thailand s low carbon scenario 2050 the aim cge analyses of co2 mitigation measures climate change and co2 mitigation have become increasingly important environmental issues recently thailand has proposed policies on ghg mitigation such as thailand s nationally appropriate mitigation action nama which aims at ghg mitigation in the energy sector this study used the computable general equilibrium cge model called aim cge model to analyse ghg mitigation measures under emission trading and carbon capture and storage ccs technology in thailand results show that the international free emission trading policy can drive more ghg reduction by decreasing energy supply and demand and increasing prices of emissions the ccs technologies would balance emission reduction but they would reduce energy efficiency improvement and renewable energy utilization in the energy security aspect the policy options in this study would improve energy security energy import dependency and co benefits of ghg mitigation in forms of improving local air quality results are also helpful to ghg mitigation policy in developing countries

covariance breakdowns and connectedness of crude oil futures markets with non synchronous data this article identifies the breakdowns in the covariance of three benchmark crude oil futures markets wti brent and dubai and investigates the changes of market connectedness across the breakdow

product differentiation and location decisions under demand uncertainty we investigate hotelling s duopoly game of location then price choices with quadratic transportation costs and uniformly distributed consumers under the assumption that firms are uncertain about the exact location of demand we characterize the unique equilibrium and the socially optimal locations contrary to the individual level random utility models location uncertainty is a differentiation force in equilibrium increases in the variance of the uncertainty lead to greater differentiation higher expected equilibrium prices and profits and a greater welfare loss

the effectiveness of energy service demand reduction a scenario analysis of global climate change mitigation abstract a reduction of energy service demand is a climate mitigation option but its effectiveness has never been quantified we quantify the effectiveness of energy service demand reduction in the building transport and industry sectors using the asia pacific integrated assessment computable general equilibrium aim cge model for the period 2015 2050 under various scenarios there were two major findings first a 25 energy service demand reduction in the building transport and basic material industry sectors would reduce the gdp loss induced by climate mitigation from 4 0 to 3 0 and from 1 2 to 0 7 in 2050 under the 450 ppm and 550 ppm co 2 equivalent concentration stabilization scenarios respectively second the effectiveness of a reduction in the building sector s energy service demand would be higher than those of the other sectors at the same rate of the energy service demand reduction furthermore we also conducted a sensitivity analysis of different socioeconomic conditions and the climate mitigation target was found to be a key determinant of the effectiveness of energy service demand reduction measures therefore more certain climate mitigation targets would be useful for the decision makers who design energy service demand reduction measures

environmental policy and double dividend in a transitional economy abstract although the environmental benefit from implementing a climate tax is usually realized the economic dividend still remains a controversial issue warranting further research this is because the impact of an environmental policy on an economy wide system will depend on factors that differ from one region to the next in this paper we develop a static cge model for liberia that is capable of analyzing both a uniform and a partial carbon tax policy under the uniform policy instituted to ensure mitigation in the range of 20 50 an economic dividend is found for energy employment and welfare in particular energy consumption increases by between 5 and 15 5 respectively interestingly under a second best policy which exempts economically strategic sectors from the tax no economic dividend is found for all three variables this time energy use declines by between 2 and 9 these suggest that a uniform environmental tax policy is a more viable option for liberia in particular as it does not only generate economic dividend for employment and welfare it also incentivizes liberia s adoption and use of renewable energy technologies in general based on the results obtained further conditions for the feasibility of a double dividend are proposed

the copula garch model of conditional dependencies an international stock market application abstract modeling the dependency between stock market returns is a difficult task when returns follow a complicated dynamics when returns are non normal it is often simply impossible to specify the multivariate distribution relating two or more return series in this context we propose a new methodology based on copula functions which consists in estimating first the univariate distributions and then the joining distribution in such a context the dependency parameter can easily be rendered conditional and time varying we apply this methodology to the daily returns of four major stock markets our results suggest that conditional dependency depends on past realizations for european market pairs only for these markets dependency is found to be more widely affected when returns move in the same direction than when they move in opposite directions modeling the dynamics of the dependency parameter also suggests that dependency is higher and more persistent between european stock markets

the triptych approach revisited a staged sectoral approach for climate mitigation abstract the triptych approach is a method for allocating future greenhouse gas ghg emission reductions among countries under a post 2012 international climate mitigation regime based on technological criteria at the sector level and accounting for structural differences the emission allowances are decomposed according to sectors thereby enabling the link to real world emission reduction strategies to be more concrete the new triptych approach presented here is a refinement of an earlier version in terms of an increased transparency and allowing a delayed participation for developing countries initial participation of developing countries with incentives but no penalties through no lose targets or sustainable development policies and measures for this article we calculated the emission reductions for countries for two technology oriented scenarios which stabilize ghg concentrations at 450 and 550 ppm co 2 eq respectively the reductions are ambitious but nonetheless compatible with existing technical reduction potentials as growth is allowed but efficiency has to be improved

dependence structure between the equity market and the foreign exchange market a copula approach abstract this paper investigates the dependence structure between the equity market and the foreign exchange market by using copulas in particular several copulas with different dependence structure are compared and used to directly model the underlying dependence structure we find that there exists significant symmetric upper and lower tail dependence between the two financial markets and the dependence remains significant but weaker after the launch of the euro our findings have important implications for both global investment risk management and international asset pricing by taking into account joint tail risk

double dividend with involuntary unemployment efficiency and intergenerational equity this paper analyzes the double dividend and distributional issues within an overlapping generations model framework with involuntary unemployment we characterize the necessary conditions needed to obtain a double dividend when the revenue of the environmental tax is recycled by a variation of the labor tax rate we show that an employment dividend may occur without any efficiency dividend and that the young generation is not always harmed by the fiscal reform even without any intergenerational transfers therefore three dividends environmental efficiency and intergenerational equity can occur simultaneously

economic analysis of a low carbon path to 2050 a case for china india and japan abstract this article studies the economic implications that different global ghg emission mitigation policies may have in the major asian economies namely china india and japan the analysis covers the period 2010 2050 and is performed by means of a recursive dynamic computable general equilibrium model gem e3 four scenarios are investigated the three standard ame scenarios and a fourth scenario with a ghg emission reduction path compatible with the 2 c target reducing global ghg emissions in 2050 by 50 relative to 2005 the scenarios are compared with the already adopted and announced policies of the respective countries in the context of the copenhagen pledges for 2020 and their long term objectives in 2050 we further discuss the role of energy efficiency measures and zero carbon power technologies in order to reach the long term 2 c target we find that postponing significant emission reductions may not accrue an economic benefit over time whereas it may increase some risks by possibly overstretching the reliance on zero carbon technologies

portfolio optimization in the presence of dependent financial returns with long memory a copula based approach abstract in this paper we seek to examine the effect of the presence of long memory on the dependence structure between financial returns and on portfolio optimization first we focus on the dependence structure using copulas to select the best copula in addition to the goodness of fit tests we employ a graphical method based on visual comparison of the fitted copula density and the smoothed copula density estimated by wavelets moreover we check the stability of the copula parameter the empirical results show that the long memory affects the dependence structure second we analyze the impact of this dependence structure on the optimal portfolio we propose a new approach based on minimizing the conditional value at risk and assuming that the dependence structure is modeled by the copula parameter the empirical results show that our approach outperforms the traditional minimizing variance approach where the dependence structure is represented by the linear correlation coefficient

realized garch a joint model for returns and realized measures of volatility summary we introduce a new framework realized garch for the joint modeling of returns and realized measures of volatility a key feature is a measurement equation that relates the realized measure to the conditional variance of returns the measurement equation facilitates a simple modeling of the dependence between returns and future volatility realized garch models with a linear or log linear specification have many attractive features they are parsimonious simple to estimate and imply an arma structure for the conditional variance and the realized measure an empirical application with dow jones industrial average stocks and an exchange traded index fund shows that a simple realized garch structure leads to substantial improvements in the empirical fit over standard garch models that only use daily returns copyright 2011 john wiley sons ltd

experimentation and learning in a differentiated products duopoly abstract this paper explores price setting behavior in the context of a duopoly in which firms are uncertain about the degree of product differentiation firms learn from the difference in their realized demands in light of the price differential the informativeness of this market experiment is shown to be increasing in size of the price differential in markets with highly substitutable products price dispersion is enhanced as firms adjust their prices so as to generate more information in markets with highly differentiated products firms compress their prices as they prefer to reveal less about the extent of product differentiation journal of economic literature classification numbers d43 d83 l13

carbon taxation in russia prospects for a double dividend and improved energy efficiency russia is not only one of the world s major sources of carbon based energy coal oil and gas but is also one the most intensive users of energy furthermore russia accounts for a disproportionately large share of global carbon dioxide emissions some 5 to 6 of global carbon dioxide emissions eia 2011a it has been estimated world bank 2008 that russia could reduce its use of primary energy use by 45 with consequent economic and environmental benefits high energy and carbon intensity of the russia economy is inter alia explained by low energy prices due to high export taxes as well as administrative regulation of domestic prices of gas and electricity and low environmental taxes carbon taxes are one such pigouvian tax and they would address concerns on several fronts simultaneously in the short to medium term they would inter alia lead to lower ghg emissions and encourage the diffusion of more energy efficient technologies in the longer term the increased cost of energy inputs is expected to induce technological progress in this analysis the macroeconomic and sectoral effects of carbon taxes on the russia economy are examined this analysis addresses the following objectives i to test the double dividend hypothesis under perfect and imperfect competition in output markets to analyse ii the incidence of carbon taxes iii impacts on sectoral competitiveness iv effects on income equity and v interactions of carbon taxes with other taxes a computable single country multi sector comparative static cge model is employed russland verfugt nicht nur uber einen der grosten vorrate an kohlenstoffbasierter energie wie kohle rohol und gas sondern ist auch einer der grosten energieverbraucher daruber hinaus ist russland fur einen uberproportional grosen anteil von kohlendioxid emission etwa 5 bis 6 der weltweiten kohlendioxidemission verantwortlich mit der einfuhrung einer kohlendioxidsteuer konnten gleichzeitig unterschiedliche wirkungen erzielt werden kurz und mittelfristig wurden kohlenstoffsteuern sowohl zu einer reduzierung von treibhausgasemissionen als auch zur einfuhrung von energieeffizienteren technologien fuhren langfristig wird erwartet dass hohe energiekosten den anreiz zur entwicklung und zur investition in energiesparenden technischen fortschritt erhohen die vorliegende arbeit analysiert und bewertet die makrookonomischen und sektoralen auswirkungen einer einfuhrung von kohlenstoffsteuern auf die russische wirtschaft die ziele der arbeit bestehen darin die hypothese der doppelten dividende fur den fall des vollkommenen und des unvollkommenen wettbewerbs auf gutermarkten zu uberprufen und die inzidenz einer kohlenstoffsteuer ihre auswirkungen auf die sektorale wettbewerbsfahigkeit ihre auswirkungen auf die einkommensverteilung und die interaktion von kohlenstoffsteuern mit anderen steuern zu analysieren und zu bewerten als methodischer ansatz wurde ein single country und multi sektor model gewahlt

an empirical model of optimal dynamic product launch and exit under demand uncertainty this paper considers the decision problem of a firm that is uncertain about the demand and hence profitability of a new product we develop a model of a decision maker who sequentially learns about the true product profitability from observed product sales based on the current information the decision maker decides whether to scrap the product central to this decision problem are sequential information gathering and the option value of scrapping the product at any point in time the model predicts the optimal demand for information e g in the form of test marketing and it predicts how the launch or exit policy depends on the firm s demand uncertainty furthermore it predicts what fraction of newly developed products should be launched on average and what fraction of these products will fail i e exit the model is solved using numerical dynamic programming techniques we present an application of the model to the case of the u s ready to eat breakfast cereal industry simulations show that the value of reducing uncertainty can be large and that under higher uncertainty firms should strongly increase the fraction of all new product opportunities launched even if their point estimate of profits is negative alternative simpler decision rules are shown to lead to large profit losses compared to our method finally we find that the high observed exit rate in the u s ready to eat cereal industry is optimal and to be expected based on our model

learning and strategic pricing we consider the situation where a single consumer buys a stream of goods from different sellers over time the true value of each seller s product to the buyer is initially unknown additional information can be gained only by experimentation for exogeneously given prices the buyer s problem is a multi armed bandit problem the innovation in this paper is to endogenize the cost of experimentation to the consumer by allowing for price competition between the sellers the role of prices is then to allocate intertemporally the costs and benefits of learning between buyers and sellers we examine how strategic aspects of the oligopoly model interact with the learning process all markov perfect equilibria mpe are efficient we identify an equilibrium which besides its unique robustness properties has a strikingly simple seemingly myopic pricing rule prices below marginal cost emerge naturally to sustain experimentation intertemporal exchange of the gains of learning is necessary to support efficient experimentation we analyze the asymptotic behavior of the equilibria

economic analysis of the climate pledges of the copenhagen accord for the eu and other major countries abstract this article uses the world gem e3 computable general equilibrium model to assess the economic consequences of the climate copenhagen accord the model allows analyzing the macroeconomic costs in terms of gdp the change in employment as well as the impacts on production of specific energy intensive sectors various 2020 climate scenarios are evaluated depending on the ghg mitigation pledges we find that the cost for the developed countries is around 0 5 of gdp in 2020 for the more ambitious pledges whereas the gdp effects are more heterogeneous across developing countries and russia reflecting the different pledges and the assumptions in the reference scenario across these countries further the article explores whether there is a form of double dividend in the eu when the revenues from auctioning or taxation of ghg emissions are used to reduce the social security contributions of employees we conclude that gdp and employment perform better compared to the free allocation of permits when more sectors are subject to auctioning or ghg taxes and the additional government revenues are used to reduce the cost of labour

application of computable general equilibrium cge to climate change mitigation policy a systematic review abstract with the growing literature related to climate change mitigation measures and policy interventions a systematic review of the application of computable general equilibrium cge model is inevitable therefore this article aims to characterise the relevant studies define a comparative framework to identify the current state of the art and the gaps in applied general equilibrium models firstly the systematic review found a total of 301 research articles from scopus and web of science databases and finally analysed 154 articles based on inclusion and exclusion criteria from 67 refereed journals the review analysis found that application of cge model is very vital in addressing climate change mitigation issues at the national regional and global levels however china attracted the most substantial research interests followed by the usa india and australia among others which are in line with their share of greenhouse gas emissions in the world most of the research themes focus on the carbon tax emission reduction target emission trading renewable energy energy efficiency and carbon capture and storage as primary drivers of low carbon economy nevertheless there is a trend of employing more static cge model compared to the dynamic cge although application of the latter has a limitation of providing right inputs to the macroeconomic policy finally research directions and gaps envision other complementary models such as dynamic stochastic general equilibrium dsge and agent based model abm for proper policy interventions

reputation and survival learning in a dynamic signalling model we consider the impact of reputation on the survival of a monopolist selling single units in discrete time periods whose quality is learned slowly if the seller learns her own quality at the same rate as customers a sufficiently bad run of luck could induce her to stop selling when she knows her quality a good seller never stops selling though at low reputations a bad seller does with some probability furthermore a seller with positive though imperfect information sells for the same number of periods whether her information is private or public we further consider the robustness of the central result when the seller s opportunities for strategic behaviour are limited

environmental levies and distortionary taxation pigou taxation and pollution i note an important distinction between the optimal price of environmental quality in a second best world and the optimal level of environmental quality using an analytical general equilibrium model i show that for reasonable parameter values an increase in tax distortions arising from an increase in required tax revenues leads to a fall in the optimal pigouvian tax rate even while environmental quality improves in general knowledge of the direction of changes in optimal environmental tax rates due to changes in the economy is not sufficient for understanding the impact on environmental quality 2003 elsevier science b v all rights reserved

innovative energy technologies and climate policy in germany due to the size and structure of its economy germany is one of the largest carbon emitters in the european union however germany is facing a major renewal and restructuring process in electricity generation within the next two decades up to 50 of current electricity generation capacity may retire because of end of plant lifetime and the nuclear phase out pact of 1998 substantial opportunities therefore exist for deployment of advanced electricity generating technologies in both a projected baseline and in alternative carbon policy scenarios we simulate the potential role of coal integrated gasification combined cycle igcc natural gas combined cycle ngcc carbon dioxide capture and storage ccs and wind power within a computable general equilibrium model of germany from the present through 2050 these advanced technologies and their role within a future german electricity system are the focus of this paper we model the response of greenhouse gas emissions in germany to various technology and carbon policy assumptions over the next few decades in our baseline scenario all of the advanced technologies except ccs provide substantial contributions to electricity generation we also calculate the carbon price where each fossil technology combined with ccs becomes competitive constant carbon price experiments are used to characterize the model response to a carbon policy this provides an estimate of the cost of meeting an emissions target and the share of emissions reductions available from the electricity generation sector

estimating quadratic variation using realized variance this paper looks at some recent work on estimating quadratic variation using realised variance rv that is sums of m squared returns this econometrics has been motivated by the advent of the common availability of high frequency financial return data when the underlying process is a semimartingale we recall the fundamental result that rv is a consistent as m estimator of quadratic variation qv we express concern that without additional assumptions it seems difficult to give any measure of uncertainty of the rv in this context the position dramatically changes when we work with a rather general sv model which is a special case of the semimartingale model then qv is integrated variance and we can derive the asymptotic distribution of the rv and its rate of convergence these results do not require us to specify a model for either the drift or volatility functions although we have to impose some weak regularity assumptions we illustrate the use of the limit theory on some exchange rate data and some stock data we show that even with large values of m the rv is sometimes a quite noisy estimator of integrated variance

gains from emission trading under multiple stabilization targets and technological constraints abstract this study quantified the effectiveness of emission trading by considering multiple technological constraints burden sharing schemes and climate stabilization targets we used a global computable general equilibrium model and evaluated the effectiveness of emission trading using welfare losses associated with climate mitigation for scenarios with and without emission trading as measured by the hicksian equivalent variation hev we found that emission trading contributed to a reduction in the economic losses associated with climate mitigation for all technological assumptions burden sharing schemes and stabilization targets the net global welfare losses in scenarios without emission trading ranged between 0 7 and 1 9 whereas emission trading reduced the losses by 0 1 to 0 5 the range depended on the assumptions in the burden sharing schemes technological constraints and stabilization targets the percentage change in welfare gain from emission trading varied regionally and was relatively high in low income or middle income countries 0 2 to 1 0 and 0 1 to 1 2 respectively compared to high income countries 0 1 to 0 3 some regions displayed negative values with regard to the effectiveness of emission trading which might be due to the change in goods and service trades associated with emission trading if the usage of carbon capture and storage was constrained welfare loss became large and the effectiveness of emission trading ultimately increased the use of a burden sharing scheme was a significant factor in changing the effectiveness of emission trading and the per capita emission convergence in 2050 was more effective for emission trading than a per income convergence

aligning renewable energy targets with carbon emissions trading to achieve china s indcs a general equilibrium assessment abstract this study evaluates the economic impact of achieving china s intended nationally determined contributions indcs through emissions trading scheme ets and renewable energy policy using a computable general equilibrium cge model we explored the behavior of different sectors in the carbon market carbon trade amount carbon price and the economic impact of an emissions cap and trade on the employment and gdp the results demonstrate that the electricity and aviation sectors have relatively higher mitigation costs and tend to be the main buyers of the carbon credits whereas chemicals nonmetal production iron and steel paper and other manufacturing sectors have relatively lower mitigation costs and tend to be the main sellers carbon trading price and market scale are closely related to various factors such as the emissions quota allocation scheme among sectors coverage of participating sectors and the level of renewable energy development emission trading is also confirmed to be an economically efficient approach that contributes to the achievement of emission reduction targets with less economic cost in order to make full use of this approach policy maker should assign an appropriate emissions quota allocation scheme extend coverage of various sectors and promote the expansion of low carbon technologies such as renewable energy

distributional and regional economic impact of energy taxes in belgium we analyse the macroeconomic and distributional effects of increased oil excises in belgium by combining a regional computable general equilibrium cge model with a microsimulation framework that exploits the rich detail of household level data the link between the cge model and the microlevel is top down feeding changes in commodity prices factor returns and employment by sector into a microsimulation model the results suggest that policymakers face an equity efficiency trade off driven by the choice of revenue recycling options when the additional revenue is used to raise welfare transfers to households the reform is beneficial for lower income groups but output levels decrease in all regions however when the energy tax revenue is used to lower distortionary labour taxes the tax shift is slightly regressive in this case national gdp is hardly affected but regional production levels diverge the impact of the environmental tax reform on income distribution depends strongly on changes in factor prices and welfare payments whereas sector composition is an important determinant for regional impact variation

international diversification a copula approach abstract the viability of international diversification involves balancing benefits and costs this balance hinges on the degree of asset dependence in light of theoretical research linking diversification and dependence we examine international diversification using two measures of dependence correlations and copulas we document several findings first dependence has increased over time second we find evidence of asymmetric dependence or downside risk in latin america but less in the g5 the results indicate very little downside risk in east asia third east asian and latin american returns exhibit some correlation complexity interestingly the regions with maximal dependence or worst diversification do not command large returns our results suggest international limits to diversification they are also consistent with a possible tradeoff between international diversification and systemic risk

consumer learning brand loyalty and competition in several markets consumers can gain further information regarding how well a product fits their preferences only by experiencing it after purchase this could then generate loyalty for the products tried first this paper considers a model in which consumers learn in the first period about the product they buy and then make choices in the second period about the competing products given what they learned in the first period the paper finds that if the distribution of valuations for each product is negatively positively skewed a firm benefits is hurt in the future from having a greater market share today the brand loyalty characteristic with negative skewness two effects are identified on one hand marginal forward looking consumers are less price sensitive than myopic consumers and this is a force toward higher prices on the other hand forward looking firms realize that they gain in the future from having a higher market share in the current period and compete more aggressively in prices for similar discount factors for consumers and firms the latter effect dominates the paper also characterizes the importance of consumer learning effects on the market outcome

the hedge value of international emissions trading under uncertainty this paper estimates the value of international emissions trading focusing on a here to fore neglected component its value as a hedge against uncertainty much analysis has been done of the kyoto protocol and other potential international greenhouse gas mitigation policies comparing the costs of achieving emission targets with and without trading these studies often show large cost reductions for all parties under trading compared to a no trading case we investigate the welfare gains of including emissions trading in the presence of uncertainty in economic growth rates using both a partial equilibrium model based on marginal abatement cost curves and a computable general equilibrium model we find that the hedge value of international trading is small relative to its value in reallocating emissions reductions when the burden sharing scheme does not resemble a least cost allocation we also find that the effects of pre existing tax distortions and terms of trade dominate the hedge value of trading we conclude that the primary value of emissions trading in international agreements is as a burden sharing or wealth transfer mechanism and should be judged accordingly

a revisit to the dependence structure between the stock and foreign exchange markets a dependence switching copula approach abstract this paper develops a dependence switching copula model to examine dependence and tail dependence for four different market statuses namely rising stocks appreciating currency falling stocks depreciating currency rising stocks depreciating currency and falling stocks appreciating currency the model is then applied to daily stock returns and exchange rate changes for six major industrial countries over the 1990 2010 period the dependence and tail dependence among the above four market statuses are asymmetric for most countries in the negative correlation regime but symmetric in the positive correlation regime these results enrich the findings in the existing literature and suggest that analyzing cross market linkages within a time invariant copula framework may not be appropriate

incentives and ratcheting in a multiproduct firm a field experiment we develop a model and derive behavioral predictions for a multiproduct sales force subject to goals set based on past performance we test these predictions using a field experiment in which 53 salespersons from a chilean beverage company face exogenous variations in monthly sales goals confirming our predictions we found that 1 absent strategic considerations no goal ratcheting salespersons increase decrease sales in the product category for which the return to effort increases decreases 2 including strategic considerations behavior reverses salespersons who expect high goal ratcheting decrease increase sales in the category for which the return to effort increases decreases 3 sales did not change for the average salespersons reflecting heterogeneity in the expectations of goal ratcheting rather than unresponsiveness to incentives our study points at the importance of the dynamics of incentive design in particular the importance of understanding the dynamics of goal setting in fir

long range dependence in daily stock volatilities recent empirical studies show that the squares of high frequency stock returns are long range dependent and can be modeled as fractionally integrated processes using for example long memory stochastic volatility models are such long range dependencies common among stocks are they caused by the same sources of variation in this article we classify daily stock returns of standard and poor 500 companies on the basis of a company s size and its business or industrial sector and estimate the strength of long range dependence in the stock volatilities using two different methods almost all of the companies analyzed exhibit strong persistence in volatility we then use a canonical correlation method to identify common long range dependent components in groups of companies finding strong evidence in support of common persistence in volatility finally we use a chi squared test to study the effects of company size and sector on the number of common long range dependent volatility components detected in g

modelling energy technologies in a competitive market abstract energy economic models must predict the mix of energy technologies in competitive energy markets we examine a market composed of several competing technologies with geographically heterogeneous cost distributions an approach for determining both the market share and average market cost of energy produced by these technologies is derived the formalism developed which is based on a conditional least cost distribution function can be used to correct the convertional logit treatment of these quantities in several existing models and to better interpret empirical data in order to determine more realistic cost distribution functions for energy technologies

the case for international emission trade in the absence of cooperative climate policy we evaluate the efficacy of international trade in carbon emission permits when countries are guided strictly by their national self interest to do so we construct a calibrated general equilibrium model that jointly describes the world economy and the strategic incentives that guide the design of national abatement policies countries decisions about their participation in a trading system and about their initial permit endowment are made noncooperatively so a priori it is not clear that permit trade will induce participation in international abatement agreements or that participation will result in significant environmental gains despite this we find that emission trade agreements can be effective that smaller groupings pairing developing and developed world partners often perform better than agreements with larger rosters and that general equilibrium responses play an important role in shaping these outcomes