a dynamic real option based investment model for renewable energy portfolios this work proposes a dynamic model to devise the optimal risk averse investment policy in a portfolio of complementary renewable sources for a generation company in the brazilian power system the proposed method merges a static energy contracting model based on a hybrid robust and stochastic optimization approach with a mean reverting binomial lattice model for real option valuation the proposed merge extends previous works by providing support to risk averse investment decisions in complementary renewable sources dynamically distributed over time the most important results of the model are how much capacity to invest or build from each renewable source how much to sell from the energy portfolio in bilateral contracts and the optimal timing to invest unlike previous reported works our model takes into account three classes of uncertainties simultaneously renewable production of candidate sources and prices in the spot and contract markets a case study with realistic data from the brazilian power system is presented to illustrate the value of our model

optimal investments in power generation under centralized and decentralized decision making this work presents a novel model for optimization of investments in new power generation under uncertainty the model can calculate optimal investment strategies under both centralized social welfare and decentralized profit objectives the power market is represented with linear supply and demand curves a stochastic dynamic programming algorithm is used to solve the investment problem where uncertainty in demand is represented as a discrete markov chain the stochastic dynamic model allows us to evaluate investment projects in new base and peak load power generation as real options and determine optimal timing of the investments in a case study we use the model to compare optimal investment strategies under centralized and decentralized decision making a number of interesting results follow by varying the assumptions about market structure and price response on the demand side

international spillovers from us forward guidance to equity markets we quantify the international spillovers of explicit federal open market committee fomc policy rate guidance used as an unconventional monetary policy tool at the zero lower bound of the policy rate on international equity markets considering equity indices of both advanced and emerging economies we find that stimulatory explicit fomc policy rate guidance announcements at the zero lower bound led to higher equity prices in a number of advanced and emerging economies moreover we find that equity indices of economies with lower sovereign ratings rose by more consistent with the risk taking channel of monetary policy

fiscal policy interventions at the zero lower bound we build on a new keynesian dynamic stochastic general equilibrium dsge model to explore the macroeconomic consequences of fiscal expansionary shocks during the economic crisis of 2008 in the eurozone in this setting we find that the big four eurozone economies france germany italy and spain can effectively escape from their liquidity trap through fiscal policy interventions caused by government purchases we estimate the government spending multiplier to be above 1 8 when this policy is associated with a long term commitment to keeping the nominal interest rate at the zero lower bound as suggested by krugman 1998 notably the short term deficit effect on the budget balance can be offset five years after the implementation of a large spending program we also show that alternative policies with tax cuts that expand the supply do not appear to have the same power in the short run moreover we provide novel empirical evidence that a large government debt renders a government spending policy ineffective

feed in tariff contract schemes and regulatory uncertainty abstract this paper presents a novel analysis of two feed in tariffs fit under market and regulatory uncertainty namely a sliding premium with cap and floor and a minimum price guarantee regulatory uncertainty is modeled with a poisson process whereby a jump event may reduce the tariff before the signature of the contract using a semi analytical real options framework we derive the project value the optimal investment threshold and the value of the investment opportunity for these schemes taking into consideration the optimal investment threshold we also compare the two aforementioned fits with the fixed price fit and the fixed premium fit which are policy schemes that have been extensively studied in the literature our results show that increasing the likelihood of a jump event lowers the investment threshold for all the schemes moreover the investment threshold also decreases when the tariff reduction increases we also compare the four schemes in terms of the corresponding optimal investment thresholds for example we find that the investment threshold of the sliding premium is lower than the minimum price guarantee this result suggests that the first regime is a better policy than the latter because it accelerates the investment while avoiding excessive earnings for producers or excessive payments for consumers

policy options in a liquidity trap the specter of a liquidity trap originally proposed as a theoretical possibility by john maynard keynes 1936 but long considered to be of doubtful practical relevance has recently created alarm among the world s central banks in japan the overnight rate has been essentially at zero for most of the time since february 1999 making further interest rate cuts impossible yet until well into 2003 growth remained anemic while prices continued to fall suggesting a need for further monetary stimulus since march 2001 the bank of japan has supplemented its zero interest rate policy with a policy of quantitative easing under which additional bank reserves are supplied beyond those needed to keep overnight interest rates at zero yet an increase in base money of more than 50 percent failed to halt the deflation suggesting a liquidity trap more recently other central banks including the fed have come close enough to the zero bound to worry about how they would deal with a similar predicament here we first discuss whether monetary policy should actually become ineffective when the zero bound on interest rates is reached we argue that open market operations even of unconventional types will be ineffective if they do not change expectations about the future conduct of policy in this sense a liquidity trap is possible nonetheless a credible commitment regarding future policy can largely mitigate the distortions created by the zero bound we fully characterize the optimal commitment in a simple example

financial market illiquidity shocks and macroeconomic dynamics evidence from the uk we examine the link between financial market illiquidity and macroeconomic dynamics by fitting a bayesian time varying parameter var with stochastic volatility to uk data from 1988q1 to 2016q4 we capture liquidity conditions in the stock market using a battery of illiquidity proxies this paper departs from previous studies examining macro financial linkages by using theoretically grounded sign restrictions and conducting structural inference in a non linear framework we document both statistically significant differences in the transmission of these shocks and substantial increases in the economic importance of these shocks during the 2008 recession

optimizing the level of renewable electric r d expenditures using real options analysis abstract one of the primary objectives of the united states federal non hydro renewable electric r d program is to promote the development of technologies that have the potential to provide consumers with stable and secure energy supplies in order to quantify the benefits provided by continued federal renewable electric r d this paper uses real option pricing techniques to estimate the value of renewable electric technologies in the face of uncertain fossil fuel prices within the real options analysis framework the current value of expected future supply from renewable electric technologies net of federal r d expenditures is estimated to be 30 6 billion of this value 86 can be attributed to past federal r d efforts and 14 can be attributed to future federal r d efforts assuming continued federal r d funding at 300 million yr in addition real options analysis shows that the value of renewable electric technologies increases as current and future r d funding levels increase this indicates that the current level of federal renewable electric r d funding is sub optimal

real options analysis of investment in solar vs wind energy diversification strategies under uncertain prices and costs in this paper we study a community or firm considering to diversify its investment in two distinct renewable energy technologies namely wind and solar pv electricity we assume technological learning curves as a function of cumulative capital investment a real options approach is applied as it takes into account uncertainty about prices and learning as well as irreversibility associated with investment decisions we investigate three different cases dealing with uncertainty about future electricity prices and uncertainty about the speed with which learning drives the costs of wind and solar electricity down we assess the minimum threshold for the stochastic price and the maximum electricity production cost that makes it optimal for the firm to invest in the two technologies the results show that the learning rate affects the option to invest in but reducing critical threshold for exercising it the greater the amount of capital invested the more learning stimulates earlier exercising of the option to invest the firm will then anticipate the option to invest and exercise it for lower critical threshold values if all capital is invested in one technology if capital investment is diversified the option should be exercised at a higher critical threshold more uncertainty in energy prices or technology costs postpones the option to invest although investing in both solar and wind may be profitable under particular conditions of price and cost uncertainty the theoretically optimal strategy is generally investing in only one technology that is solar or wind depending on their relative initial costs and learning rates this suggests that the practice in most countries of diversifying renewable energy may reflect a mistaken strategy

evolutionary finance and central banking this article considers minsky s contribution to evolutionary economics paying attention to his concepts of evolutionary finance and central banking evolutionary finance is defined by minsky as the process through which changes in effective demand uncertainty and cash flows trigger solvency and liquidity risk that increase financial fragility and the possibility of financial instability and debt deflation emphasis is placed on the role of ponzi position making operations and failed margins of safety in inducing low quality leverage and liability structures evolutionary central banking is defined by minsky as the process that central banks use by applying qualitative monetary policy through discount window procedures and lender of last resort interventions to target ponzi leverage structures and financial stability evolutionary central banking provides operational guidelines and objectives that help us understand the monetary policies adopted by central banks after the global financial crisis of 2007 2008 as well as the limitations of the non conventional monetary policies

from conventional to unconventional monetary policies the failure of the market maker of last resort this paper analyses the new role of market maker of last resort openly assumed by central banks since the 2008 financial crisis revealed the increasing impact of noninterest income activities on banks balance sheets a brief review of the distinction between conventional and unconventional monetary policies shows that the inflexion point from lender of last resort to market maker of last resort is given by the extension of central bank intervention to other markets than the bank reserves markets herein it is explained how the market maker of last resort role is as counterproductive as its predecessor in putting the economy back on track we show that the main problem of both conventional and unconventional monetary policies is that they distort price signals particularly asset prices in their attempt to reignite economic growth instead of correcting cyclical fluctuations the policies of the market maker of last resort prevent the cyclical divergences between financial and goods sectors from readjusting

feed in tariffs with minimum price guarantees and regulatory uncertainty abstract the feed in tariff fit program is a popular policy for incentivizing new renewable energy projects because it establishes a long term contract with renewable energy investors this paper presents a novel model to analyze a fit contract with a minimum price guarantee i e a price floor regime from an investor s perspective the results show that a perpetual guarantee only induces investment for prices below the price floor when offering a risk free investment opportunity in contrast the finite guarantee may induce investment even when the revenue from the guarantee is lower than the investment cost when an investor faces a scenario with regulatory uncertainty a higher and more likely reduction in the price floor induces earlier investment for all cases investors postpone an investment decision when market conditions present a higher price volatility

a simple general equilibrium model of large excess reserves abstract in a general equilibrium macroeconomic model with a banking system that can hold large excess reserves and is subject to possibly binding capital constraints i study how the quantity of government provided monetary assets is related to the price level in steady state when the central bank does not pay interest on reserves the price level moves one for one with the monetary base if instead the central bank can pay interest on reserves at market rates the price level can decouple from the quantity of monetary assets in the economy a larger monetary base need not imply a higher price level however for large enough levels of reserves the capital constraint binds and the tight link between money and prices reemerges

an empirical procedure to evaluate monetary management under exogenous changes in the money supply this article proposes an empirical procedure to evaluate central banks monetary management in a presence of exogenous changes in the money supply monetary shocks deviate the market intere

what is the effect of unconventional monetary policy on bank performance this paper examines the relationship between unconventional monetary policy and the us banking performance unconventional monetary policy is captured through the central bank s assets and excess reserves results show that unconventional monetary policy has a negative relationship with bank performance further analysis shows that the negative association between unconventional monetary policy and performance is mitigated for banks with a high level of asset diversification and low deposit funding we also find that the negative relationship between unconventional monetary policy and performance subdues for deposit insured financial institutions finally we use dynamic panel threshold analysis which reveals that the negative association between unconventional monetary policy and bank performance is particularly pronounced above the reported threshold value

clean energy policy taxing carbon and the illusion of the equity objective abstract the australian government has passed legislation the clean energy future policy establishing a carbon emission pricing scheme while the scheme is represented as the most efficient and cost effective means of reducing emissions the government has also committed to ensuring equity in burden sharing particularly through the use of household compensation methods and by minimising the disadvantages faced by energy intensive trade exposed industries thereby committing to these industries continued developments treasury modelling used to determine the required level of household compensation has remained relatively uncontested we question the conclusion of equity in burden sharing on the basis of this modelling the modelling reflects fairly standard conventional economic theory in terms of market structures the determination of prices and outputs and the characterisation of factor markets the behavioural assumptions overstate the consumer and producer substitution possibilities failing to consider the possibility of technical reswitching and ignore the impact that oligopolistic market structures would have on price increases and infrastructure investment the full ramifications of compensation for overall government expenditure and therefore the capacity of the government to continue to fund a range of elements of the social wage the potential for unemployment and transitioning workers to less carbon intensive industries are also overlooked

the coal question that emissions trading has not answered abstract can emissions trading assist with the task of placing a limit on coal production and consumption in australia this paper outlines a critical political economy perspective on coal and a flagship market mechanism for emissions reduction the prospects for an effective emissions trading scheme in coal dominated economies are considered in light of its theoretical justifications as well as recent attempts to price carbon in australia emissions trading is a weak instrument that does not address real world failures of coal governance at their theoretical best carbon prices produce marginal changes to the cost structure of production in practice the australian case demonstrates emissions trading is an attempt to displace the emissions reduction task away from coal through compensation arrangements and offsetting in light of the urgent need to rapidly reduce global emissions direct regulation and democratisation of coal production and consumption should be flagship climate policy

quantitative easing in the 1930s during the 1934 39 recovery from the u s great depression overnight interest rates were usually at a lower bound meanwhile american monetary authorities followed policies related to today s debates on quantitative easing they tried to stabilize yields on treasury bonds with open market operations they created rapid growth in high powered money and they allowed transitory factors to affect high powered money effects of these policies on bond yields reveal a portfolio effect of short duration asset supply on term premiums this portfolio effect helps explain why high powered money growth was associated with recovery of real activity over 1934 39

the carbon market incremental payoff in renewable electricity generation projects in brazil a real options approach the objective of this work is to present a methodology capable of estimating the incremental payoff of the carbon market for grid connected renewable power generation projects in brazil the proposed methodology consists of using the newave model to determine the optimal operating policy for the brazilian interconnected system over the medium term and to establish hydrological dispatch scenarios for the power plants connected to this system based on these results the criteria defined in the methodology acm0002 were used to estimate the baseline of the projects developed in response to the clean development mechanism of the kyoto protocol having estimated the baseline for the project the incremental payoff obtained from the sale of certified emission reductions is estimated using the real options theory subsequently the value of the option is added to the conventional cash flow of the project determining the impact of the carbon market on its internal rate of return

the macroeconomic effects of large scale asset purchase programmes the effects of asset purchase programs on macroeconomic variables are likely to be moderate we reach this conclusion after simulating the impact of the federal reserve s second large scale asset purchase program lsap ii in a dsge model enriched with a preferred habitat framework and estimated on u s data our simulations suggest that such a program increases gdp growth by less than half a percentage point although the effect on the level of gdp is very persistent the program s marginal contribution to infl ation is very small one key reason for our fi ndings is that we estimate a small degree of fi nancial market segmentation if we enrich the set of observables with a measure of long term debt the semi elasticity of the risk premium to the amount of debt in privatesector hands is substantially smaller than that reported in the recent empirical literature in this case our baseline estimates of the effects of lsap ii on the macroeconomy decrease by at least a factor of two throughout the analysis a commitment to an extended period at the zero lower bound for nominal interest rates increases the effects of asset purchase programs on gdp growth and infl ation

compound real options valuation of renewable energy projects the case of a wind farm in serbia abstract renewable energy sources have become a very important issue due to environmental and sustainability concerns in addition most renewable energy electricity generation res e projects are characterized by considerable uncertainty and sequential decision making these projects net present value npv is very often close to zero which renders them a good candidate for the application of real options valuation methodology of investment project appraisal this paper examines the real options valuation of a potential onshore wind farm project in serbia the binomial tree model spans a 15 year period consisting of a 2 year investment period and a 13 year operating period the first 12 years of which are protected by feed in tariffs according to local renewable energy regulations the authors examine a multi phased compound nested path dependent real option consisting of mutually exclusive options a sequential option to invest as well as expand repower contract and abandon options volatility which is calculated by means of a monte carlo simulation according to the logarithmic present value returns approach shows predominant sensitivity to the capacity factor simulated with the rescaled weibull s probability distribution the final binomial tree results show that the proposed sequence of options increases project value by transforming higher risk and lower return in the initial discounted cash flow model to lower risk and higher return in the ro model this paper contributes to the existing literature in at least two ways it presents in depth analysis of the real option application to the res e project and provides decision makers with sophisticated tool for improving strategic thinking capital budgeting and decision making processes

the economics of climate change impacts a la stern novel and nuanced or rhetorically restricted abstract the stern report conducts an estimation of greenhouse gas control costs weighed against the benefits of avoiding damages at the global scale as i show stern and colleagues are aware of the limits to cba although they chose to ignore the considerable literature on the subject the many contributions by ecological economists and especially work specific to the enhanced greenhouse effect various problems are raised or mentioned in the report including strong uncertainty incommensurability plural values non utilitarian ethics rights distributional inequity poverty and treatment of future generations how then can this report acknowledging so many of those aspects of climate change that render cba an unsuitable tool for generating policy recommendations go ahead to conduct a global cba and make policy recommendations i explain how issues are suppressed and sidelined in a careful and methodical manner with the pretence they have been addressed by state of the art solutions meanwhile the authors maintain allegiance to an economic orthodoxy which perpetuates the dominant political myth that traditional economic growth can be both sustained and answer all our problems besides perpetuating myths this diverts attention away from alternative approaches away from ethical debates over harming the innocent the poor and future generations and away from the fundamental changes needed to tackle the very real and serious problems current economic systems pose for environmental systems

investment timing and optimal capacity choice for small hydropower projects this paper presents a method for assessing small hydropower projects that are subject to uncertain electricity prices we present a real options based method with continuous scaling and we find that there is a unique price limit for initiating the project if the current electricity price is below this limit it is never optimal to invest but above this limit investment is made according to the function for optimal size the connection between the real option and the physical properties of a small hydropower plant is dealt with using a spreadsheet model that performs a technical simulation of the production in a plant based on all the important choices for such a plant the main results of the spreadsheet are simulated production size and the investment costs which are in turn used for finding the value of the real option and the price limit the method is illustrated on three different norwegian small hydropower projects

the impact of chinese carbon emission trading scheme ets on low carbon energy lce investment china is planning to introduce emission trading scheme ets to decrease co2 emission as low carbon energy lce will play a pivotal role in reducing co2 emissions our paper is to assess the extent and the conditions under which a carbon ets can deliver lce investment in china we chose wind technology as a case study and a real option based model was built to explore the impact of a number of variables and design features on investment decisions e g carbon and electricity price carbon market risk carbon price floor and ceiling and on grid ratio we compute critical values of these variables and features and explore trade offs among them according to our work a carbon ets has a significant effect on wind power plant investment although it cannot support investment in wind power on its own carbon price stabilization mechanisms such as carbon price floor can significantly improve the effect of carbon ets but the critical floor to support investment is still much higher than the carbon price in china pilot etss our results show that other policy measures will be needed to promote low carbon energy development in china

mortgage debt consumption and illiquid housing markets in the great recession using a model with housing search endogenous credit constraints and mortgage default this paper accounts for the housing crash from 2006 to 2011 and its implications for aggregate and cross sectional consumption during the great recession left tail shocks to labor market uncertainty and tighter down payment requirements emerge as the key drivers an endogenous decline in housing liquidity amplifies the recession by increasing foreclosures contracting credit and depressing consumption balance sheets act as a transmission mechanism from housing to consumption that depends on gross portfolio positions and the leverage distribution low interest rate policies accelerate the recovery in housing and consumption

clearing up the fiscal multiplier morass bayesian prior predictive analysis of five nested dsge models suggests that model specifications and prior distributions tightly circumscribe the range of possible government spending multipliers multipliers are decomposed into wealth and substitution effects yielding uniform comparisons across models by constraining the multiplier to tight ranges model and prior selections bias results revealing less about fiscal effects in data than about the lenses through which researchers choose to interpret data when monetary policy actively targets inflation output multipliers can exceed one but investment multipliers are likely to be negative passive monetary policy produces consistently strong multipliers for output consumption and investment

the relevance or otherwise of the central bank s balance sheet abstract this paper explores the impacts on an economy of a central bank changing the size and composition of its balance sheet one of the ways in which such asset purchases could influence prices and demand is via portfolio balance effects we develop and calibrate a simple olg model in which risk averse households hold money and bonds to insure against risk central bank asset purchases have the potential to affect households choices by changing the composition and return of their asset portfolios we find that the effect is weak and that its size depends on how fiscal policy is conducted that is not to say that the big expansion of central bank balance sheets in recent years has been ineffective our finding is rather that the portfolio balance channel evaluated in an environment of normally functioning though nonetheless incomplete asset markets is weak that is not inconsistent with the evidence that large scale asset purchases by central banks since 2008 have had significant effects because those purchases were made when financial markets were to varying extents dysfunctional nonetheless our results are relevant to those purchases because they may be unwound in an environment where financial markets are no longer dysfunctional

tobin s imperfect asset substitution in optimizing general equilibrium in this paper we present a dynamic optimizing model that allows explicitly for imperfect substitutability between different financial assets this is specified in a manner which captures tobin s 1969 view that an expansion of one asset s supply affects both the yield on that asset and the spread or risk premium between returns on that asset and alternative assets our estimates of this model on u s data confirm that some of the observed deviations of long term rates from the expectations theory of the term structure can be traced to movements in the relative stocks of financial assets the richer aggregate demand and asset specifications imply that there exists an additional channel of monetary policy our results suggest that central bank operations exercise a modest influence on the relative prices of alternative financial securities and so exert an extra effect on long term yields and aggregate demand separate from their effect on the expected path of short term rates

the euro area bond free float and the implications for qe this paper examines how shocks to government bond duration risk held by price sensitive investors affect the euro area term structure of interest rates and the wider macroeconomy we construct a new measure of the bond free float which adjusts total debt for foreign official holdings and weights by residual maturity using a small macrofinance bayesian vector autoregression var model we estimate that the first round of asset purchases under the european central bank s ecb public sector purchase program reduced euro area 10 year bond yields by around 30 bps in 2015 the positive impact on the output gap and inflation in 2016 was about 0 2 and 0 3 ppt respectively

evaluation of r d investments in wind power in korea using real option abstract in recent years many countries put an emphasis on the development and deployment of renewable energy to cope with the global environmental crisis such as depletion of fossil energy climate convention to control emissions of greenhouse gases among the various new and renewable energy sources the korean government selected wind power energy as one of the core areas for r d investments in this paper we evaluate the economic value of the investment in wind power energy r d in korea and optimal deployment timing of wind power technology by using the real option approach the real option model adopted in this paper assumes that a decision maker has a compound option to abandon deployment or continue the r d as a result by using empirical data of korea it is found that there exists a considerable amount of positive economic value of investments in wind power energy r d

comparing dsge var forecasting models how big are the differences abstract i generate priors for a vector autoregression var from a standard real business cycle rbc model an rbc model with capital adjustment costs and habit formation and a sticky price model with an unaccommodating monetary authority the response of hours worked to a tfp shock differs sharply across these models i compare the accuracy of forecasts made from each of the resulting dynamic stochastic general equilibrium vector autoregression dsge var models despite having different structural characteristics the dsge vars are comparable in terms of forecasting performance as in previous work dsge vars compare favorably with atheoretical vars

application of real options valuation for analysing the impact of public r d financing on renewable energy projects a company s perspective abstract this paper contrasts the financial benefit of grants given to research and development projects with the reduction in managerial flexibility they impose which implies a loss in the value of the project to quantify this loss of value real options analysis has been adopted as the most suitable framework to assess and quantify managerial flexibility this idea is illustrated by the case of a research and development project in renewable energy specifically concentrated solar power our results show that the value added by the grants is less than the nominal incentives received as a result of the loss of flexibility for managers they cannot apply certain options such as deferral nor can they abandon the project therefore a break even grant is proposed that equals the financial incentive with the loss of managerial flexibility under this break even point the grant should be rejected this paper will create awareness for both policy makers and private companies regarding a more accurate assessment of grants to research and development funding as well as provide insights to improve grant schemes without increasing the amount of public funds

international effects of a compression of euro area yield curves abstract in this paper we use a bayesian global vector autoregressive model to analyze the macroeconomic effects of a flattening of euro area yield curves our findings indicate positive effects on real activity and prices both within the euro area as well as in neighboring economies spillovers transmit through an exchange rate channel and a broad financial channel we complement our analysis by conducting a portfolio optimization exercise our results show that multi step ahead forecasts conditional on the euro area yield curve shock improve sharpe ratios relative to other investment strategies

monetary policy in exceptional times this paper describes the way in which the european central bank ecb the federal reserve and the bank of england conducted monetary policy since the beginning of the financial crisis in august 2007 we argue that both quantitative easing and the other non standard measures introduced by central banks that changed the composition of the asset side of their balance sheets so called qualitative easing acted mainly through their effects on interest rates and in particular on money market spreads rather than solely through quantity effects in terms of the money supply we perform a quantitative exercise on the euro area which estimates the effect of the reduction of these spreads to the broader economy michele lenza huw pill and lucrezia reichlin

fiscal policy in an expectations driven liquidity trap we study the effects of fiscal policy interventions in a liquidity trap in a model with nominal rigidities and an interest rate rule in a liquidity trap caused by a self fulfilling state of low confidence higher government spending has deflationary effects that reduce the spending multiplier when the zero lower bound is binding instead cuts in marginal labor tax rates are inflationary and become more expansionary when the zero lower bound is binding these findings contradict popular views about the effects of fiscal policy in a liquidity trap

the output employment and interest rate effects of government consumption abstract we study the impact on aggregate variables of changes in government consumption using the neoclassical stochastic growth model we show theoretically that the impact on output and employment of a persistent change in government consumption exceeds that of a temporary change we also show that in principle there can be an analog to the keynesian multiplier in the neoclassical growth model finally in an empirically plausible version of the model we show that the interest rate impact of a persistent government consumption shock exceeds that of a temporary one our results provide counterexamples to existing claims in the literature

optimal monetary interventions in credit markets in an environment based on lagos and wright 2005 but with two rounds of pairwise meetings we introduce imperfect monitoring that resembles operations of unsecured loans we characterize the set of implementable allocations satisfying individual rationality and pairwise core in bilateral meetings we introduce a class of expansionary monetary policies that use the seignorage revenue to purchase privately issued debts we show that under the optimal trading mechanism both money and debt circulate in the economy and the optimal in ation rate is positive except for very high discount factors under which money alone achieves the rstbest our model captures the view that unconventional monetary policy encourages lending while it may create in ation

the impact of monetary policy on corporate bonds under regime shifts abstract we study the effects of a conventional monetary expansion quantitative easing and the maturity extension program on corporate bond yields using impulse response functions obtained from flexible models with regimes using a three state markov switching model with time homogeneous vector autoregressive var coefficients that emerges from a systematic model specification search we find that unconventional policies may have been generally expected to decrease both corporate yields and spreads however even though the sign of the responses is the one desired by policymakers the size of the estimated effects depends on the assumptions regarding the decline in long term treasury yields caused by unconventional policies on which considerable uncertainty remains further tests based on yield spreads and a variable that measures inflation expectations show that in the crisis regime unconventional monetary policies do not produce any perverse effects on expected inflation these results prove robust to adopting a framework that allows var coefficients to break to imposing coefficient restrictions that increase parsimony and to a range of different ordering schemes that identify shocks in alternative ways

real options theory applied to electricity generation projects a review abstract real options ro theory is well known for enhancing the value of projects under uncertainty this is achieved by modelling the flexibility that managers possess to adjust the projects in response to changes in their environments based on this ro theory could be used to tackle current energy and environmental issues by enhancing the value of electricity generation projects egp especially renewable energy projects rep the potential of ro theory to increase the value of egp and rep has been a driver for new research in the topic however existing literature is still scarce diverse and tends to neglect the state of the art of ro theory e g ro in the design of projects ro studies tend to ignore the use of ro in the design of projects as they are difficult to formulate without the help of experts on the projects designs this paper aims to encourage novel research in the application of ro theory to egp and rep for this purpose a critical review of ro theory its state of the art and its applications to egp and rep is presented this review identifies current areas of interest and gaps in knowledge in this research area it is concluded that new and novel ro research should address the state of the art of ro theory and uncertainties that are exclusive for specific types of projects this future research will require the involvement of electrical engineers specialised in the design of egp and rep

the response of interest rates to us and uk quantitative easing we analyse declines in government bond yields following announcements by the federal reserve and the bank of england of plans to buy longer term debt using dynamic term structure models we decompose us and uk yields into expectations about future short term interest rates and term premiums we find that declines in us yields mainly reflected lower expectations of future short term interest rates while declines in uk yields appeared to reflect reduced term premiums thus the relative importance of the signalling and portfolio balance channels of quantitative easing may depend on market institutional structures and central bank communication policies

can government purchases stimulate the economy this essay briefly reviews the state of knowledge about the government spending multiplier drawing on theoretical work aggregate empirical estimates from the united states as well as cross locality estimates i assess the likely range of multiplier values for the experiment most relevant to the stimulus package debate a temporary deficit financed increase in government purchases i conclude that the multiplier for this type of spending is probably between 0 8 and 1 5 jel e23 e62 h50

unconventional fiscal policy at the zero bound when the zero lower bound on nominal interest rates binds monetary policy cannot provide appropriate stimulus we show that in the standard new keynesian model tax policy can deliver such stimulus at no cost and in a time consistent manner there is no need to use inecient policies such as

deficits public debt dynamics and tax and spending multipliers cutting government spending can increase the budget defi cit at zero interest rates according to a standard new keynesian model calibrated with bayesian methods similarly increasing sales taxes can increase the budget defi cit rather than reduce it both results suggest limitations of austerity measures at zero interest rates running budget defi cits can be either expansionary or contractionary depending on how they interact with expectations about long run taxes and spending the effect of fi scal policy action is thus highly dependent on the policy regime a successful stimulus therefore needs to specify how the budget is managed not only in the short but also in the medium and long runs

revisiting the techno economic analysis process for building mounted grid connected solar photovoltaic systems part two application part one in this two part paper identified monte carlo analysis as an improved approach over traditional deterministic techno economic methods for solar pv prosumers in deregulated markets in this

fiscal policy profits and investment this paper evaluates the effects of fiscal policy on investment using a panel of oecd countries we find a sizeable negative effect of public spending and in particular of its wage component on profits and on business investment this result is consistent with different theoretical models in which government employment creates wage pressure for the private sector various types of taxes also have negative effects on profits but interestingly the effects of government spending on investment are larger than those of taxes our results can explain the so called non keynesian i e expansionary effects of fiscal adjustments jel e22 e62

quantitative easing and unconventional monetary policy an introduction this article assesses the impact of quantitative easing and other unconventional monetary policies followed by central banks in the wake of the financial crisis that began in 2007 we consider the implications of theoretical models for the effectiveness of asset purchases and look at the evidence from a range of empirical studies we also provide an overview of the contributions of the other articles in this feature

international money supply and real estate risk premium the case of the london office market abstract the main purpose of this study is to deeply investigate the determinants of the risk premium for the central london market between q2 2002 and q3 2015 using a vector autoregression var model we shed new light on the role of central banks in the historical level of the commercial real estate risk premium indeed since the global financial crisis gfc central banks have used unconventional monetary policies increasing the quantity of money available in the economy and creating structural changes therefore we have described the link between monetary policies and real estate using a theoretical is lm mundell fleming framework for a small open economy with a flexible exchange rate to empirically explore this phenomenon we have constructed a monetary index adapted to the office market we find that throughout the whole period 2002 2015 the vacancy rate the employment in services the ftse 100 the new monetary index and the autoregressive parameter are the main determinants of the historical risk premium however this result hides the complex realities of different sub periods finally we study the structural changes introduced by the monetary policy using a structural var model and impulse response function

the ecb and the interbank market this paper analyses the impact on the macroeconomy of the ecb s non standard monetary policy implemented in the aftermath of the collapse of lehman brothers in the fall of 2008 we study in particular the effect of the expansion of the intermediation of transactions across central bank balance sheets as dysfunctional financial markets seize up which we regard as a key channel of transmission for non standard monetary policy measures our approach is similar to lenza et al 2009 but we introduce the important innovation of distinguishing between private intermediation of interbank transactions in the money market and central bank intermediation of bank to bank transactions across the eurosystem balance sheet we do this by exploiting data drawn from the aggregate monetary and financial institutions mfi balance sheet which allows us to construct a new measure of the policy shock represented by the ecb s increasing role as a financial intermediary we find that bank loans to households and in particular to non financial corporations are higher than would have been the case without the ecb s intervention in turn the ecb s support has a significant impact on economic activity two and a half years after the failure of lehman brothers the level of industrial production is estimated to be 2 higher and the unemployment rate 0 6 percentage points lower than would have been the case in the absence of the ecb s non standard monetary policy measures

nonlinear adventures at the zero lower bound abstract in this paper we argue for the importance of explicitly considering nonlinearities in analyzing the behavior of the new keynesian model with a zero lower bound zlb of the nominal interest rate to show this we report how the decision rules and the equilibrium dynamics of the model are substantially affected by the nonlinear features brought about by the zlb we also illustrate a tension between the length of a spell at the zlb and the drop in consumption there

no news in business cycles this paper uses a structural large dimensional factor model to evaluate the role of news shocks shocks with a delayed eect on productivity in generating the business cycle

inflation employment and monetary policy objectives and outcomes in the uk and u s compared this paper explores how sensitive is monetary policy to the precise preferences of the central bank over inflation and economic activity it does so in order to address a puzzle which is that the u s fed and the bank of england appear to have quite different objectives and yet have adopted strikingly similar policies in recent years i use a calibrated model to assess how policy might be sensitive to attaching different weights to inflation output and the output gap in central bank objectives i find that a wide range of weights can give rise to rather similar monetary policies

the effects of government purchases shocks review and estimates for the eu in this article we review the theoretical consequences of government purchases shocks for both closed and open economies followed by a discussion of the empirical literature next we provide our own estimates for the eu countries we find that an increase in government purchases raises output consumption and investment and reduces the trade balance however the stimulating effect is weaker and the trade balance reduction is larger for the more open eu economies consistent with larger leakage effects further we show that government purchases shocks in large eu economies have non negligible consequences for economic activity in the main trading partners

assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives this study quantifies the effects of persistently low interest rates near to the zero lower bound and unconventional monetary policy on pension fund risk incentives in the united states using two structural vector autoregressive var models and a counterfactual scenario analysis the results show that monetary policy shocks as identified by changes in treasury yields following changes in the central bank s target interest rates lead to a substantial increase in pension funds allocation to equity assets notably the shift from bonds to equity securities is greater during the period where the us federal reserve launched unconventional monetary policy measures additional findings show a positive correlation between pension fund risk taking low interest rates and the decline in treasury yields across both well funded and underfunded public pension plans which is thus consistent with a structural risk shifting incentive

unconventional economic policies and sentiment an international assessment this paper estimates using bayesian and global vars the spillover effects of unconventional fiscal and monetary policies implemented in the united states and in the eurozone during the last decade consumer confidence and investor sentiment indicators are introduced in the models in order to highlight the signalling channel in the responses to economic policy innovations in times of crisis our results reveal that consumer and investor perceptions of innovative economic measures are relevant to study the pass through of economic policies to the real sector in times of crisis and zero lower bound interest rates in particular the signalling channel plays an important role in successful unconventional economic policies moreover if unconventional economic policies have an impact abroad the effects are similar to those measured in the domestic country region consequently coordination and transparency are a prerequisite for ensuring short term growth after a global financial crisis

fiscal policy in general equilibrium this paper studies four classic fiscal policy experiments within a quantitatively restricted neoclassical model the authors main findings are as follows 1 permanent changes in government purchases can lead to short run and long run output multipliers that exceed one 2 permanent changes in government purchases induce larger effects than temporary changes 3 the financing decision is quantitatively more important than the resource cost of changes in government purchases and 4 public investment has dramatic effects on private output and investment these findings stem from important dynamic interactions of capital and labor absent in earlier equilibrium analyses of fiscal policy copyright 1993 by american economic association

the effectiveness of alternative monetary policy tools in a zero lower bound environment this paper reviews alternative options for monetary policy when the shortterm interest rate is at the zero lower bound and develops new empirical estimates of the effects of the maturity structure of publicly held debt on the term structure of interest rates we use a model of risk averse arbitrageurs to develop measures of how the maturity structure of debt held by the public might affect the pricing of level slope and curvature term structure risk we find that these treasury factors historically were quite helpful for predicting both yields and excess returns over 1990 2007 the historical correlations are consistent with the claim that if in december 2006 the fed were to have sold off all its treasury holdings of less than 1 year maturity about 400 billion and use the proceeds to retire treasury debt from the long end this might have resulted in a 14 basis point drop in the 10 year rate and an 11 basis point increase in the 6 month rate we also develop a description of how the dynamic behavior of the term structure of interest rates changed after hitting the zero lower bound in 2009 our estimates imply that at the zero lower bound such a maturity swap would have the same effects as buying 400 billion in long term maturities outright with newly created reserves and could reduce the 10 year rate by 13 basis points without raising short term yields

real option valuation in renewable energy literature research focus trends and design abstract in light of intensive development of the renewable energy re sector a growing number of academic papers address the complexity of re investment planning and valuation to take account of the high risk profile and irreversibility of re investments researchers have resorted to sophisticated real options ro approaches that enable flexibility to be incorporated into project design in the face of an uncertain environment the variety of different frameworks and models adopted as well as a lack of aggregated analysis of the field suggest a need for a critical review of ro methodology and design in re assessment this study describes the research focus trends and design found in contemporary academic literature devoted to re valuation with a ro approach particular attention is given to ro in project and policy design the results give a comprehensive picture of existing research on the topic thus providing researchers with a solid foundation for further study and indications of directions for future development furthermore the findings provide policymakers and project planners with valuable insights into key aspects of re project and policy design

the federal reserve s large scale asset purchase programmes rationale and effects we provide empirical estimates of the effect of large scale asset purchases lsaps on longer term us treasury yields within a framework that allows for several transmission channels including the scarcity channel associated with the preferred habitat literature and the duration channel associated with interest rate risk we also clarify lsaps role in the broader context of historical monetary policy strategy results indicate that lsap style operations mainly impact longer term rates via the nominal term premium within that premium the response is predominantly embodied in the real term premium the scarcity and duration channels both seem to be of considerable importance

priors from general equilibrium models for vars abstract this paper uses a simple new keynesian dynamic stochastic general equilibrium model as a prior for a vector autoregression shows that the resulting model is competitive with standard benchmarks in terms of forecasting and can be used for policy analysis jel classification c11 c32 c53 key words bayesian analysis dsge models forecasting vector autoregressions 1 introduction dynamic stochastic general equilibrium dsge models are popular nowadays in macroeconomics they are taught in virtually every economics ph d program and represent a predominant share of publications in the field yet when it comes to policy making these models are scarcely used at least from a quantitative point of view the main quantitative workhorse for policy making at the federal reserve system is frb us a macro econometric model built in the cowles foundation tradition a style of macroeconomics that is no longer taught in many ph d programs 1 in their decision process fed policy makers rely heavily on forecasting they want to know the expected path of inflation in the next few quarters and by how much a 50 basis point increase in the federal funds rate would affect that path frb us offers answers to these questions answers that many macroeconomists would regard with suspicion given both the lucas 1976 critique and the fact that in general the restrictions imposed by cowles foundation models are at odds with dynamic general equilibrium macroeconomics sims 1980 general equilibrium models on the other hand have a hard time providing alternative answers the fact that these models are perceived to do badly in terms of forecasting as they are scarcely parameterized is perhaps one of the reasons why they are not at the forefront of policy making while progress is being made in the development of dsge models that deliver acceptable forecasts e g smets and wouters 2003 this paper proposes an approach that combines a stylized general equilibrium model with a vector autoregression var to obtain a specification that both forecasts well and is usable for policy analysis specifically the approach involves using prior information coming from a dsge model in the estimation of a vector autoregression loosely speaking this prior can be thought of as the result of the following exercise i simulate time series data from the dsge model ii fit a var to these data in practice we replace the sample moments of the simulated data by population moments computed from the dsge model solution since the dsge model depends on unknown structural parameters we use a hierarchical prior in our analysis by placing a distribution on the dsge model parameters a tightness parameter controls the weight of the dsge model prior relative to the weight of the actual sample markov chain monte carlo methods are used to generate draws from the joint posterior distribution of the var and dsge model parameters the paper shows that the approach makes even a fairly stylized new keynesian dsge model competitive with standard benchmarks in terms of forecasting real output growth inflation and the nominal interest rate the three variables that are of most interest to policy makers 2 up to this point our procedure borrows from the work of dejong ingram and whiteman 1993 and ingram and whiteman 1994 who are the first to use priors from dsge models for vars ingram and whiteman showed that prior information from the bare bones stochastic growth model of king plosser and rebelo 1988 is helpful in forecasting real economic activity such as output consumption investment and hours worked in addition to documenting the forecasting performance of a trivariate var with a prior derived from a monetary dsge model this paper makes two contributions that significantly extend the earlier work first we show formally how posterior inference for the var parameters can be translated into posterior inference for dsge model parameters

entry into the electricity market uncertainty competition and mothballing options the present paper analyzes the entry strategies into the electricity market of two firms that have power plants under price uncertainty and competition we consider the symmetric and asymmetric two firms which have either a thermal power plant or a nuclear power plant the differences between the thermal power plant and the nuclear power plant such as the cost structure and operational flexibility are modeled the threshold values of market entry are calculated for each firm with either the thermal power plant or the nuclear power plant as the leader or the follower we show the dependence of cost structures on entry thresholds of the leader and the follower into the electricity market for various market and cost conditions the diagrams of the leader are also shown

fiscal multipliers in recessions standard business cycle models have difficulties generating large state dependent fiscal multipliers employing a model of costly financial intermediation based on curdia woodford we show that fiscal multipliers can be strongly state dependent fiscal expansions during recessions may lead to multiplier values exceeding two while similar expansions during economic booms would produce values falling short of unity this pattern obtains if the spread the financial friction is more sensitive to fiscal policy during recessions than during expansions a feature that is present in the data our results are consistent with recent empirical work documenting the state contingency of multipliers

optimal design of feed in tariffs to stimulate renewable energy investments under regulatory uncertainty a real options analysis feed in tariffs fits are widely used as policy instruments to promote investments in renewable energy sources res while fits are often regarded as the most effective res support scheme regulators around the world continuously review their fit schemes in the light of budget constraints and evolving policy goals we assess the impact of adjustments to fit schemes by quantifying the relationship between fit levels i e the guaranteed amount paid per quantity of electricity produced and the propensity to invest in res through a regime switching model we quantify the impact of regulatory uncertainty induced by regulators considering moves from a fit scheme to a more market oriented regulatory regime our focus is on market independent fixed fits the dominant scheme in europe receiving increasing attention globally we find that res investment projects under market independent fixed fit schemes become now or never decisions and derive fit thresholds required to induce investment we show that uncertainty regarding future regulatory regimes delays or even reduces investment activity for fit levels near electricity market prices and high probabilities of an imminent regime switch

the effectiveness of the ecb s unconventional monetary policy comparative evidence from crisis and non crisis euro area countries abstract during the european financial crisis the european central bank implemented a series of unconventional monetary policy measures we argue that these programs lowered the bond yield spreads of euro area countries this hypothesis is tested using pooled ols estimations and two different datasets monetary policy event dummies and the purchase volumes of the securities markets programme smp overall we find significantly negative effects on bond yield spreads for both datasets leading us to accept the hypothesis while the omt reduces the spreads of both crisis and non crisis countries ltros and the lowering of the deposit rate to 0 percent are mainly effective in non crisis countries the smp lowers the spreads of crisis countries but it has the opposite effect on non crisis countries this converse effect is explained by the risk that increasingly accumulates on the ecb s balance sheet through the smp and that way constitutes a fiscal risk for non crisis countries the results are confirmed by pooled ols estimations that measure the effect of unconventional monetary policy on central government debt

the paradox effects of uncertainty and flexibility on investment in renewables under governmental support abstract given that companies have the flexibility to decide about size and timing of a renewable electricity investment the existence of four paradox effects is proven only the type but not the amount of governmental support has an influence on the optimal capacity of a renewable electricity generating system a decrease of governmental support over time may result in higher capacities of renewables installed on an industry level at least on the short term likewise higher uncertainty may encourage an expansion of these capacities in contrast technological progress may hamper the expansion of capacities finally these four paradox effects are exemplified in a germany based case study regarding a photovoltaic project

the use of real options approach in energy sector investments abstract energy shortage global warming and climate change led to an increase in the use of alternative sources of energy with renewable energy sources res playing a fundamental role in this new energetic paradigm however the investment costs often constitute a major barrier to their spread use moreover the overall benefits of renewable energy technologies are often not well understood and consequently they are often evaluated to be not as cost effective as traditional technologies from the moment that the energy sector started a deregulation process with a high level of competitiveness and associated increased market uncertainty traditional project evaluation techniques alone became insufficient to properly deal with these additional risk and uncertainty factors the diffusion of the renewable energy technologies is also affected by this feature the way investors evaluate their investments call now for the use of more sophisticated evaluation techniques real options approach can deal with these issues and as so began to be considered and applied for the energy sector decision aid this approach it is now extensively widespread in evaluating investment projects in the energy sector a large set of applications in almost all fields of energy decision making from electricity generation technologies appraisal to policy evaluation is available in the literature however the use of this technique in the field of res is still limited and worth to be analysed this paper addresses this issue a review of the current state of the art in the application of real options approach to investments in non renewable energy sources and res is presented giving perspectives for further research in this field

cross border spillover effects of unconventional monetary policies on swiss asset prices abstract unconventional monetary policies umps announced by the federal reserve the european central bank the bank of england and the bank of japan exert important spillover effects on asset prices in switzerland using a broad ump event set and a long term bond futures based measure of market anticipation we show that surprisingly expansionary umps lower swiss government and corporate bond yields induce the swiss franc to appreciate and dampen swiss equity prices four extensions provide further insights first the estimated effects are strongest for announcements by the ecb second the impact on government bonds is largest for bonds with residual maturities of 7 10 years third the impact of foreign ump shocks on exchange rates and swiss bond yields is less pronounced after the introduction of the minimum rate of 1 20 swiss franc per euro by the swiss national bank on september 6 2011 indicating that domestic monetary policy action partially affects the impact of external monetary shocks on domestic financial markets fourth the sign of spillover effects differs for positive and negative ump surprises but their strength does not

photovoltaic smart grids in the prosumers investment decisions a real option model abstract the digitization of power system represents one of the main instruments to achieve the target set by the european union 2030 climate and energy agenda of affordable energy transition during the last years such innovation process has been associated with the smart grid sg term in this context efficiency and flexibility of power systems are expected to increase and energy consumers to be active also on the production side thus becoming prosumers agents that both produce and consume energy this paper provides a theoretical real option framework with the aim to model prosumers decision to invest in photovoltaic power plants assuming that they are integrated in a sg our main focus is to study the optimal plant size and the optimal investment threshold in a context where exchange of energy among prosumers is possible the model was calibrated and tested with data from the northern italy energy market our findings show that the possibility of selling energy between prosumers via the sg increases investment values this opportunity encourages prosumers to invest in a larger plant compared with the case without exchange possibility and that there is a positive relation between optimal size and optimal investment timing the effect of uncertainty is in line with the literature showing increasing value to defer with volatility our comparative statics stress the need for policies to push the pv efficiency

estimating fiscal multipliers news from a non linear world we estimate non linear vars to assess to what extent fiscal spending multipliers are countercyclical in the us we deal with the issue of non fundamentalness due to fiscal foresight by appealing to sums of revisions of expectations of fiscal expenditures this measure of anticipated fiscal shocks is shown to carry valuable information about future dynamics of public spending results based on generalised impulse responses suggest that fiscal spending multipliers in recessions are greater than one but not statistically larger than those in expansions however non linearities arise when focusing on extreme events that is deep recessions versus strong expansionary periods

the risk taking channel of monetary policy transmission in the euro area abstract in this paper we provide evidence for a risk taking channel of monetary policy transmission in the euro area that works through the relaxation of lending standards for borrowers our dataset covers the period 2003q1 2016q2 and includes in addition to the standard variables for real gdp growth inflation and the monetary policy stance indicators of bank lending standards and bank lending margins based on vector autoregressive models with i recursive identification and ii sign restrictions we show that banks react aggressively to an expansionary monetary policy shock by lowering their lending standards the banks efforts to keep their lending margin stable however are not successful as we detect a significant compression we document these findings for the euro area as a whole and for its individual member states in particular banks in the netherlands portugal spain and ireland lowered their lending standards after expansionary monetary policy shocks the compression of the lending margin is most pronounced in the five crisis countries greece ireland italy portugal and spain

announcements of ecb unconventional programs implications for the sovereign spreads of stressed euro area countries abstract this paper studies the effects of ecb communications about unconventional monetary policy operations on the sovereign spreads of greece ireland italy portugal and spain relative to germany between 2008 and 2012 more than fifty events concerning non standard operations are identified and classified with respect to the specific ecb program the empirical results suggest that the ecb announcements about unconventional monetary policies substantially reduced long term government bond yield spreads relative to german counterparts in all countries except greece particularly among the different types of measures news about the securities markets programme strongly affected the perceived sovereign risk of the five stressed euro area countries while the announcements of the outright monetary transactions seem to have a significant impact only in italy and spain

new keynesian versus old keynesian government spending multipliers renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy because of modelling uncertainty it is essential that policy evaluations be robust to alternative assumptions we find that models currently being used in practice to evaluate fiscal policy stimulus proposals are not robust government spending multipliers in an alternative empirically estimated and widely cited new keynesian model are much smaller than in these old keynesian models the estimated stimulus is extremely small with gdp and employment effects only one sixth as large and with private sector employment impacts likely to be even smaller we investigate the sensitivity of our findings with regard to the response of monetary policy the zero bound on nominal interest rates and the inclusion of an empirically relevant degree of rule of thumb behaviour in the new keynesian model in addition we relate our findings using estimated structural macroeconomic models to the recent literature using reduced form regression techniques

have we underestimated the likelihood and severity of zero lower bound events prior to the financial crisis most economists probably did not view the zero lower bound zlb as a major problem for central banks using a range of structural and statistical models we find that previous research understated the zlb threat by ignoring uncertainty about model parameters and latent variables focusing too much on the great moderation experience and relying on structural models whose dynamics cannot generate sustained zlb episodes our analysis also suggests that the federal reserve s asset purchases while materially improving macroeconomic conditions did not prevent the zlb constraint from having first order adverse effects on real activity and inflation

real option valuation of facts investments based on the least square monte carlo method efficient and well timed investments in electric transmission networks that cope with the large ongoing power market uncertainties are currently an open issue of significant research interest strategic flexibility for seizing opportunities and cutting losses contingent upon an unfavorable unfolding of the long term uncertainties is an attribute of enormous value when assessing irreversible investments in this sense flexible ac transmission systems facts devices appear as an effective manner of adding flexibility to the transmission expansion planning this article proposes an investment valuation approach which properly assesses the option value of deferring transmission lines investments whereas gaining flexibility by investing in facts devices the flexibility provided by facts investments option to abandon and to relocate is assessed through a real option valuation approach based on the novel least square monte carlo method in order to illustrate the practicability of the proposed valuation approach a traditional expansion strategy lines and a flexible investment strategy lines and facts are compared in a real study case the article shows that a proper combination of lines and facts leads to efficient investments by allowing a progressive adaptation of the transmission grid to the changing scenarios

assessing the economy wide effects of quantitative easing this article examines the macroeconomic impact of the first round of quantitative easing qe by the bank of england we attempt to quantify the effects of these purchases by focusing on the impact of lower long term interest rates on the wider economy we use three different models to estimate the impact of qe on output and inflation a large bayesian vector autoregression var a change point structural var and a time varying parameter var our estimates suggest that qe may have had a peak effect on the level of real gdp of around and a peak effect on annual cpi inflation of about points