equitable representation in councils theory and an application to the united nations security council we analyze democratic equity in council voting games cvgs in a cvg a voting body containing all members delegates decision making to a time varying subset of its members as describes e g the relationship between the united nations general assembly and the united nations security council unsc we develop a theoretical framework for analyzing democratic equitability in cvgs at both the country and region levels and for different assumptions regarding preference correlation we apply the framework to evaluate the equitability of the unsc and the claims of those who seek to reform it we find that the individual permanent members are overrepresented by between 21 3 times united kingdom and 3 8 times china from a country level perspective while from a region perspective eastern europe is the most heavily overrepresented region with more than twice its equitable representation and africa the most heavily underrepresented our equity measures do not preclude some unsc members from exercising veto rights however

causalities between co2 electricity and other energy variables during phase i and phase ii of the eu ets the topic of this article is the analysis of the interplay between daily carbon electricity and gas price data with the european union emission trading system eu ets for co2 emissions in a first step we have performed granger causality tests for phase i of the eu ets january 2005 until december 2007 and the first year of phase ii of the eu ets 2008 the analysis includes both spot and forward markets given the close interactions between the two sets of markets the results show that during phase i coal and gas prices through the clean dark and spark spread impacted co2 futures prices which in return granger caused electricity prices during the first year of the phase ii the short run rent capture theory in which electricity prices granger cause co2 prices prevailed on the basis of the qualitative results of the granger causality tests we obtained the formulation testable equations for quantitative analysis standard ols regressions yielded statistically robust and theoretically coherent results

reforming the governance of the international monetary fund cacy of these initiatives depends upon the level of compliance by the fund s member countries democratising the fund will make the organisation s initiatives more effective as decisions produced by a democratic process have greater legitimacy and credibility amongst participating members the turn toward issues of global governance moves the imf reform debate beyond arguments about the proper size and scope of the fund realistic changes in the governance of the fund can be achieved by rationalising the fund s quota regime which forms the framework for the organisation s decision making process as well as the basis for allocating member contributions to the organisation s resources reforms based on broadly accepted principles will enhance the fund s legitimacy and accountability as a forum for global economic policy decision making a failure to reform the fund coupled with the recurrence of financial crises in the emerging market economies may hinder the growth of the global economy as processes of production are subordinate to the flows of financial capital financial crises have direct impacts on real economic activity moreover even though most financial crises are short lived they exert long term and asymmetric economic and social impacts on the lives of the most vulnerable members of the global economy recent financial crises and global economic trends have already mobilised non governmental organisations students and workers around the world

coevolution of policy market and technical price risks in the eu ets within the eu there have been calls for governments to provide greater certainty over carbon prices even though it is evident that their price risk is not entirely due to policy uncertainty we develop a stochastic simulation model of price formation in the eu ets to analyse the coevolution of policy market and technology risks under different initiatives the current situation of a weak 20 overall abatement target motivates various technology support interventions elevating policy uncertainty as the major source of carbon price risk in contrast taking a firm decision to move to a more stringent 30 cap would leave the eu ets price formation driven much more by market forces than by policy risks this leads to considerations of how much risk mitigation by governments would be appropriate and how much should be taken as business risk by the market participants

long run effects of public sector sponsored training in west germany between 1991 and 1997 west germany spent on average about 3 6 bn euro per year on public sector sponsored training programmes for the unemployed we base our empirical analysis on a new administrative data base that plausibly allows for selectivity correction by microeconometric matching methods we identify the effects of different types of training programmes over a horizon of more than seven years using bias corrected weighted multiple neighbours matching we find that all programmes have negative effects in the short run and positive effects over a horizon of about four years however for substantive training programmes with duration of about two years gains in employment probabilities of more than 10 points appear to be sustainable but come at the price of large negative lock in effects

integration of carbon risks and opportunities in enterprise risk management systems evidence from australian firms this study addresses managerial perceptions of risks and opportunities related to carbon pricing and emission management and the factors that affect the extent to which carbon related risks and opportunities are integrated into the organisation s formal enterprise risk management erm system we assess the role played by internal governance features resource availability managerial perceptions on competitive pressures and industry type on the inclusion of carbon risks within the erm system based on survey responses from 96 senior managers in australian carbon intensive firms i e firms listed in the 2009 publication of data under section 24 of the national greenhouse and energy reporting nger act 2007 we find that the extent of carbon risk integration is positively associated with the existence of a formal carbon strategy senior management involvement internal audit oversight resource personnel and funds availability and energy sector membership the paper also provides several insights into the perceptions of risks and opportunities confronting an organisation as a result of carbon pricing mechanism

reforming the imf s weighted voting system this paper surveys various proposals to reform the imf s quota determination process and voting regime we first provide some necessary context by describing imf decision rules including the methods by which the fund determines quotas according to countries relative positions in the world economy this section also addresses the arbitrariness of the imf quota determination process and how imf decision rules hamper developing country influence within the fund following this we review several proposals designed to provide developing countries greater voice in imf decision making we conclude that the problems of developing country representation are not likely to be fixed by either reallocating quotas on the margins of the existing imf system or by tinkering with the quota determination formulas rather more fundamental institutional adjustments will be required

an institutional critique of intergovernmentalism most intergovernmentalist analyses of european integration focus on treaty bargaining among european union member governments recent articles also have examined everyday decision making through power index analysis an approach that asserts that a government s ability to influence policy is a function of all possible coalitions in the council of ministers to which it is pivotal this approach suffers from two major weaknesses first it fails to take into account the policy preferences of governments it overestimates the influence of governments holding extreme preferences and underestimates that of more centrist governments second power index analysis fails to consider the important roles of the commission of the european communities and the european parliament in legislative processes today s procedures affect the mix of agenda setting and veto power and this has systematic effects on policy outcomes if intergovernmentalism is to explain choices made during treaty rounds it must take into account these legislative dynamics

voting power in the ec decision making and the consequences of two different enlargements abstract in this paper we study the voting power in the council of ministers of the ec the purpose of this paper is twofold first to evaluate the voting power for the member states of today s community and second to analyse the balance of power after two different enlargements of the community the analysis is based on the shapley shubik and the banzhaf power indices of simple cooperative games the modified version of the shapley shubik index is used to analyse how the sub systems of the ec can change the distribution of power in the decision making process

search theoretic models of the labor market a survey we survey the literature on search theoretic models of the labor market we show how this approach addresses many issues including the following why do workers sometimes choose to remain unemployed what determines the lengths of employment and unemployment spells how can there simultaneously exist unemployed workers and unfilled vacancies what determines aggregate unemployment and vacancies how can homogeneous workers earn different wages what are the tradeoffs firms face from different wages how do wages and turnover interact what determines efficient turnover we discuss various modeling choices concerning wage determination and the meeting process including recent models of directed search

the last word on the wage curve abstract since 1990 there has been extensive international research on the responsiveness of wages of individuals to changing local labour market conditions for many countries an inverse relationship between wages and local unemployment rates has been found in their book the wage curve blanchflower and oswald argued that the unemployment elasticity of pay is around 0 1 in most countries in a 1995 literature survey card referred to this striking empirical regularity as being close to an empirical law of economics nonetheless reported elasticities do vary even excluding outliers between about 0 5 and 0 1 there is also considerable heterogeneity among wage curve studies in terms of data and model specification this paper carries out meta analytic techniques on a sample of 208 elasticities derived from the literature to uncover the reasons for the differences in empirical results across studies several causes of variation are identified there is also clear evidence of downward publication bias in addition many reported t statistics are biased upwards due to the use of aggregate unemployment rates a maximum likelihood method and a trimming procedure are used to correct for these biases both methods give similar results for our sample an unbiased estimate of the wage curve elasticity at the means of study characteristics is about 0 07

the power of the proposal maker in a model of endogenous agenda formation in a distributive setting this study examines a voting procedure for which agenda formation is endogenous it is found not surprisingly that agenda formation is another avenue for strategic manipulation of the voting process and provides the member to first take the floor an asymmetric advantage what is surprising is the degree of this advantage we find that the initial proposal maker earns a share of the fixed resource exceeding 1 for an majority rule and this is regardless of the number of members the voting rule is found to be an effective instrument in at least partially offsetting the power of the proposal maker while maintaining the stability of the voting process

hedging downside risk of oil refineries a vine copula approach abstract the financial health of an oil refinery greatly depends on its refining margin or the difference between the prices of its refined products typically gasoline and heating oil and the cost of crude oil the refinery may hedge against the downside risk of unfavorable price movements using crude oil gasoline and heating oil futures this paper examines the use of a vine copula approach to estimate multiproduct hedge ratios that minimize the downside risk of the refinery the advantage of the vine copula approach is that it allows us to capture important characteristics of petroleum price changes including skewness and fat tailedness in the marginal distributions of individual price change series as well as heterogeneous tail dependence patterns between different pairs of price changes the out of sample hedging effectiveness of two popular classes of vine copula models canonical c and drawable d vine copula models are evaluated and compared with that of the widely used nonparametric method and three standard multivariate copula models the empirical results reveal that the d vine copula model is a good and safe choice in managing the downside risk of the refinery

a comparison of var and cvar constraints on portfolio selection with the mean variance model in this paper we analyze the portfolio selection implications arising from imposing a value at risk var constraint on the mean variance model and compare them with those arising from the imposition of a conditional value at risk cvar constraint we show that for a given confidence level a cvar constraint is tighter than a var constraint if the cvar and var bounds coincide consequently a cvar constraint is more effective than a var constraint as a tool to control slightly risk averse agents but in the absence of a risk free security has a perverse effect in that it is more likely to force highly risk averse agents to select portfolios with larger standard deviations however when the cvar bound is appropriately larger than the var bound or when a risk free security is present a cvar constraint dominates a var constraint as a risk management tool

hedging crude oil using refined product a regime switching asymmetric dcc approach abstract in this paper we explore the strategy on hedging crude oil using refined product we develop a regime switching asymmetric dcc rs adcc model by taking into account both of regime switching and asymmetry in correlations our out of sample findings indicate that rs adcc displays greater hedging effectiveness than some conventional multivariate garch heating oil can better hedge crude oil than gasoline

futures hedging effectiveness under the segmentation of bear bull energy markets abstract this article undertakes eight hedging models regression md garch bekk garch ccc garch ecm md ecm bekk ecm ccc and state space models to investigate hedging effectiveness of different price scenarios in energy futures markets different models have systematically evidenced that hedging effectiveness is higher in an increasing pattern termed bull markets than in a decreasing pattern termed bear markets for crude oil and gasoline futures that is findings show asymmetric hedging performance between upward and downward price trends consistently from the most popular hedging models in literature out of sample examination also suggests that the ranking of hedging effectiveness of different hedging models is not parallel in different price patterns across futures contracts implying that investors should adjust their hedging strategies accordingly

search intensity job advertising and efficiency this paper demonstrates that if both firms and workers search the other side of the market for job matches the equilibrium rate of unemployment is likely to be too high both sides ignore a positive externality of their search when they establish a job match they remove from the market a job searcher so they save society his search costs i show that there is no feasible wage rate that can internalize this externality under fairly weak restrictions on the technology of search

predicting carbon market risk using information from macroeconomic fundamentals abstract economic theories suggest that carbon price movements are closely related to economic fundamentals this paper develops an economic state dependent sd approach to evaluate carbon market value at risk var that incorporates information from macroeconomic fundamentals into carbon return var modeling and forecasting this method implements an economic sd sampling scheme that utilizes historical carbon return observations from the relevant economic states to predict future carbon market var applying this sd method to the european union eu carbon market we confirm that the eu fundamental economy has two distinct states that correspond to expansion and recession periods and that the carbon returns have different distributions in the two states we find that the sd method outperforms the traditional non sd methods in out of sample var forecasts and this is particularly evident when the carbon market experiences large scale economy driven structural breaks

hedging strategy for ethanol processing with copula distributions it has become important for ethanol producers to hedge input and output price risks the purpose of this paper is to analyze an ethanol producing firm s strategy to reduce price risks for inputs and outputs corn is the primary input and the outputs are ethanol corn oil distillers dried grains ddgs and renewable identification numbers rins a theoretical model is developed including margins and risk is measured using value at risk var an empirical model is developed and extended to var using copulas to analyze the marginal distribution and dependence structure for input and output prices on margins efficient frontier curves analyzing var with and without copula are discussed the results compare varying risk strategy measures for long corn short corn and combining short and long corn sensitivity analyses are conducted for functional changes in the margin as a result of ethanol price changes

a model of competition between unemployed and employed job searchers an application to the unemployment outflow rate in britain this paper proposes a model to explain the allocation of new jobs to workers the central innovation is the analysis of the competition for jobs between employed and unemployed job searchers it is argued that the endogeneity of the fraction of the employed engaging in search is a crucial determinant of the unemployment outflow rate the model is applied to the unemployment outflow rate in britain the model fits the data well and encompasses its main rival copyright 1993 by royal economic society

what determines eu decision making needs power or both this paper examines the determinants of power in the council of the european union it argues that quantitative power indices stemming from voting theory provide a good description of the actual distribution of power among eu members of course we cannot directly verify the accuracy of such indices since it is impossible to measure power directly instead we evaluate whether these power measures explain a quantifiable manifestation of the exercise of power namely members shares of eu budget allocation as an alternative explanation of the eu budget we also consider a needs view of the budget where members allocations are determined by principles of solidarity our empirical analysis is based on 1976 2001 data on the patterns of the eu budget shares and on measures of each member state s needs and political power our results indicate that at least 60 of the budget expenditures can be attributed to selfish power politics and the remaining 40 to the declared benevolent eu budget policies however when we apply specific voting power measures that allow correlated preferences and cooperative voting patterns between the member states our estimates indicate that the power politics view can explain as much as 90 of the budget shares we conclude that power politics can explain a major part of the council decisions and that correlated preferences and voting cooperation between eu countries potentially play significant roles in eu decision making heikki kauppi and mika widgren

alternating bid bargaining with a smallest money unit abstract in a seminal paper ariel rubinstein has shown that impatience implies determinateness of the two person bargaining problem in this note we show that this result depends also on the assumption that the set of alternatives is a continuum if the pie can be divided only in finitely many different ways for example because the pie is an amount of money and there is a smallest money unit any partition can be obtained as the result of a subgame perfect equilibrium if the time interval between successive offers is sufficiently small we also show that for a fixed discount rate all subgame perfect equilibrium payoffs of the discrete game converge to the solution obtained by rubinstein if the smallest money unit tends to zero

are international monetary fund quotas unfavorable to less developed countries a normative historical analysis abstract the international monetary fund criterion of economic size receives normative justification as the determinant of quotas but size must be represented by appropriately measured income reserves and trade the fund s income measure is deficient because it uses exchange rates rather than purchasing power parities to convert figures to a common currency if a favourable quota disparity is defined as an actual quota above the quota predicted by economic size less developed countries had adverse disparities early in imf history but increasingly favorable disparities over time given the inertia of relative quotas members would do well to maximize their initial quota

dynamic return volatility dependence and risk measure of covar in the oil market a time varying mixed copula model abstract this study investigates the risk level in the oil market measured by value at risk var and conditional var covar as well as the dynamic and asymmetric dependence between wti returns and crude oil volatility index ovx by constructing six time varying mixed copula models results show that mixed copula between t copula and the 270 degree rotated clayton copula is the optimal fitting copula to measure dynamic dependence the estimated time varying kendall coefficients indicate that wti returns and ovx present negative dependence most of the time there exists a structural change point of dependence between wti returns and ovx changes on april 17 2009 while the dependence characteristics within the subsamples are similar to that in the whole sample indicating the rationality of our time varying mixed copula models finally the tests show significant risk spillover from ovx to wti returns and also asymmetric effects for covars in response to different upside and downside extreme ovx movements

value at risk estimation of energy commodities a long memory garch evt approach abstract in this paper we evaluate value at risk var and expected shortfall es for crude oil and gasoline market we adopt three long memory models including figarch hygarch and fiaparch to forecast energy commodity volatility by capturing some volatility stylized fact such as long range memory heteroscedasticity asymmetry and fat tails then we consider extreme value theory which concentrates on the tail distribution rather than the entire distribution evt is considered as a potential framework for the separate treatment of tails of distributions which allows for asymmetry our results show that the fiaparch model with extreme value theory performs better in predicting the one day ahead var using the fitted long memory garch model and a simulation approach to estimate var for horizons over than one day backtesting results show that our approach still performs for lower estimation frequencies overall our findings confirm that taking into account long range memory asymmetry and fat tails in the behavior of energy commodity prices returns combined with filtering process such as evt are important in improving risk management assessments and hedging strategies in the high volatile energy market

information linkage dynamic spillovers in prices and volatility between the carbon and energy markets abstract the european union emissions trading system eu ets has strengthened the information flow and connection between carbon market and energy markets which makes the carbon energy system more complicated this paper investigates information linkages and dynamic spillover effects between the carbon and energy markets we adopt a systemic time series approach to study connectedness in both returns and volatility in the carbon energy system moreover a rolling windows method is used to show the dynamic features empirical results show that brent oil prices play an important role in affecting carbon price changes and risks feedback exists from the carbon market to other energy markets and electricity prices are shown to be the biggest information receiver in the system it is also shown that the level of connectedness in the volatility system is substantially higher than that in the returns system our results can provide useful implications for policymakers to design market mechanisms and market investors to manage their portfolios

carbon risk and optimal retrofitting in cement plants an application of stochastic modelling montecarlo simulation and real options analysis abstract the cement sector is highly intensive in co2 emissions and is the second biggest industrial sector in terms of emissions after the electricity generation sector it emits co2 from the combustion of fossil fuels the calcination process and indirectly from electricity consumption the ambitious climate change policy in the eu means that carbon prices and fuel prices are two very important sources of uncertainty that may affect the competitiveness of the sector this paper focuses on understanding the risk associated with the future price of european union emission trading system allowances this is done by modelling a stochastic process with parameters calculated using market prices risks are valued with the expected shortfall and value at risk measures over the lifetime of a plant using montecarlo simulation two well known risk measures in financial economics risks are greater and returns lower in the wet process than in the dry one the paper includes a sensitivity analysis of the effects arising from changes in the prices of allowances as a consequence of a hypothetical drastic change in climate policy including jumps withdrawing of free emission allowances and changes in future carbon prices in this case impacts will also be higher in the wet process finally the paper illustrates the optimal conditions for retrofitting a wet cement plant to convert it to a dry cement plant under uncertainty of the price of carbon allowances this is done using real options analysis the trigger price is 114 million for a plant with remaining lifetime of 25 years and a production of one million tonnes

computing power indices for large voting games voting power indices enable the analysis of the distribution of power in a legislature or voting body in which different members have different numbers of votes although this approach to the measurement of power has been known for a long time its application to large games has been limited by the difficulty of computing these indices this paper presents a new method for computing power indices that combines exact methods with an approximate method due to owen this method is of most utility in situations where the number of players is large and the voting weights are concentrated in the hands of a small number of members

value at risk estimations of energy commodities via long memory asymmetry and fat tailed garch models abstract in this paper we evaluate the value at risk var and the expected shortfalls for some major crude oil and gas commodities for both short and long trading positions classical var estimations as well as riskmetrics and other extensions to cases considering for long range memory asymmetry and fat tail in energy markets volatility were conducted we computed the var for three arch garch type models including figarch fiaparch and hygarch these models were estimated in the presence of three alternative innovation s distributions normal student and skewed student our results show that considering for long range memory fat tails and asymmetry performs better in predicting a one day ahead var for both short and long trading positions moreover the fiaparch model outperforms the other models in the var s prediction these results present several potential implications for energy markets risk quantifications and hedging strategies

dynamic hedge ratio estimations in the european union emissions offset credit market following the introduction of the european union emissions trading scheme in 2005 the size of the carbon market has been growing at a tremendous rate to meet the emissions reduction targets the regulated parties can choose to participate in the allowance based market by purchasing the spot allowances commencing in 2008 the regulated parties are also allowed to purchase the offset credits to meet their allowance limit given the risky nature of the offset credits this paper evaluates the hedging performance of dynamic hedge ratios for the carbon offset credit certified emissions reduction market in the eu ets to the best of our knowledge this paper is the first attempt to evaluate the hedging performance of dynamic and constant hedge ratios in the carbon offset credit market based on the variance reduction and utility improvement measurements the findings generally support the use of static hedge ratios over the more sophisticated dynamic hedge ratios

the wage curve a review in the wage qurve david g blancflower and andrew j oswald argue that there is a fundamental negative relation between wages and the unemployment rate in a worker s local labor market blancflower and oswald use large scale micro data sets to estimate this relation for the united states britain and 10 other countries i review their empirical methods and findings and provide some further evidence on the nature of the wage curve relationship in the united states i conclude that there is a strong statistical correlation between rates of pay and local unemployment although the interpretation of this correlation remains unresolved this abstract was borrowed from another version of this item

non cooperative bargaining theory an introduction the paper provides an informal introduction to some of the main themes of the recent literature on non cooperative or sequential bargaining models it focuses in particular on the relationship between the new approach and the traditional axiomatic approach exemplified by nash bargaining theory it illustrates the new insights offered by the non cooperative approach by reference to a detailed analysis of the manner in which the presence of an outside option available to one of the parties will affect the negotiated outcome finally the difficulties which arise in extending this analysis to two person bargaining with incomplete information and to n person bargaining are discussed this is a revised version of the fourth review of economic studies lecture presented in april 1985 at the joint meeting of the association of university teachers of economics and the royal economic society held in oxford the choice of lecturer is made by a panel whose members are currently professors hahn mirrlees and nobay and the paper is refereed in the usual way this paper aims to provide an informal and elementary introduction to an approach to bargaining which has received a great deal of attention over the past few years the approach involves writing down some particular sequence of moves offers and replies to be made over time in the course of negotiations and then looking for a non cooperative equilibrium in the game thus specified in practice a perfect equilibrium or in games of incomplete information a sequential equilibrium while the approach appears at first sight to be very different in spirit from the traditional axiomatic approach in which a bargaining solution is specified by appealing to a number of general requirements which are deemed appropriate on the basis of some a priori considerations the two approaches are in fact complementary while the

downside risk and the energy hedger s horizon abstract in this paper we explore the impact of investor time horizon on an optimal downside hedged energy portfolio the optimal heating oil hedge ratio is first calculated for a variety of downside risk objective functions at different time horizons using the wavelet transform next associated hedging effectiveness is contrasted for a range of risk metrics with all metrics showing increasing hedging effectiveness at longer horizons moreover decreased hedging effectiveness is demonstrated for increased levels of uncertainty at higher confidence intervals while small differences in effectiveness are found across the different hedging objectives time horizon effects are found to dominate confirming the importance of the hedging horizon the findings suggest that while downside risk measures are useful in determining an optimal futures hedge encompassing negative returns hedging horizon and confidence intervals should also be given careful consideration by the energy hedger

choosing how to choose self stable majority rules and constitutions constitutional arrangements affect the decisions made by a society we study how this effect leads to preferences of citizens over constitutions and ultimately how this has a feedback that determines which constitutions can survive in a given society constitutions are stylized here to consist of a voting rule for ordinary business and possibly a different voting rule for making changes to the constitution we define an equilibrium notion for constitutions called self stability whereby under the rules of a self stable constitution the society would not vote to change the constitution we argue that only self stable constitutions will endure we prove that self stable constitutions always exist but that most constitutions even very prominent ones may not be self stable for some societies we show that constitutions where the voting rule used to amend the constitution is the same as the voting rule used for ordinary business are dangerously simplistic and there are many societies for which no such constitution is self stable we conclude with a characterization of the set of self stable constitutions that use majority rule for ordinary business

the wage curve revisited estimates from a uk panel abstract panel data from the uk are used to estimate a wage curve allowing simultaneously for time individual and spatial effects thereby correcting for grouped and cross classified data bias estimates of the unemployment elasticity of the wage are volatile and imprecise

job competition and the wage curve longhi s job competition and the wage curve regional studies the wage curve literature consistently finds a negative relationship between regional unemployment rates and regional wages the most widely accepted theoretical explanations interpret the unemployment rate as a measure of job competition this paper proposes new ways of measuring job competition alternative to the unemployment rate and finds that the negative relationship still holds when job competition is measured following the job search literature while for men the wage impact of the theoretically based measures of job competition is rather similar to the wage impact of the unemployment rate for women the difference is substantial longhi s la competition pour l emploi et la courbe des salaires regional studies la documentation sur la courbe des salaires affirme systematiquement que le taux de chomage regional est en correlation faible avec les salaires regionaux les explications theoriques les plus recues considerent le taux de

european monetary policy and the ecb rotation model voting power of the core versus the periphery this paper analyses the voting power of individual members of the ecb governing council and in particular that of the executive board in the light of recent information published by the ecb using the randomization scheme based on the multilinear extension of games we modify the standard analysis in three ways first we include heterogeneous preferences of the governing council members second we address the agenda setting power of the ecb president third we take into account the dynamic decision setting we show that the rotation model is able to stabilize the position of the core countries of the euro area

voting and vetoing the consequences of veto power in committees is analyzed using the appro ach of noncooperative bargaining theory it is first shown that in equilibrium nonveto players do not share in the benefits gained by the decision making of the committee that is in every equilibrium outcome of the bargaining game nonveto players earn zero some measures for reducing the excessive power of veto members in committees are analyzed specifically i study the effects of imposing a deadline on negotiations and of expanding the committee by increasing the number of nonveto players quantitative results are given for the case of the un security council

stochastic dominance and risk measure a decision theoretic foundation for var and c var abstract is it possible to obtain an objective and quantifiable measure of risk backed up by choices made by some specific groups of rational investors to answer this question in this paper we establish some behavior foundations for various types of var models including var and conditional var as measures of downside risk in this paper we will establish some logical connections among vars conditional var stochastic dominance and utility maximization though supported to some extents with unanimous choices by some specific groups of expected or non expected utility investors vars as profiles of risk measures at various levels of risk tolerance are not quantifiable they can only provide partial and incomplete risk assessments for risky prospects we also include in our discussion the relevant vars and several alternative risk measures for investors these alternatives use somewhat weaker assumptions about risk averse behavior by incorporating a mean preserving spread for this latter group of investors we provide arguments for and against the standard deviation versus var and conditional vars as objective and quantifiable measures of risk in the context of portfolio choice

markov switching garch models for bayesian hedging on energy futures markets abstract effective hedging strategies on oil spot and future markets are relevant in reducing price volatility for investors energy traders and companies operating in the oil markets a new bayesian multi chain markov switching garch model for dynamic hedging in energy futures markets is developed it builds on the construction of a system of simultaneous equations for the return dynamics on the hedged portfolio and the futures the implication of our model for portfolios allocation and energy trading are manyfold first our formulation allows for an easy identification of the different states of the discrete processes as volatility regimes secondly the use of regime switching models with multiple chains allows for an effective way to reduce risk furthermore correlated chains are more flexible than single chain models since they account for co movement in the volatility regimes of different markets thus they should be preferred in turbulent periods e g financial crisis finally the combination of the expected utility framework with the regime switching structure allows us to define a robust minimum variance hedging strategy changes in the optimal hedging strategies before and after the financial crisis are evidenced when the proposed robust hedging strategy is applied to crude oil spot and futures markets it is therefore recommended that many and different models should be used in place of a single one in energy risk hedging since they could perform differently in various phases of the market

causes of the eu ets price drop recession cdm renewable policies or a bit of everything new evidence the price of eu allowances euas in the eu emissions trading scheme eu ets fell from almost 30 tco2 in mid 2008 to less than 5 tco2 in mid 2013 the sharp and persistent price decline has sparked intense debates both in academia and among policy makers about the decisive allowance price drivers in this paper we examine whether and to what extent the eua price drop can be justified by three commonly identified explanatory factors the economic recession renewable policies and the use of international credits capitalizing on marginal abatement cost theory and a broadly extended data set we find that only variations in economic activity and the growth of wind and solar electricity production are robustly explaining eua price dynamics contrary to simulation based analyses our results point to moderate interaction effects between the overlapping eu ets and renewable policies the bottom line however is that 90 of the variations of eua price changes remains unexplained by the abatement related fundamentals together our findings do not support the widely held view that negative demand shocks are the main cause of the weak carbon price signal in view of the new evidence we evaluate the eu ets reform options which are currently discussed

the de merits of minimum variance hedging application to the crack spread we study the empirical performance of the classical minimum variance hedging strategy comparing several econometric models for estimating hedge ratios of crude oil gasoline and heating oil crack spreads given the great variability and large jumps in both spot and futures prices considerable care is required when processing the relevant data and accounting for the costs of maintaining and re balancing the hedge position we find that the variance reduction produced by all models is statistically and economically indistinguishable from the one for one naive hedge however minimum variance hedging models especially those based on garch generate much greater margin and transaction costs than the naive hedge therefore we encourage hedgers to use a naive hedging strategy on the crack spread bundles now offered by the exchange this strategy is the cheapest and easiest to implement our conclusion contradicts the majority of the existing literature which favours the implementation of garch based hedging strategies

the high politics of imf lending analysts have long suspected that politics affects the lending patterns of the international monetary fund imf but none have adequately specified or systematically tested competing explanations this paper develops a political explanation of imf lending and tests it statistically on the developing countries between 1985 and 1994 it finds that political realignment toward the united states the largest power in the imf increases a country s probability of receiving an imf loan a country s static political alignment position has no significant impact during this period suggesting that these processes are best modeled dynamically an analysis of two subsamples rejects the hypothesis that the imf has become less politicized since the end of the cold war and suggests that the influence of politics has actually increased since 1990 the behavior of multilateral organizations is still driven by the political interests of their more powerful member states

a model of the wage curve abstract this paper uses a simple dynamic efficiency wage model of phelps 1994 phelps and hoon 1992 to explain the wage curve of blanchflower and oswald 1994 we derive a theoretical elasticity of wages with respect to employment which depends on only one parameter this invariance may go part of the way to explaining why blanchflower and oswald found wage curve estimates that were so similar across countries

a markov regime switching approach for hedging energy commodities abstract this paper estimates constant and dynamic hedge ratios in the new york mercantile exchange oil futures markets and examines their hedging performance we also introduce a markov regime switching vector error correction model with garch error structure this specification links the concept of disequilibrium with that of uncertainty as measured by the conditional second moments across high and low volatility regimes overall in and out of sample tests indicate that state dependent hedge ratios are able to provide significant reduction in portfolio risk

unconditional return disturbances a non parametric simulation approach abstract simulation methods are extensively used in asset pricing and risk management the most popular of these simulation approaches the monte carlo requires model selection and parameter estimation in addition these approaches can be extremely computer intensive historical simulation has been proposed as a non parametric alternative to monte carlo this approach is limited to the historical data available in this paper we propose an alternative historical simulation approach given a historical set of data we define a set of standardized disturbances and we generate alternative price paths by perturbing the first two moments of the original path or by reshuffling the disturbances this approach is either totally non parametric when constant volatility is assumed or semi parametric in presence of garch 1 1 volatility without a loss in accuracy it is shown to be much more powerful in terms of computer efficiency than the monte carlo approach it is also extremely simple to implement and can be an effective tool for the valuation of financial assets we apply this approach to simulate pay off values of options on the s p 500 stock index for the period 1982 2003 to verify that this technique works the common back testing approach was used the estimated values are insignificantly different from the actual s p 500 options payoff values for the observed period

on the weights of nations assigning voting weights in a heterogeneous union we study indirect democracy in which countries states or districts each elect a representative who later votes at a union level on their behalf we show that the voting rule that maximizes the total expected utility of all agents in the union involves assigning a weight to each district s vote and then sticking with the status quo unless at least a threshold of weighted votes is cast for change we analyze how the weights relate to the population size of a country and the correlation structure of agents preferences and then we compare the voting weights in the council of the european union under the nice treaty and the recently proposed constitution

optimal hedging in the us natural gas market the effect of maturity and cointegration abstract we use the us natural gas market as the rich experimental context to test multiple features of hedging performances first we compare the hedging effectiveness of a single futures contract i e henry hub used for hedging six different physical price positions second we examine the performance of hedging when one uses a futures contract with time to maturity beyond the hedging horizon i e a non matching hedging strategy finally we quantify the effect of accounting for cointegration and also the time varying volatility in the calculation of optimal hedge ratios as a robustness check we conduct our analysis using both ex ante out of sample and ex post in sample methods our findings suggest that using longer maturity contracts may improve the hedging effectiveness we also find that accounting for cointegration and time varying prices has minimal effect on the hedge ratio and hedging effectiveness for almost all physical prices our findings can inform businesses exposed to commodity price risks in on making better risk management decisions

quorum and turnout in referenda we analyze the effect of turnout requirements in referenda in the context of a group turnout model we show that a participation quorum requirement may reduce the turnout so severely that it generates a quorum paradox in equilibrium the expected turnout exceeds the participation quorum only if this requirement is not imposed furthermore a participation quorum does not necessarily imply a bias for the status quo we also show that in order to induce a given expected turnout and avoid the quorum paradox the quorum should be set at a level that is lower than half the target finally we argue that a super majority requirement to overturn the status quo is never equivalent to a participation quorum jel d72

a regime switching approach for hedging tanker shipping freight rates tanker shipping is the primary means for the transportation of petroleum and petroleum products around the world and thus plays a crucial role in the energy supply chain however the high volatility of tanker freight rates has been a major concern for market participants and led to the development of the tanker freight derivatives in the form of forward freight agreements ffas the aim of this paper is to investigate the performance of these instruments in managing tanker freight rate risk using a data set for six major tanker routes covering the period between 2005 and 2013 we examine the effectiveness of alternative hedging methods including a bivariate markov regime switching garch model in hedging tanker freight rates the regime switching garch specification links the concept of equilibrium freight rate determination underlying different market conditions and the dynamics of the conditional second moments across high and low volatility regimes overall we find evidence supporting the argument that the tanker freight market is characterized by different regimes however while the use of a regime switching model allows for a significant improvement in the performance of the hedge in sample out of sample results are mixed

modeling and forecasting the volatility of carbon dioxide emission allowance prices a review and comparison of modern volatility models abstract the launch of the markets for carbon dioxide emission allowances was guided by the aim to use the supposedly efficient price formation mechanism of an organized exchange to optimally allocate a certain quantity of emissions among potential polluters while this introduction of a centralized trading arrangement should have helped to achieve required emission reductions with a minimum of economic losses from the viewpoint of market participants it has raised concerns about appropriate risk management provisions to cope with the fluctuations of time varying allowance prices the present review provides an overview over state of the art models for price volatility expanding the scope from relatively simple garch type models to models with long term dependence and regime switches including the relatively recent class of so called multifractal models we provide a comparative application of these models to carbon dioxide emission allowance prices from the european union emission trading scheme and evaluate their performance with up to date model comparison tests based on out of sample forecasts of future volatility and value at risk

eua and scer phase ii price drivers unveiling the reasons for the existence of the eua scer spread abstract this article studies the price relationships between eu emissions allowances euas valid under the eu emissions trading scheme eu ets and secondary certified emissions reductions scers established from primary cers generated through the kyoto protocol s clean development mechanism cdm given the price differences between euas and scers financial and industrial operators may benefit from arbitrage strategies by buying scers and selling euas i e selling the eua scer spread to cover their compliance position as industrial operators are allowed to use scers towards compliance with their emissions cap within the european system up to 13 4 our central results show that the spread is mainly driven by eua prices and market microstructure variables and less importantly as we would expect by emissions related fundamental drivers this might be justified by the fact that the eu ets remains the greatest source of cer demand to date

hedging emerging market stock prices with oil gold vix and bonds a comparison between dcc adcc and go garch while much research uses multivariate garch to model volatility dynamics and risk measures one particular type of multivariate garch model go garch has been underutilized this paper uses dcc adcc and go garch to model volatilities and conditional correlations between emerging market stock prices oil prices vix gold prices and bond prices a rolling window analysis is used to construct out of sample one step ahead forecasts of dynamic conditional correlations and optimal hedge ratios in most of the situations we study oil is the best asset to hedge emerging market stock prices hedge ratios from the adcc model are preferred most effective for hedging emerging market stock prices with oil vix or bonds hedge ratios estimated from the go garch are most effective for hedging emerging market stock prices with gold in some instances these results are reasonably robust to choice of model refits forecast length and distributional assumptions

competition between employed and unemployed job applicants swedish evidence we use the swedish applicant database to investigate empirically whether being unemployed per se reduces the probability of getting contacted by a firm all searchers looking for a new job are invited to submit their personal details to this database over the internet since we have access to exactly the same information as the firms we can minimize the problems associated with unobserved heterogeneity our results show that an unemployed applicant faces a lower contact probability than an otherwise identical employed applicant thus supporting the notion that firms view employment status as a signal of productivity

risk dependence of covar and structural change between oil prices and exchange rates a time varying copula model abstract this paper analyses the dynamic dependence between wti crude oil and the exchange rates of the united states and china taking structural changes of dependence into account by using six time varying copula models upside and downside conditional values at risk covars are introduced specifically to measure the upward and downward risk dependences between oil prices and exchange rates the findings indicate a structural break point of dependence exists between daily or weekly crude oil and the us dollar index the dependence between crude oil and the rmb exchange rate is faintly positive with lower tail dependence while the dependence between crude oil and the us dollar index is significantly negative with lower upper and upper lower tail dependence finally the covars results show that there is significant risk spillover from crude oil to chinese and the us exchange rate markets furthermore the spillover effect is significantly asymmetry in chinese exchange rate market in response to rising and falling oil returns while the asymmetry of spillover effect for the us dollar index is not significant

the minimum cvar strategy with semi parametric estimation in carbon market hedging problems abstract effective hedging strategies are important in reducing price volatility risk for business investors and companies participating into carbon markets in this paper we investigate the risk triggered by price fluctuation of european union allowance eua a semi parametric approach with cornish fisher expansion which approximates the quantile using the higher moments of the distribution is provided to estimate hedging ratios using cvar as risk objective function the approach can successfully capture the features of higher moments with the heavy tailed and higher kurtosis distribution of the eua returns which tends to be neglected the hedging performances of minimum cvar model we proposed and the conventional minimum variance model are evaluated and compared our empirical results show that minimum cvar hedging strategy generally outperforms the other in sample using all the effectiveness criteria while it is not consistent out of sample the proposed semi parametric minimum cvar strategy with cornish fisher expansion is advisable in carbon market hedging problems

designing the voting system for the council of the european union this paper examines the system of qualified majority voting used by the council of the european union from the perspective of enlargement of the union it uses an approach based on power indices due to penrose 1946 banzhaf 1965 and coleman 1971 to make two analyses 1 the question of the voting power of member countries from the point of view of fairness and 2 the question of how the threshold number of votes required for qmv should be determined it studies two scenarios for change from 2005 onwards envisaged by the nice treaty 1 no enlargement the eu comprising 15 member countries and 2 full enlargement to 27 members by the accession of all the present twelve candidates the proposal is made that fair weights be determined algorithmically as a technical or routine matter as the membership changes the analysis of how the threshold affects power shows the trade offs that countries face between their blocking power and the power of the council to act the main findings are 1 that the weights laid down in the nice treaty are close to being fair the only significant discrepancies being the under representation of germany and romania and the over representation of spain and poland 2 the threshold required for a decision is set too high for the council to be an effective decision making body

energy risk management and value at risk modeling abstract the value of energy trades can change over time with market conditions and underlying price variables the rise of competition and deregulation in energy markets has led to relatively free energy markets that are characterized by high price shifts within oil markets the volatile oil price environment after opec agreements in the 1970s requires a risk quantification value at risk has become an essential tool for this end when quantifying market risk there are various methods for calculating value at risk the methods we introduced in this paper are historical simulation arma forecasting and variance covariance based on garch modeling approaches the results show that among various approaches the hsaf methodology presents more efficient results so that if the level of confidence is 99 the value at risk calculated through hsaf methodology is greater than actual price changes in almost 97 6 percent of the forecasting period

hedging strategies in energy markets the case of electricity retailers as market intermediaries electricity retailers buy electricity from the wholesale market or self generate for re sale on the retail market electricity retailers are uncertain about how much electricity their residential customers will use at any time of the day until they actually turn switches on while demand uncertainty is a common feature of all commodity markets retailers generally rely on storage to manage demand uncertainty on electricity markets retailers are exposed to joint quantity and price risk on an hourly basis given the physical singularity of electricity as a commodity in the literature on electricity markets few articles deal on intra day hedging portfolios to manage joint price and quantity risk whereas electricity markets are hourly markets the contributions of the article are twofold first we define through a var and cvar model optimal portfolios for specific hours 3 am 6 am 12 pm based on electricity market data from 2001 to 2011 for the french market we prove that the optimal hedging strategy differs depending on the cluster hour secondly we demonstrate the significantly superior efficiency of intra day hedging portfolios over daily therefore weekly and yearly portfolios over a decade 2001 2011 our results clearly show that the losses of an optimal daily portfolio are at least nine times higher than the losses of optimal intra day portfolios

risk spillovers across the energy and carbon markets and hedging strategies for carbon risk this study examines the risk spillovers between energy futures prices and europe based carbon futures contracts we use a markov regime switching dynamic correlation generalized autoregressive conditional heteroscedasticity ms dcc garch model in order to capture the time variations and structural breaks in the spillovers we further evaluate the optimal weights hedging effectiveness and dynamic hedging strategies for the ms dcc garch model based on both the regime dependent and regime independent optimal hedge ratios we finally complement our analysis by examining the in and out of sample hedging performances for alternative strategies our results mainly show significant volatility and time varying risk transmission from energy markets to carbon market we also find that spot and futures segments of the emission markets exhibit time varying correlations and volatile hedging effectiveness the subsample estimates show significant changes in the hedge effectiveness over the different phases of the european carbon market these results have important investment and policy implications

a noncooperative view of coalition formation and the core a noncooperative implementation of the core is provided for games with transferable utility the implementation obtained here is meant to reflect the standard motivation for the core as closely as possible in the model proposed time is continuous this idealized treatment of time is most amenable for capturing an essential feature of the core there is always time to reject a noncore proposal before it is consumated

risk spillover between energy and agricultural commodity markets a dependence switching covar copula model abstract unlike previous studies we employ a relatively newer modelling technique a time varying copula with a switching dependence to characterise the conditional dependence between energy and agricultural commodity markets in a more realistic way because the dependence may switch between positive and negative correlation regimes over time a dependence switching copula more appropriately and realistically captures a dependence structure than a single copula regime our findings indicate that the lower tail dependence is much stronger in a bearish regime than in a bullish regime highlighting the importance of systematic risk spillovers during extreme downward movements furthermore the significant risk spillovers from energy to agricultural commodities are verified by measuring the conditional value at risk covar and delta covar finally some useful implications are summarized for investors portfolios and risk avoidance

investment under uncertain climate policy a practitioners perspective on carbon risk this paper introduces the concept of payment probability as an important component of carbon risk the financial risk associated with co2 emissions under uncertain climate policy in modeling power plant investment decisions most existing literature uses the expected carbon price e g the price of traded permits or carbon tax as a proxy for carbon risk in contrast this paper identifies expected carbon payment as a more accurate measure of carbon risk as perceived by industry practitioners this measure of carbon risk incorporates both expected price and the probability that this price would actually be faced in the case of a particular investment this concept helps explain both the surge of activity in 2005 2006 and the subsequent decline in interest in coal fired power plant development in the u s the data for this case study comes from an extensive online survey of 700 u s energy professionals completed in 2006 as well as interviews conducted with industry representatives from 2007 to 2009 by analyzing industry views on policy uncertainty and future carbon legislation we gain a better understanding of investor attitudes toward carbon risk this understanding will help policy makers design better incentives for investing in low carbon technologies

on the job search some empirical evidence from britain abstract this paper considers evidence from the labour force survey concerning job search by employed workers the unconditional probability of observing on the job search is decomposed into the product of two constituent probabilities upon which maximum likelihood estimation is performed the analysis facilitates the identification of who searches and whether search takes place in work or from unemployment temporary or part time employment encourages continued search by men but not women skilled workers search more than the unskilled and demonstrate a preference for employed search inter industry wage relativities encourage search on the job job tenure is a significant determinant of the quality of a job match and the subsequent likelihood that on the job search is undertaken employed job seekers adopt search strategies that are more readily integrated into a working environment

deadline effects and inefficient delay in bargaining with endogenous commitment abstract bilateral sequential negotiators delay agreements until a deadline if a player that rejects an offer is subsequently committed not to accept any poorer proposal and if the common discount factor is close enough to one journal of economic literature classification numbers c7 c78 j52

a model for hedging load and price risk in the texas electricity market energy companies with commitments to meet customers daily electricity demands face the problem of hedging load and price risk we propose a joint model for load and price dynamics which is motivated by the goal of facilitating optimal hedging decisions while also intuitively capturing the key features of the electricity market driven by three stochastic factors including the load process our power price model allows for the calculation of closed form pricing formulas for forwards and some options products often used for hedging purposes making use of these results we illustrate in a simple example the hedging benefit of these instruments while also evaluating the performance of the model when fitted to the texas electricity market

a noncooperative theory of legislative coalitions this noncooperative theory is based on a model that incorporates an institutional structure that reflects the sequential process of agenda formation and voting in a legislature that has the task of allocating particularistic benefits among legislative districts the theory is intended to identify the incentives for the formation of proposal coordinating coalitions as a function of characteristics of the political system and the rules that govern agenda formation coalition proposals allocate all the benefits to their districts and whenever the coalition has discipline or controls the chair it will be of minimal winning size when proposals are governed by a closed rule when coalition discipline is absent and the chair is neutral the coalition will be comprised of approximately 70 of the legislature a legislative rule that allows amendments may result in larger coalitions coalition composition is also considered

a utility based approach to energy hedging abstract a key issue in the estimation of energy hedges is the hedgers attitude towards risk which is encapsulated in the form of the hedgers utility function however the literature typically uses only one form of utility function such as the quadratic when estimating hedges this paper addresses this issue by estimating and applying energy market based risk aversion to commonly applied utility functions including log exponential and quadratic and we incorporate these in our hedging frameworks we find significant differences in the optimal hedge strategies based on the utility function chosen

the reservation wage curve evidence from the uk we investigate the relationship between an individuals reservation wage and unemployment in the local area district largely unexplored in the literature this adds to the work which has examined the association between employee wages and unemployment the wage curve

order independent equilibria we study a noncooperative game of coalition formation based on an underlying game in coalitional form we introduce order independent equilibria oie a strategy profile is an oie if for any specification of first movers in the sequential game it remains an equilibrium and leads to the same payoff our results are 1 payoffs in oie that use pure stationary strategies must be in the core of the underlying game in coalitional form 2 if the underlying game has the property that all its subgames have nonempty cores then for each payoff vector there exists an oie with the same payoff journal of economic literature classification numbers c70 c71 c72 c78

labor market slack and the wage curve abstract the unemployment rate might not serve as an accurate measure of labor market slack when analysing countries with large scale labor market programs we replicate and extend the wage curve for east germany the results are in favor of the incorporation of such policy measures

estimating a wage curve for britain 1973 90 following a w phillips s 1958 original work on the united kingdom applied research on unemployment and wages has been dominated by the analysis of highly aggregated time series data sets however it has proved difficult with such methods to uncover statistically reliable models this paper adopts a different approach it uses macroeconomic data on 175 000 british workers from 1973 to 1990 to provide evidence for the existence of a negatively sloped relationship linking the level of pay to the local rate of unemployment the paper casts doubt on standard ideas in macroeconomics regional economics and labor economics copyright 1994 by royal economic society