cointegration in a macroeconomic system abstract this paper represents an exploratory study that investigates the vector autoregressive properties of a time series system containing six main indicators of the austrian economy gross domestic product gdp private consumption investment gdp deflator interest rate wages interest focuses on cointegrating structures in the system i e on linear combinations of some trending variates that generate stationary series johansen s 1987 procedure identifies three relations of this kind it is also tried to give an economic interpretation to these relations more extensively a variety of sensitivity experiments are performed which make somehow original use of the technique of canonical correlations contrary to the sensitivity experiments a critical assessment of the identified structure by medium term forecasting until 1999 sheds considerable doubt on its correctness at most one or two cointegrating relations may help to increase forecasting precision relative to traditional vector autoregression which do not use the idea of cointegration at all on the other hand using all three identified relations seems to impose excess stationarity on the system which is not replicated by actual data behavior

marginal pricing and supplement cost allocation in transmission open access the application of marginal costing to transmission pricing in open access schemes requires the collection of a supplement to finance the transmission systems the paper describes the application of marginal cost based pricing in the chilean power system and the difficulties faced in allocating the supplement among parties involved alternative methods for defining the allocation are formulated generalized generation and load distribution factors for cost allocation are formulated and implemented the methods are applied to allocate payments for transmission services provided by the transmission network and by a distribution company

marketing margins and price uncertainty the case of the u s wheat market this paper seeks to determine the effect of changes in output price risk on marketing margins a theoretical model of price determination in a marketing channel with risk averse firms is developed this model shows that if marketing firms are competitive and decreasingly absolute risk averse then an increase in output price risk should result in higher expected marketing margins empirical evidence from the wheat marketing channel supports the theoretical model increased price variability significantly increases wheat marketing margins for both the farm mill margin and the mill retail margin these results suggest a potential benefit from price stabilization programs

evaluation of alternatives for power system coordination and pooling in a competitive environment the paper defines and classifies essential issues that relate the need for electric power system coordination with the increasing development of competition principles are formulated and a coordination model and a market structure are proposed emphasizing the need for economic dispatch in the wholesale market a detailed comparison is made of the market and pooling implementations developed in argentina and chile countries that have pioneered the creation of competitive markets in the electric energy sector an evaluation of strengths and weaknesses of those two implementations is included

application of games with incomplete information for pricing electricity in deregulated power pools the authors present a game theory approach to the problem of pricing electricity in deregulated marketplaces they assume that an independent operator receives bids by pool participants and defines transactions among participants by looking for the minimum price that satisfies the demand in the pool the competition among pool participants is modeled as a noncooperative game with incomplete information they assume that each pool participant knows its own operation costs but does not know his opponents operation costs the game with incomplete information is transformed into a game with complete but imperfect information and solved using the nash equilibrium idea the approach presented in this paper is geared towards providing support for pricing electricity in deregulated pools

evaluating us state police performance using data envelopment analysis abstract in this paper we evaluate the efficiency of state police services in the continental united states using a multiple stage data envelopment analysis model using multiple inputs and multiple outputs to characterize police service provision technical and scale efficiency are calculated for the 49 continental states given the complex nature of service provision we allow for environmental factors of production and control for these non discretionary inputs our results indicate that most states are technically efficient but nearly half are operating at less than optimal scale size

why has poland avoided the price liberalization trap the case of the hog pork sector price liberalization in the agri food economy in the transition economies is likely to slip into a trap food prices rocket up consumption declines but food supply does not catch up and even contracts however during the transition period following the 1989 price liberalization the polish hog pork sector succeeded in avoiding this trap by conducting market structure and econometric analysis this article looks for the reasons for this success in the polish hog pork sector the restructuring of state owned enterprises and the emergence of private firms introduced an effective price transmission mechanism between the processing retailing and farm levels this mechanism allowed farm supply to respond to changed demand and to take advantage of increased retail prices such a relatively efficient marketing system was made possible by a relatively stable macroeconomic environment and limited government intervention

real interest rates in regional economic blocs this paper investigates the long run relationship of real interest rates within a number of economic blocs such as asia pacific europe north america using cointegration analysis and vector error correction models

competitive bidding as a control problem the dynamics and mechanisms of bidding by electricity generators to supply electricity to a national grid are investigated a mathematical model for the bidding process is developed and the generators are assumed to act rationally according to the maximize expected utility principle the model and system objectives are interpreted as a classical control problem and results simulated and analytical are presented the results show that by introducing multiple bidding rounds convergence to a pareto optimum is possible if a proportional integral control policy is introduced

the farm retail price spread in an imperfectly competitive food industry in a previous article in this journal gardner investigated the effects of three distinct forces affecting food system equilibria shifts in retail demand shifts in farm commodity supply and shifts in marketing input supply he derived comparative static predictions about how the quotient of retail and farm prices the retailfarm price ratio would adjust to changes in each of these exogenous effects the investigation was conducted within a framework that

asymmetry in farm retail price transmission for major dairy products an econometric model is used to estimate the net relationship between changes in the farm level price of milk and changes in the retail prices of four major dairy products fluid milk butter cheese and ice cream results indicate that the farm retail price transmission process in the dairy sector is asymmetric retail dairy product prices adjust more rapidly and more fully to increases in the farm price of milk than to decreases the role in pricing asymmetry of retail demand versus farm supply shifts is tested via a chow type test asymmetry is tested using the houck procedure for estimating nonreversible functions

optimal response of a thermal unit to an electricity spot market this paper addresses the optimal response of a thermal unit to an electricity spot market the objective is to maximize the unit profit from selling both energy and spinning reserve in the spot market the paper proposes a 0 1 mixed integer linear programming approach that allows a rigorous modeling of i nonconvex and nondifferentiable operating costs ii exponential start up costs iii available spinning reserve taking into account ramp rate restrictions and iv minimum up and down time constraints this approach overcomes the modeling limitations of dynamic programming approaches and is computationally efficient results from realistic case studies are reported

transaction analysis in deregulated power systems using game theory the electric power industry is in transition to a deregulated marketplace for power transactions in this environment all power transactions are made based on price rather than cost a regional power pool is noted as the most straightforward path to a deregulated electricity marketplace however many questions remain unanswered regarding the economics of power pool participation in a deregulated energy marketplace participants are interested in maximizing their own profits regardless of the system wide profits it is perceived that competition will reduce the price of electricity for retail customers however the key issue for participants is related with the price definition to remain competitive in this paper the authors use game theory to simulate the decision making process for defining offered prices in a deregulated environment the outcome of this study may be used by power pool coordinators to discourage unfair coalitions a modified ieee 30 bus power system is used as a deregulated power pool to illustrate the main features of the proposed method

rational expectations econometric analysis of changes in regime an investigation of the term structure of interest rates abstract this paper is of interest both for its methodological contribution of new tools for analyzing rational expectations models and for its substantive conclusions concerning the term structure of interest rates during the monetary experiment of october 1979 the paper studies systems subject to changes in regime interpreted here as occasional discrete shifts in the parameters governing the time series behavior of exogenous economic variables the specification is shown to be quite tractable both theoretically and empirically the technique is used to analyze yields on three month treasury bills and ten year treasury bonds during 1962 to 1987 a constant parameter linear model for short term rates is shown to be inconsistent both with the univariate time series properties of short rates and with the observed bivariate relation between long and short rates under the expectations hypothesis of the term structure an alternative nonlinear model that admits the possibility of changes in regime affords a much better description of the univariate process for short rates moreover the cross equation restrictions implied by the expectations hypothesis of the term structure are consistent with the nonlinear specification indeed the residuals of the restricted relation have a standard error of only 0 8 basis points this is a third less than that of a completely unrestricted linear regression of long rates on short rates and compares with an unconditional standard deviation of long rates of 142 basis points i conclude that once the recognition by bond traders of changes in regime is taken into account the expectations hypothesis of the term structure of interest rates holds up fairly well for these data

nodal uniform or zonal pricing distribution of economic surplus competitive markets for electricity determine either a uniform marginal price ump a set of nodal marginal prices nmps or a smaller set of zonal marginal prices zmps in theory the nmp system is best as it correctly accounts for transmission constraints and losses in some versions but critics allege that the large number of prices is confusing since the ump or zmp solution must be adjusted to account for transmission constraints and losses it is reasonable to consider a market design in which actual dispatch corresponds to an nmp model that accounts for losses and if a ump or zmp model is used at all it is only to compute prices for settlements and compensation for constrained on or off generation or load we prove that if used in this way the ump or zmp models a do not affect the total economic surplus b redistribute the surplus among generators and loads at the different nodes and c give perverse incentives for generation expansion we illustrate on a realistic system

nonstationarity of regressors and tests on real interest rate behavior this article reexamines tests on the behavior of real interest rates in light of recent results that indicate that regressors are nonstationary and not strictly exogenous strong rejections of constancy of real interest rates that have been found previously in the literature are confirmed here although there is some evidence here that real rates are negatively correlated with expected inflation this result is not as strong as has been indicated by previous research in addition results that found a significant negative correlation between real rates and nominal rates before 1979 are not supported here although there is evidence for a positive correlation of real and nominal interest rates after 1979

some evidence on the international inequality of real interest rates abstract this paper undertakes econometric tests of the hypothesis that ex ante real interest rates are equal across countries with highly integrated capital markets the issue is of practical importance because the violation of real rate equality is a necessary condition for monetary policy to influence the open economy through the real interest rate channel although an empirical literature concerning real rate equality already exists previous investigators have focused on pre tax real rates this paper contributes to the literature by attempting to incorporate the effects of taxation into the analysis

market plurality and manipulation performance comparison of independent system operators in this paper the authors present three different models that represent the coordinating functions of existing independent system operators isos and discuss their advantages and disadvantages max iso is a centralized operator based on the pool model and min iso is a decentralized operator based on the bilateral model mix iso is positioned in between having multiple power exchanges or bilateral contracts the performance of the different isos is compared by the total social welfare and the vulnerability to market manipulation a numerical example is presented to compare the performance of different isos the max iso is considered to be the most efficient model theoretically but it does not necessarily provide the best market in terms of vulnerability to market manipulation

benefit optimization of centralized and decentralized power systems in a multi utility environment the objective is to examine the theoretical bases for benefit optimization in centralized and decentralized electric power systems in a centralized single control power system cost revenue and profit are used as system performance criteria for benefit optimization and the conditions are compared the results show that conventional cost minimization is not necessarily equivalent to benefit optimization based on other criteria in a decentralized multi utility power system benefit optimization and its allocation are investigated at the unconstrained economic optimum economic optimum with constraints and conditions under which the solution is an economic suboptimum the data from the epri regional systems are used to show practical examples of the benefit allocation with wheeling transactions although some rules are better for society than others there still is not one right answer to determine the rules for benefit optimization

the international linkage of real interest rates the european us connection abstract in this paper we present evidence on several questions regarding the movement in short term real interest rates in eight countries have ex ante real estates in the united states and europe been high during recent years has there been a link between us real rates and those in other countries can this link be quantified the basic finding in this paper is that real rates have climbed dramatically from the 1970s to the 1980s in both the european countries and the united states there is also strong evidence that there is a positive association between movements in us real rates and those in europe however european real rates typically do not move one for one with us real rates still leaving open the possibility that european monetary policy can influence domestic economic activity

marketing margins market power and price uncertainty this paper provides a conceptual and empirical framework for analyzing marketing margins in a noncompetitive food processing industry facing output price uncertainty the framework allows the decomposition of observed margins into components reflecting the marginal cost of the processing industry oligopoly oligopsony price distortions and an output price risk component the empirical procedure is applied to a time series of spreads between wholesale pork prices and farm prices of market hogs the principal finding is that while farm wholesale margins are more consistent with competitive performance now than they were fifteen years ago the output price risk component persisted throughout the sample period

a simulation model for a competitive generation market the simulation of a wholesale electricity market should go beyond a simple optimization based on the operating costs of the generating units a model of a competitive electricity market must consider the market structure the strategy of the market participants and any other factor that lead to prices different from costs this paper presents cosmee a model of a wholesale electricity market based on simple bids that estimates expected bid prices and quantities system hourly prices and generation schedules taking into account the bidding strategies of generators and the structure of the market the model reflects the profit maximizing behavior of the market agents subject to different types of constraints cosmee has been used to simulate a real wholesale market