the demand for lotto the role of conscious selection this article presents estimates of the elasticity of demand for lottery tickets using time series data in which there is variation in the expected value of a lottery ticket induced by rollovers an important feature of our data is that there are far more rollovers than expected given the lottery design we find strong evidence that individuals do not choose their lottery numbers uniformly from a uniform distribution that is conscious selection we use our estimates to derive the inverse supply function for the industry and this enables us to identify the demand elasticity we find the price elasticity to be close to unity which implies that the operator is revenue maximizing which is the regulator s objective

macroeconomic effects of precautionary demand for oil summary we evaluate the macroeconomic effects of shocks specific to the oil market which mainly reflect fluctuations in precautionary demand for oil driven by uncertainty about future supplies a two stage identification procedure is used first daily changes in the futures spot price spread proxy for precautionary demand shocks and the path of oil prices is estimated this information is then exploited to restrict the oil price response in a vector autoregression impulse responses suggest that such shocks reduce output and raise prices historical decomposition shows that they contributed significantly to the us recessions in the 1990s and in the early 2000s but not to the most recent slump copyright 2014 john wiley sons ltd

the stochastic convergence of co2 emissions a long memory approach in response to equity concerns surrounding the spatial distribution of co2 emissions and assumptions of co2 convergence within some climate models this paper examines the convergence of co2 emissions within the oecd over the period 1870 2004 more specifically using the local whittle estimator and its variants we examine whether relative per capita co2 emissions are fractionally integrated that is they are long memory processes which although highly persistant may revert to the mean trend in the long run our results suggest that co2 emissions within 13 out of 18 oecd countries are indeed fractionally integrated implying that they converge over time albeit slowly interestingly though the countries whose emissions are not found to be fractionally integrated are some of the highest polluters within the oecd at least in per capita terms our results have implications both for future studies of co2 convergence and for climate policy

expected utility skewness and the baseball betting market a subjective expected utility model is developed to explain the gambling behaviour of bettors on major league baseball games in the united states betting activity was examined over 15 seasons for the period 1978 1992 the observed overbetting of favourite teams by baseball bettors can be reconciled without abandoning the traditional assumption of risk aversion additionally there is some evidence to suggest that positive skewness has a discernible influence in the decision making process for higher odds contests

the who and why of lottery empirical highlights from the seminal economic literature lotteries operate today in many countries around the world this type of gambling is usually run by governments and is sometimes described as regressive lottery is an unfair bet so explaining the purchase of lottery tickets by risk averse consumers has been a challenge for economic theory lotteries can be analysed from either of two economic perspectives as a source of public revenue or as a consumer commodity in this paper the state of economic research on lotteries is reviewed focusing on its main empirical findings

the ir relevance of real wage rigidity in the new keynesian model with search frictions we explore the role of real wage dynamics in a new keynesian business cycle model with search and matching frictions in the labor market both job creation and destruction are endogenous we show that the model generates counterfactual inflation and labor market dynamics in particular it fails to generate a beveridge curve vacancies and unemployment are positively correlated introducing real wage rigidity leads to a negative correlation and increases the magnitude of labor market flows to more realistic values however inflation dynamics are only weakly affected by real wage rigidity this is because of the presence of labor market frictions which generate long run employment relationships the measure of real marginal cost that is relevant for inflation dynamics via the phillips curve contains a dynamic component that does not necessarily move with real wages

factors influencing the adoption of state lotteries this paper explores the factors influencing the adoption of state lotteries in the united states the conceptual framework utilizes a common utility framework in which a representative legislator maximizes utility derived from the current and expected fiscal position of a state subject to a political constraint the empirical results support the theoretical hypotheses including the finding that changes in the fiscal health of the state the predicted profit potential of a lottery and the political climate of the state all affect the likelihood that a lottery is adopted by introducing a sound conceptual framework using better data than used in previous studies utilizing an appropriate estimation technique and obtaining strong results this study advances our knowledge of why states adopt lotteries

connectedness of economic policy uncertainty and oil price shocks in a time domain perspective abstract in this paper we investigate causality and connectedness between economic policy uncertainty and oil price shocks across time scales by incorporating the wavelet approach into the structural vector autoregression var framework proposed by diebold and yilmaz 2009 2012 2014 we find that crude oil prices behave like receivers of information from economic policy uncertainty regardless of time scale however the causality relationship between economic policy uncertainty and oil price shocks intensifies as time scales increase in addition the connectedness relationship is robust to time scale changes whereas the causal relationship intensifies as time scales increase notably the weight of us economic policy uncertainty increases in the var system as time scales increase in particular we employ the west texas intermediate wti crude oil price as an alternative measure to increase the robustness of our results and identify differences in the var system overall the total connectedness of the wti crude oil price is lower than that of the brent crude oil price regardless of time scale our results provide meaningful information for both investors and policymakers

stochastic divergence or convergence of per capita carbon dioxide emissions re examining the evidence this paper revisits the time series literature on the convergence of per capita carbon dioxide co2 emissions and examines the robustness of previous results using a sample of oecd countries for the period 1950 2002 we employ a battery of stationarity and unit root tests including those that allow for cross sectional dependencies within the panel we also correct for inaccuracies in previous studies that could result in a trend stationary series being labelled as converging even if it were actually diverging from the international average the body of evidence provided by our analysis suggests that per capita co2 emissions have not converged among oecd countries during the period under consideration this finding is of importance to both climate change policy makers and to those who construct climate change models

substitution between games in the uk national lottery virtually all lottery agencies offer a variety of games to suit the tastes of players in an attempt to maximize revenue to the government using the uk national lottery which offers a variety of on line and scratchcard games the extent to which there is substitution or complementarity between games is evaluated employing weekly data from the three uknl lottery games offered over the sample period it is found that own game characteristics have by far the largest influence on sales some evidence is found suggesting that the lotto and scratchcard games are partial substitutes for one another thunderball sales appear independent of the other two games some evidence is also found that the wednesday and saturday drawings of the lotto game are substitutes the overall conclusion is that camelot has successfully designed and marketed three games that each appeal to bettors in different ways thus sales from one game do not seem to seriously cannibalize the sales of the other games with the exceptions no

buying a dream alternative models of demand for lotto existing lotto demand models utilize effective price computed as the face value of a ticket minus the expected value of prize money per ticket as their primary explanatory variable by contrast this article proposes a key role for consumption benefit or fun in the demand for gambling in general and lotto demand in particular it develops an alternative model of lotto demand that focuses on the maximum possible prize when this is tested against the traditional model using data from the u k national lottery we find that jackpot considerations exert an influence over and above that of variations in effective price

the role of inflation target adjustment in stabilization policy we study optimal monetary policy in a new keynesian model in which the monetary authority faces a trade off between inflation and output gap stabilization due to cost push shocks in particular we highlight the role of the inflation target adjustment in stabilization policy by showing that it can mitigate this policy trade off and considerably improve welfare the main findings can be summarized as follows first we find that the welfare cost of a standard taylor rule is non trivial even with optimized policy coefficients second we propose an additional policy tool of a medium run inflation target mrit rule when combined with the standard taylor rule the optimal mrit significantly reduces fluctuations in inflation originating from the cost push shocks and results in a similar level of welfare to that associated with the ramsey optimal policy third the optimal mrit needs to be adjusted in a persistent manner and in the opposite direction to the realization of a cost push shock fourth the welfare implication of the mrit is more pronounced under a flatter phillips curve finally the main findings are relevant to the current economic environment of low inflation rates under a flat phillips curve implying that the monetary authority should increase the inflation target in such an environment

nominal price rigidity money supply endogeneity and business cycles abstract this paper investigates the ability of nominal price rigidity to explain the co movement of inflation with the cyclical component of output observed in the post war u s data a dynamic general equilibrium model is constructed with the introduction of monopolistic competition and nominal price rigidity in a standard real business cycle model allowing for an endogenous money supply rule it is then demonstrated that sticky price models can explain the observed associations between movements in inflation and output much better than flexible price models this result depends little on whether money supply is assumed to be endogenous or not

testing for efficiency in lotto markets state sponsored lotto games because they are pari mutuel and because jackpots with no winner are rolled over into the next drawing present an excellent opportunity to test for market efficiency using data from massachusetts kentucky and ohio we investigate bettors responses and test for weak form efficiency lotto bets do not have positive net expected returns thus weak form efficiency exists to evaluate strong form efficiency we utilize the concept of a rational expectations equilibrium we find that in general lotto bettors decisions to play generate a level of sales that conform to their original forecasts of expected value

evidence of long memory behavior in u s renewable energy consumption this study examines the degrees of time persistence in u s total renewable energy consumption using innovative fractional integration and autoregressive models with monthly data from 1981 1 to 2010 10 the results indicate that renewable energy consumption is better explained in terms of a long memory model that incorporates persistence components and seasonality the degree of integration is above 0 5 but significantly below 1 0 suggesting nonstationarity with mean reverting behavior the presence of long memory behavior persistence in renewable energy consumption suggests that random shocks may very well move renewable energy consumption from pre determined target levels for a period of time

real wage rigidities and the new keynesian model most central banks perceive a trade off between stabilizing inflation and stabilizing the gap between output and desired output however the standard new keynesian framework implies no such trade off in that framework stabilizing inflation is equivalent to stabilizing the welfare relevant output gap in this paper we argue that this property of the new keynesian framework which we call the divine coincidence is due to a special feature of the model the absence of nontrivial real imperfections we focus on one such real imperfection namely real wage rigidities when the baseline new keynesian model is extended to allow for real wage rigidities the divine coincidence disappears and central banks indeed face a trade off between stabilizing inflation and stabilizing the welfare relevant output gap we show that not only does the extended model have more realistic normative implications but it also has appealing positive properties in particular it provides a natural interpretation for the dynamic inflation unemployment relation found in the data

the peculiar scale economies of lotto the best selling lottery game in the united states is lotto a parimutuel game of long odds and large jackpots unlike in the other popular lottery games numbers and instant there is a strong tendency for per capita lotto sales to increase with the size of the population base the fact that the jackpot also tends to increase with population size is not a complete explanation since the probability of winning tends to be inversely proportional to state population our explanation for why the games are more successful in large states is that players tend to judge the likelihood of winning based on the frequency with which someone wins then a larger state can offer a game at longer odds but the same perceived probability of winning as a smaller state this abstract was borrowed from another version of this item

models of energy use putty putty versus putty clay energy use is inelastic in time series data but elastic in international cross section data two models of energy use reproduce these elasticities a putty putty model with adjustment costs developed by pindyck and rotemberg 1983 and a putty clay model in the pindyck rotemberg model capital and energy are highly complementary in both the short run and the long run in the putty clay model capital and energy are complementary in the short run but substitutable in the long run we highlight the differences in the cross section implications of the models by considering the effect of an energy tax on output in both models in the putty putty model an energy tax that doubles the price of energy leads to a fall in output in the long run of 33 in contrast the same tax in the putty clay model leads to a fall in output of only 5 3

the representative bettor bet size and prospect theory abstract models of representative bettors have ignored the decision on the size of bet that a gambler takes by modelling bet size the favourite longshot bias observed in many pari mutuel betting markets is shown to be consistent with both i a representative bettor taking decisions according to prospect theory based on standard shaped value and weighting functions and ii the bettor simply being risk loving for gains and risk averse for losses

solution and estimation of re macromodels with optimal policy macro models of monetary policy typically involve forward looking behavior except in rare circumstances we have to apply some numerical method to find the optimal policy and the rational expectations equilibrium this paper summarizes a few useful methods and shows how they can be combined with a kalman filter to estimate the deep model parameters with maximum likelihood simulations of a macro model with staggered price setting interest rate elastic output and optimal monetary policy illustrate the properties of this estimation approach

convergence in carbon dioxide emissions among industrialised countries revisited this paper examines the existence of stochastic and deterministic convergence of carbon dioxide co2 emissions in 23 countries over the period 1960 2002 for that purpose we conduct unit root testing by employing the recently developed panel stationarity test of carrion i silvestre et al carrion i silvestre j l del barrio castro t lopez bazo e 2005 breaking the panels an application to the gdp per capita econometrics journal 8 159 175 which assumes a highly flexible trend function by incorporating an unknown number of structural breaks we accommodate general forms of cross sectional dependence as well as control for finite sample bias through bootstrap methods overall our analysis provides strong evidence supporting both stochastic and deterministic convergence in co2 emissions thus confirming strazicich and list strazicich m c list j a 2003 are co2 emission levels converging among industrial countries environmental and resource economics 24 263 271 and westerlund and basher westerlund j basher s a 2007 testing for convergence in carbon dioxide emissions using a century of panel data environmental and resource economics forthcoming findings of convergence

the british gambler s fallacy people facing choices under uncertainty and gamblers in particular are often subject to statistical fallacies this paper explores the hypothesis that if lotto players were subject to the gambler s fallacy predictable fluctuations in the number of jackpots would occur evidence based on a poisson regression model in which the number of winning bets is conditional on the history of draws indicates that number selection in the uk is only marginally affected by the history of draws

forecasting oil prices high frequency financial data are indeed useful abstract the paper examines the importance of combining high frequency financial information along with the oil market fundamentals in order to gain incremental forecasting accuracy for oil prices inspired by french et al 1987 and bollerslev et al 1988 who maintain that future asset returns are also influenced by past volatility we use daily volatilities and returns from financial and commodity markets to generate real out of sample forecasts for the monthly oil futures prices our results convincingly show that although the oil market fundamentals are useful for long run forecasting horizons the combination of the latter with high frequency financial data significantly improve oil price forecasts by reducing the rmse of the no change forecast by approximately 68 results are even more impressive during the oil price collapse period of 2014 15 these findings suggest that we cannot ignore the information extracted from the financial markets when forecasting oil prices our results are both statistically and economically significant as suggested by several robustness tests

lottery pricing and price elasticity dispersion in the uk and canada abstractwe estimate effective price elasticities for different quantiles of the demand distribution of the uk national lottery and the canadian lotto 649 we show that price elasticities vary significantly from draw to draw and have a tendency to increase with lottery participation and jackpot size our findings indicate that setting lottery rules on the basis of mean effective price elasticities should be faced with caution because expected profits are negatively related to the evident variation of elasticities among lottery draws we also simulate alternative active rollover distributions and show that limiting the rollover accumulation by withholding portions and ploughing them back in future nonrollover draws is potentially profitable

speed limit policies the output gap and optimal monetary policy in a standard new keynesian model a myopic central bank concerned with stabilizing inflation and changes in the output gap will implement a policy under discretion that replicates the optimal timeless perspective precommitment policy by stabilizing output gap changes the central bank imparts inertia into output and inflation that is absent under pure discretion even a fully optimizing i e non myopic central bank operating in a discretionary policy environment achieves better social outcomes if it focuses on inflation and changes in the output gap than are achieved under inflation targeting this abstract was borrowed from another version of this item

an alternative reference scenario for global co2 emissions from fuel consumption an arfima approach abstract in this note we establish an alternative reference scenario based on an arfima model estimated using global co2 emissions from 1750 to 2013 these new reference forecasts are free from additional assumptions on demographic and economic variables often used in most reference forecasts instead we only rely on the properties of the underlying stochastic process for global co2 emissions that are in this sense closer to fundamentals our reference forecasts are clearly below the levels proposed by other reference scenarios available in the literature this is important as it suggests that the ongoing policy goals are actually easier to reach than what is implied by the standard reference scenarios having lower and more realistic reference emissions projections gives a truer assessment of the policy efforts that are needed and highlights the lower costs involved in mitigation efforts thereby maximizing the likelihood of more widespread environmental policy efforts

long memory and disaggregated energy consumption evidence from fossils coal and electricity retail in the u s abstract in this paper the long memory properties of disaggregated fossils coal and electricity retail consumption in the u s over the 1989 2009 period are examined the presence of long memory is related to autocorrelation persistence of each series our results show that there is heterogeneity in the order of integration between these types of energy consumption and for the different sectors employed which is affected by the inclusion of a break event the order of integration was generally higher for the case of a break in the intercept than in the slope with the latter being more plausible for all series

inflation stabilization and welfare the case of a distorted steady state this paper considers the appropriate stabilization objectives for monetary policy in a microfounded model with staggered price setting rotemberg and woodford 1997 and woodford 2002 have shown that under certain conditions a local approximation to the expected utility of the representative household in a model of this kind is related inversely to the expected discounted value of a conventional quadratic loss function in which each period s loss is a weighted average of squared deviations of inflation and an output gap measure from their optimal values zero however those derivations rely on an assumption of the existence of an output or employment subsidy that offsets the distortion due to the market power of monopolistically competitive price setters so that the steady state under a zero inflation policy involves an efficient level of output here we show how to dispense with this unappealing assumption so that a valid linear quadratic approximation to the optimal policy problem is possible even when the steady state is distorted to an arbitrary extent allowing for tax distortions as well as market power and when as a consequence it is necessary to take account of the effects of stabilization policy on the average level of output we again obtain a welfare theoretic loss function that involves both inflation and an appropriately defined output gap though the degree of distortion of the steady state affects both the weights on the two stabilization objectives and the definition of the welfare relevant output gap in the light of these results we reconsider the conditions under which complete price stability is optimal and find that they are more restrictive in the case of a distorted steady state we also consider the conditions under which pure randomization of monetary policy can be welfare improving and find that this is possible in the case of a sufficiently distorted steady state though the parameter values required are probably not empirically realistic

the welfare effects of lotto evidence from the uk abstract this paper estimates the demand for lottery tickets using pooled cross section data that contain individual incomes and extensive information about characteristics one of the cross sections corresponded to a draw which was a double rollover the jackpot was enhanced by adding the two previous draws jackpots which had not been won together these datasets provide sufficient observations facing different prices to allow us to estimate the price elasticity as well as the income elasticity of demand we estimate tobit and other specifications and use the estimates to evaluate the welfare effects arising from the introduction of the lottery

commodity price volatility with endogenous natural resources abstract natural resource reserves are exogenous in models of small commodity exporters changes in the stock of reserves play no role in the macroeconomy including in business cycle volatility trade dynamics or exchange rate volatility we consider richer supply dynamics and model exploration and depletion we show that an endogenous supply of reserves is important for capturing the stylised facts associated with commodity price shocks including a commodity currency the crowding out of non commodity activity dutch disease and a volatile business cycle we also consider how exploration and depletion affect the ranking of optimal monetary and taxation policies when natural resource reserves are held fixed monetary policy is an efficient tool for stabilising the effects of commodity price shocks however when exploration and depletion are accounted for using interest rates to stabilise the effects of commodity price changes becomes inefficient using taxes on the resource sector specifically an ad valorem royalty remains efficient

have air pollutant emissions converged among u s regions evidence from unit root tests previous studies of income distribution have found evidence indicating that incomes across u s regions have converged supporting the prediction of the neoclassical growth model a potential shortcoming in these studies is that only one measure of well being is considered a measure of wealth linked to incomes or production this paper examines whether income convergence was accompanied by air pollutant emission convergence results from unit root tests provide some evidence that indicators of environmental quality have converged across u s regions during the 1929 1994 period

oil price shocks and chinese banking performance do country risks matter abstract this paper contributes to the existing literature by investigating the impacts of oil prices on bank performance through a broad array of camel capital adequacy asset quality management earnings and liquidity indicators in china over the period 2000 2014 to gain further insights into this issue we also discuss whether the correlations change with different dimensions of country risk i e economic financial and political which extant studies ignored the results reveal that oil prices have a significant impact on banking performance as their increase triggers a reduction in banking performance in terms of capitalization management efficiency earning power and liquidity however these adverse effects are mitigated by country stability especially economic stability and political stability these results are important for policy makers who should be cautious when formulating a strategy for macroeconomic stability from the managerial perspective bank managers should consider establishing early warning and response mechanisms on the back of oil price shocks in order to operate under better performance

designing a simple loss function for central banks does a dual mandate make sense yes it makes a lot of sense this paper studies how to design simple loss functions for central banks as parsimonious approximations to social welfare we show both analytically and quantitatively that simple loss functions should feature a high weight on measures of economic activity sometimes even larger than the weight on inflation two main factors drive our result first stabilising economic activity also stabilises other welfare relevant variables second the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand the result holds up in the presence of measurement errors with large shocks that generate a trade o between stabilising inflation and resource utilisation and also when imposing a moderate degree of interest rate volatility

dynamic spillovers of oil price shocks and economic policy uncertainty this study examines the dynamic relationship between changes in oil prices and the economic policy uncertainty index for a sample of both net oil exporting and net oil importing countries over the period 1997 01 2013 06 to achieve that an extension of the diebold and yilmaz 2009 2012 dynamic spillover index based on structural decomposition is employed the results reveal that economic policy uncertainty oil price shocks responds negatively to aggregate demand oil price shocks economic policy uncertainty shocks furthermore during the great recession of 2007 2009 total spillovers increase considerably reaching unprecedented heights moreover in net terms economic policy uncertainty becomes the dominant transmitter of shocks between 1997 and 2009 while in the post 2009 period there is a significant role for supply side and oil specific demand shocks as net transmitters of spillover effects these results are important for policy makers as well as investors interested in the oil market

oil price shocks and policy uncertainty new evidence on the effects of us and non us oil production important interaction has been established for us economic policy uncertainty with a number of economic and financial variables including oil prices this paper examines the dynamic effects of us and non us oil production shocks on economic policy uncertainty using a structural var model such an examination is motivated by the substantial increases in us oil production in recent years with implications for us political and economic security positive innovations in us oil production are associated with decreases in us economic policy uncertainty the economic forecast interquartile ranges about the us cpi and about federal state local government expenditures are particularly sensitive to innovations in us oil supply shocks shocks to us oil supply disruption causes rises in the cpi forecast uncertainty and accounts for 21 of the overall variation of the cpi forecaster disagreement dis aggregation of oil production shocks into us and non us oil production yields novel results oil supply shocks identified by us and non us origins explain as much of the variation in economic policy uncertainty as structural shocks on the demand side of the oil market

oil and the macroeconomy since the 1970s economists have long been intrigued by empirical evidence that suggests that oil price shocks may be closely related to macroeconomic performance this interest dates back to the 1970s the 1970s were a period of growing dependence on imported oil unprecedented disruptions in the global oil market and poor macroeconomic performance in the united states thus it was natural to suspect a causal relationship from oil prices to u s macroeconomic aggregates since then a large body of work has accumulated that purports to establish this link on theoretical grounds and to provide empirical evidence in its support we do not attempt a comprehensive survey of this literature but rather provide an idiosyncratic synthesis of what we view as the key issues in this debate and the insights gained over the last 30 years the timing seems right for such an account although the experience of the 1970s continues to play an important role in discussions of the link between oil and the macroeconomy there have been a number of new oil price shocks since the 1970s notably the 1986 collapse of oil prices and the 2000 boom in oil prices as well as the oil price increases associated with the 1990 1991 gulf war and the 2003 iraq war given this richer case history we are arguably in a better position than two decades ago to distinguish the idiosyncratic features of each oil crisis from the systematic effects increases in oil prices have been held responsible for recessions periods of excessive inflation reduced productivity and lower economic growth in this paper we review the arguments supporting such views first we highlight some of the conceptual difficulties in assigning a central role to oil price shocks in explaining

oil prices monetary policy and counterfactual experiments recessions are associated with both rising oil prices and increases in the federal funds rate are recessions caused by the spikes in oil prices or by the sharp tightening of monetary policy this paper discusses the difficulties in disentangling these two effects

lotto nothing the budgetary impact of state lotteries lottery revenues are often touted as an independent revenue source for states using 32 years of state financial data the fallacy of such thinking is demonstrated being the first to control for the self selection of being a lottery state it is found that overall tax revenues decline with increased lottery sales moreover it is discovered that this decline is driven by a decrease in revenues from general sales and excise taxes which is only partially offset by increases in income tax receipts such findings are attributed to a combination of behavioural and political responses following the lottery s implementation

long memory in us disaggregated petroleum consumption evidence from univariate and multivariate lm tests for fractional integration previous studies that have tested for a unit root in aggregate energy consumption have potentially reached misleading conclusions because they fail to allow for the possibility that energy consumption might be fractionally integrated and do not distinguish between different types of energy consumption this study tests for long memory in disaggregated petroleum consumption in the united states using univariate and multivariate lagrange multiplier lm tests for fractional integration the results point strongly to the need to distinguish between different forms of energy consumption and allow for a generalization of the i 0 i 1 dichotomy when considering the order of integration of energy consumption allowing for short run dynamics the univariate test suggests that less than 50 of the series are fractionally integrated consistent with expectations the non stationary series are found to have the highest mean and standard deviation the multivariate test suggests that petroleum consumption in the commercial and industrial sectors is clearly fractionally integrated when allowing for short run dynamics and as such exhibits persistent effects while petroleum consumption in the residential sector is a stationary process

willingness to pay and the demand for lotto why do many bettors participate in an unfair gamble in particular a lotto game while at the same time purchase insurance the willingness to pay for lotto is analysed to find a rational explanation for a local risk averter s participation in an unfair bet a reasonable case is found where bettors preference can be approximately characterized as a locally risk averse and sufficiently prudent cubic function such bettors dislike risk but prefer standard third moment of the payoff the result suggests that the traditional effective price for lotto demand may omit important explanatory variables we thus propose an alternative method to examine the demand for lotto by incorporating the second and the third moments of lotto s payoff evidence from taiwan lotto data supports that lotto bettors could be both locally risk averse and rational

dynamic factor demands and the effects of energy price shocks a dynamic model is used to understand how sharp changes in energy prices affect investment behavior employment and energy use the authors discuss the theory behind their model selection model specifications estimation methods and data list parameter estimates and elasticities for the selected model and describe the simulations they conclude that 1 the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production 2 the data indicate adjustment costs on labor are small and 3 their results help reconcile some of the conflicting estimates of energy demand elasticities appearing in recent literature 23 references 3 figures 3 tables

testing for rational expectations in the uk national lottery the concept of rational expectations has typically been assumed without testing in the analysis of consumer demand and market efficiency in betting markets including betting on lottery games lottery games offer an excellent opportunity to test how participants process the information that is available to them using the uk national lottery as our particular case we find that participants in general efficiently process available information specifically they act as if they can on average forecast the level of sales for a given drawing

the economic analysis of lotteries lotteries determinants of ticket sales and the optimal payout rate this paper considers policy issues arising in the design regulation and taxation of lotteries focusing on the market for an on line lottery game demand determines who buys lottery tickets and in what quantities the design of lotteries affects the terms on which tickets are supplied uk data suggest that its lottery may be priced too high to maximize lottery revenue more revenue might be raised if the proportion of sales allocated to tax and other levies were smaller having established the positive economics of lotteries the paper then assesses their welfare implications pari mutuel lotteries enjoy scale economies and as natural monopolies are invariably run either by government agencies or a regulated licensee i estimate consumer surplus and identify the excess burden that arises from existing over taxation of lotteries the large price elasticity of demand implies that revenue raised from the lottery is raised very inefficiently moreover the demand for lottery tickets is inferior and there is some evidence that such games are contagious and addictive so using lotteries as a vehicle for raising revenue is extremely regressive finally i consider other policy implications induced effects on charitable giving and on other forms of gambling the impact on the government budget perceptions of risk and distributional considerations ian walker

oil shocks and aggregate macroeconomic behavior the role of monetary policy hamilton and herrera hh have provided an interesting comment on our 1997 paper bernanke gertler and watson 1997 bgw we take the opportunity offered to us by the editors to respond briefly the goal of bgw was to show that the magnitude and shape of the economy s response to a particular exogenous shock will typically depend critically on how monetary policy makers choose to react to the shock as a consequence we argued that assessments of the importance of monetary policy for real activity should take into account the systematic portion of policy i e the policy rule as well as the unsystematic component i e monetary policy shocks the specific type of exogenous shock that we considered in bgw was a sharp increase in the price of oil of the magnitude observed during several episodes in the 1970s using a modified var framework we considered counterfactual scenarios in which monetary policy represented by the level of the federal funds rate does not respond to an oil price shock we found that the adverse effects of an oil price shock on output are reduced considerably when the endogenous response of the funds rate is shut off indeed our point estimates suggested that the endogenous response of monetary policy accounted for virtually all the negative impact of the oil shock on this research was funded in part by nsf grants to each of the authors we thank michele cavallo for research assistance

reassessing the environmental kuznets curve for co2 emissions a robustness exercise the number of studies seeking to empirically characterize the reduced form relationship between a country economic growth and the quantity of pollutants produced in the process has recently increased significantly in several cases researchers have found evidence pointing to an inverted u benvironmental kuznetsq curve in the case of co2 however the evidence is at best mixed in this paper we reconsider that evidence by assessing how robust it is when the analysis is conducted in a different parametric setup and when using alternative emissions data from the international energy agency relative to the literature our contribution can be viewed as a robustness exercise in these two respects the econometric results lead to two conclusions firstly published evidence on the ekc does not appear to depend upon the source of the data at least as far as carbon dioxide is concerned secondly when an alternative functional form is employed there is evidence of an inverted u pattern for the group of oecd countries with reasonable turning point regardless of the data set employed not so for non oecd countries as the ekc is basically increasing slowly concave according to the iea data and more bellshaped in the case of cdiac data d 2005 elsevier b v all rights reserved

monetary policy response to oil price shocks how should monetary authorities react to an oil price shock this paper shows that in a noncompetitive economy policies that perfectly stabilize prices entail large welfare costs hence explaining the reluctance of policymakers to enforce them the policy trade off is nontrivial because oil energy is an input to both production and consumption as welfare maximizing policies are hard to implement and communicate i derive a simple interest rate rule that depends only on observables but mimics the optimal plan in all dimensions the optimal rule is hard on core inflation but accommodates oil price changes

notes on the underground monetary policy in resource rich economies how should monetary policy respond to a commodity price shock in a resource rich economy as in the baseline new keynesian model the central bank of a small oil exporting economy faces a tradeoff between the stabilization of domestic infl ation and an appropriately defined output gap but in our framework the output gap depends on oil technology and the weight on output gap stabilization is increasing in the importance of the oil sector given substantial spillovers to the rest of the economy optimal policy calls for a reduction of the interest rate following a drop in the oil price in contrast a central bank with a mandate to stabilize consumer price infl ation would raise interest rates to limit the infl ationary impact of an exchange rate depreciation

jackpot promotion model for taiwan lotto lotto was inaugurated in january 2002 and immediately became a popular activity in taiwan as the big craze following its initial introduction has subsided the growth of lotto game sales has slowed to maintain lottery sales momentum operators have conducted numerous jackpot promotions this study examines the effectiveness of various jackpot promotional strategies the analytical results can provide a valuable reference for operators and governmental authorities regarding ways of increasing lottery earnings the empirical findings of this investigation include the following 1 the effective price elasticity of lotto is 0 382 taipei fubon bank can increase the revenue gained from lotto by increasing the effective price 2 operators can significantly increase lottery sales by declaring the jackpot as an unconditional added fixed or variable bonus

monetary and macroprudential policies in a leveraged economy we examine the optimal monetary policy in the presence of endogenous feedback loops between asset prices and economic activity when macroprudential policies can also be pursued absent macroprudential policies the optimal monetary policy leans against asset prices and can be closely approximated using a speed limit rule that responds to the growth of financial variables an endogenous feedback loop is crucial for this result price stability is otherwise quasi optimal similarly a simple macroprudential rule that links reserve requirements to credit growth dampens the endogenous feedback loop and leads to near price stability state contingent taxes on lending are shown to be welfare improving

solving for optimal simple rules in rational expectations models this paper presents algorithms that solve for optimal simple monetary policy rules in rational expectations models with precommitment and discretion the algorithms are applied to the models in fuhrer j money credit banking 29 1997 214 clarida et al j econ lit 37 1999 1661 and rudebusch econ j 112 2002 402 to examine the efficiency properties of operational policy rules we show that optimized taylor type rules preform well in these models but that aside from the fuhrer moore model this result is sensitive to whether the central bank can respond to current period shocks taylor type rules that are operational in the sense that they do not respond to current period information are found to be highly inefficient in the rudebusch model and in the clarida et al 1999 model

dynamic relationship of oil price shocks and country risks abstract this study investigates the dynamic relationship between oil price shocks and country risks using a structural var framework for a sample of both net oil exporting and net oil importing countries over the period january 1994 december 2014 the results reveal that country risk is significantly affected by oil price shocks but the impacts are different unanticipated positive oil price shocks trigger a reduction addition in country risk for net oil exporting country net oil importing countries as to the responses of oil prices to country risk shock evidence show that country risk shocks have a delayed significantly positive impacts on oil price for oil exporting country with respect to the effects of subcomponents of country risk we find evidence that economic and political risk have a significant impact on supply side shocks in net oil exporting countries like canada while economic and political risk have a significant effect on supply side shocks and oil specific demand shocks in net oil importing countries like the us these results are particularly important to policy makers and government

oil shocks and aggregate macroeconomic behavior the role of monetary policy a recent paper by bernanke gertler and watson 1997 suggests that monetary policy could be used to eliminate any recessionary consequences of an oil price shock this paper challenges this conclusion on two grounds first we question whether the federal reserve actually has the power to implement such a policy for example we consider it unlikely that additional money creation would have succeeded in reducing the fed funds rate by 900 basis points relative to the values seen in 1974 second we point out that the size of the effect that bernanke gertler and watson attribute to oil shocks is substantially smaller than that reported by other researchers primarily due to their choice of a shorter lag length than that used by other researchers we offer evidence in favor of the longer lag length employed by previous research and show that under this specification even the aggressive federal reserve policies proposed would not have succeeded in averting a downturn