determinants of the equilibrium real exchange rate n b professor neary was based at university college dublin and queen s university ontario canada when this article was first published the full text of this article is not available in ora at this time citation neary j p 1988 determinants of the equilibrium real exchange rate american economic review 78 1 210 215

willingness to supply biomass for bioenergy production a random parameter truncated analysis this paper presents research results based on data from two biomass producer surveys collected from mid missouri and southern illinois a series of random parameter truncated regressions are utilized to analyze willingness to supply results under three price scenarios marginal effects suggest that producers will supply an additional 1 6 to 2 4 of their biomass production for each one dollar increase in price and that supply for three types of biomass stover straw and hay is elastic this means commercial developers that are interested in pricing biomass and policy makers considering subsidies could expect modest supply responses for each dollar increase in price

implications of incomplete markets for international economies we develop a restriction that precludes implausibly high reward for risk in incomplete inter national economies to consider a theoretical problem that characterizes a lower bound on the covariance between stochastic discount factors sdfs subject to correct pricing the problem is analytically solvable and synthesizes domestic and foreign sdfs into spanned and unspanned components our novelty is that exchange rate growth need not equal the ratio of sdfs and that the sdf correlations are plausibly lowered exploiting the realities of cross country corre lations of macroeconomic quantities namely consumption wealth dividend growths and asset returns our empirical investigation refutes the speci cation of complete markets

non traded goods and the international transmission of fiscal policy abstract this paper looks at the effect of non traded goods on the international transmission of fiscal policy intertemporal movements in the price of non traded goods affect real interest rates differentially between countries the real interest rate effects of a fiscal expansion depend crucially upon both the composition of fiscal spending and the intertemporal elasticity of substitution with a high intertemporal elasticity of substitution in consumption a temporary fiscal expansion on non traded goods will lead consumer real interest rates to move in opposite directions between countries

uninsurable risk and financial market puzzles abstract we compare the empirical performances of three risk sharing arrangements involving idiosyncratic skill shocks a where individuals are unable to directly insure their consumption against individual specific shocks b where agents strike long term insurance contract with financial intermediaries involving a truth revelation constraint as in kocherlakota and pistaferri 2009 c full risk sharing based on the widely accepted assumption of cross sectional log normality of individual consumption levels we work out closed form expressions of the pricing kernels for a and b we put these three models to test four financial market anomalies namely the equity premium currency premium risk free rate and consumption real exchange rate puzzles simultaneously in an integrated framework we find that the pricing kernel associated with a outperforms the other two models in terms of the produced estimates of the agent s preference parameters and the model ability to predict the equity and currency premia the risk free rate and the log growth in the exchange rate however the predictive ability is still far from satisfactory for all three models under scrutiny

the consumption real exchange rate anomaly with extensive margins abstract this paper investigates a consumption real exchange rate anomaly from the open macroeconomics literature known as the backus smith puzzle we both analytically and quantitatively examine how an expansion of trade along extensive margins can contribute to the puzzle s resolution our argument is based on 1 a wealth effect due to changes in the number of product varieties 2 statistical inefficiency in measuring the number of product varieties and 3 market incompleteness contrary to complete asset markets which in general feature overly strong risk sharing properties changes in the number of product varieties under incomplete markets may produce a wealth effect under high trade elasticity since statistical agencies systematically fail to capture the welfare impact arising from that changes data consistent terms of trade and real exchange rates tend to appreciate due to this positive wealth effect this provides a realistic correlation between data consistent real exchange rates and consumption

asset prices and risk sharing in open economies this paper proposes a two good two country general equilibrium model with external habits and home biased preferences that addresses a number of international nance puzzles speci cally the model reconciles the high degree of international risk sharing implied by relatively smooth exchange rates with the modest cross country consumption growth correlations seen in the data resolving the brandt cochrane and santa clara 2006 puzzle furthermore the model matches the empirically observed low correlation between exchange

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

another look at the role of the industrial structure of markets for international diversification strategies abstract this paper re examines the extent to which gains from international diversification are due to differences in industrial structure across countries recent papers by roll 1992 journal of finance 47 3 42 and heston and rouwenhorst 1994 journal of financial economics 36 3 27 investigate this issue and find conflicting evidence using a new database the dow jones world stock index with coverage in 25 countries and over 66 industry classifications we decompose comprehensively both country and industrial sources of variation we confirm that little of the variation in country index returns can be explained by their industrial composition we also uncover differences in the proportion of variation in industry index returns that is captured by country and industry factors and discuss the implications for global diversification strategies

the collapse of purchasing power parities during the 1970 s one of the striking facts concerning the relationship beiveen prices and exchange rates during the 1970 s has been the dismal performance of the predictions of the simple versions of the purchasing power parity doctrine ppp that doctrine in its absolute version states that the equilibrium exchange rate between domestic and foreign currencies equals the ratio of domestic to foreign price levels the relative version of the doctrine relates equilibrium changes in exchange rates to changes in the ratio of domestic to foreign prices during the 1970 s short run changes in exchange rates bore little relationship to short run differentials in national inflation rates and frequently divergences from purchasing power parities have been cumulative this paper reviews and analyzes the empirical record of exchange rates and prices during the 1970 s and the analysis is based on the experience of the dollar pound the dollar frecch franc and the dollar dm exchange rates section 2 presents the evidence on ppp during the 1970 s and contrasts it with the evidence from the 1920 s a period during which the doctrine held up reasonably well this analysis is relevant for assessing whether the flexible exchange rate system was successful in providing national economies with an added degree of insulation from foreign shocks and whether it provided policymakers with an added instrument for the conduct of macroeconomic policy the evidence regarding devia tions from purchasing power parities is also relevant for determining whether there is a case for managed float section 3 attempts to explain what went wrong with

international portfolio nondiversification and exchange rate variability abstract incomplete international portfolio diversification is implied by an equilibrium models of exchange rates with nontraded goods the model can also explain the greater correlation between consumption and income within a country than between consumption across countries nontraded goods make more stringent the elasticity conditions required to explain exchange rate variability resulting from current productivity disturbances though not from disturbances to fiscal policies or the prospective return to investment the model is also consistent with international real interest rate differentials changes over time in the current account and relative wealth across nations and observed time series properties of exchange rates

household heterogeneity and real exchange rates we assume that individuals can fully insure themselves against cross country shocks but not against individual specifi cs hocks we consider two particular models of limited risk sharing domestically incomplete markets di and private information pareto optimal pipo risk sharing for each model we derive a restriction relating the cross sectional distributions of consumption and real exchange rates we evaluate these restrictions using household level consumption data from the us and the uk we show that the pipo restriction fits the data well when households have a coefficient of relative risk aversion of around 5 the restrictions implied by the complete risk sharing model and the di model fare poorly this paper was prepared for the economic journal lecture at the 2006 royal economic society meetings kocherlakota thanks winnie choi for many stimulating conversations about real exchange rates kocherlakota acknowledges the support of nsf 0305833 and 0606695 we thank an associate editor of the journal george alessandria and ivan werning for helpful comments jaromir nosal and sonam sherpa for research assistance orazio attanasio and andrew leicester for help with the fes data and joan gieseke and hakki yazici for editorial assistance the views expressed herein are those of the authors and not necessarily those of the federal reserve bank of minneapolis or the federal reserve system

the diversity of design of tsos it is puzzling today to explain diversity and imperfection of actual transmission monopoly designs in competitive electricity markets we argue that transmission monopoly in competitive electricity markets has to be analysed within a wilson 2002 modular framework applied to the management of electricity flows at least three modules make the core of transmission design 1 the short run management of network externalities 2 the long run management of network investment and 3 the coordination of neighboring transmission system operators for cross border trade in order to tackle this diversity of designs of tsos we show that for each of these modules three different basic ways of managing them are possible among the identified twenty seven options of organisation we define an ideal tso second we demonstrate that 1 monopoly design differs from this ideal tso and cannot handle these three modules irrespective of the institutional definition and allocation of property rights on transmission while 2 definition and allocation of property rights on transmission cannot ignore the existing electrical industry and transmission network structure they have to complement each other to be efficient some conclusions for regulatory issues of transmission systems operators are derived from this analysis of network monopoly organisation

current account dynamics and the terms of trade harberger laursen metzler two generations later this is a study of the current account dynamics resulting from the savings and investment dynamics in a small open economy which is subject to exogenous changes in its terms of trade and in world interest rates anticipated and unanticipated as well as temporary and permanent terms of trade changes have very different effects there is however a general tendency towards cycles in both savings and investment which gives rise to cycles in the current account it is shown that the classic harberger laursen metzler effect on saving of a terms of trade deterioration can have any sign for plausible parameter values both for temporary and permanent disturbances

the law of one price in international commodity markets a reformulation and some formal tests abstract we report formal tests of whether the law of one price lop holds in the long and in the short run for commodities traded in orgnized markets we formalize the distinction between short and long run by introducing lagged price adjustments also we introduce expectations explicitly tests support the long run lop but they reject the short rn lop the long run lop holds better for future prices than for spot prices on average 90 per cent of the deviation from lop is eliminated within 10 weeks but this ranges from 1 to 120 weeks

risk external adjustment and capital flows abstract this paper studies the process of external adjustment i develop an open economy model with endowment and preference shocks that can account for the empirical behavior of real exchange rates interest rates and consumption in the u s and europe the model includes cross border holdings of bonds and equity and financial frictions that impede international risk sharing i find that external adjustment following endowment shocks predominantly takes place via trade flows consistent with the intertemporal approach to the current account in contrast preference shocks that change investors risk aversion induce adjustment via the trade and valuation channels where the latter includes the effects of unexpected capital gains and loss on existing cross border holdings and changes in the expected future return differentials between foreign assets and liabilities the model estimates imply that the valuation channel of external adjustment is more important for the u s than the trade channel consistent with this implication i show that forecasts of future return differentials contributed most to the volatility of the u s net foreign asset position in the post bretton woods era

spot and futures prices and the law of one price the law of one price lop is tested for narrowly defined commodities traded in futures markets in different countries during the period 1973 80 although the lop holds as an average tendency for most of the commodities there are instances of large riskless arbitrage returns before transactions costs deviations from the lop tend to be commodity specific rather than due to a common external factor and they tend to be smaller the longer the maturity of the futures contract in this paper we examine how well the law of one price lop holds for commodities traded internationally the answer to this question is important for two reasons the first is that in most modern theories of exchange rates price arbitrage for at least some goods is a necessary condition to determine the level of exchange rates but recent empirical research on the behavior of various price indices casts doubt on the empirical validity of the lop across countries for even the most disaggregated indices if it is not possible to identify any commodities for which the lop works satisfactorily then models incorporating the lop will not provide an adequate description of exchange rates the second reason for studying individual commodities is to gain information on the efficiency and the degree of integration of international commodity markets in efficient markets international commodity arbitrage implies that for a standard commodity prices in two markets expressed in a common currency will not differ but for transport costs

asset prices and exchange rates in this paper we study the implications of introducing demand shocks and trade in goods into an otherwise standard international asset pricing model trade in goods gives rise to an additional channel of international propagation through the terms of trade absent in traditional single good asset pricing models the inclusion of demand shocks helps overturn many unrealistic implications of existing international flnance models in which productivity shocks are the sole source of uncertainty our model generates a rich set of implications on how stock bond and foreign exchange markets co move we solve the model in closed form which yields a system of equations that can be readily estimated empirically our estimation validates the main predictions of the theory

are real interest rates equal across countries an empirical investigation of international parity conditions this paper conducts empirical tests of the equality of real interest rates across countries the empirical evidence strongly rejects the hypothesis of real rate equality and the joint hypotheses of uncovered interest parity and ex ante relative ppp or the unbiasedness of forward rate forecasts and ex ante relative ppp the evidence suggests that it is worth studying open economy macroeconomic models which allow 1 domestic real rates to differ from world rates 2 time varying risk premiums in the forward market or 3 deviations from ex ante relative ppp the relationship of real interest rates across countries is of central importance to our understanding of open economy macroeconomics in some models where there is costless international arbitrage in goods and financial assets real interest rates for comparable securities should be equal across countries this has been a feature of much of the early research in the monetary approach to exchange rates e g frenkel 11 and bilson 2 on the other hand finance theory indicates that risk premia may well differ for comparable securities denominated in different currencies solnick 27 roll and solnick 26 stulz 28 fama and farber 7 hansen and hodrick 17 and dornbusch 6 and more recent theoretical models in the exchange rate literature such as dornbusch 5 frankel 10 and mussa 24 depend on real rates differing between countries in the short run the proposition that real rates are equal across countries is worth studying

an equilibrium model of exchange rate determination and asset pricing with nontraded goods and imperfect information this paper presents a two country model with maximizing households stochastic production stochastic money growth and perfect capital mobility because of the presence of nontraded goods households in different countries consume different goods analytic solutions are presented for the nominal exchange rate the real exchange rate nominal interest rates and real interest rates it is shown that the model is compatible with some important features of the real world behavior of exchange rates when households are imperfectly informed about the distribution of money growth the exchange rate exhibits patterns of overshooting and is more volatile than the ratio of the money stocks copyright 1987 by university of chicago press

labour market institutions and household consumption insurance within oecd countries this paper tests empirically whether the effect of idiosyncratic income shocks on aggregate consumption depends on institutional features of national labour markets the results show that in a sample of 15 oecd countries institutional heterogeneity is a significant determinant of the response of household consumption to country specific income shocks this is consistent with the idea that institutionally provided social insurance may help increase income stability when people differ in their ability to access financial markets and smooth consumption fluctuations

saving and investment in an open economy with non traded goods the authors examine a model of a small open economy in which there is free international mobility of financial capital investment in capital goods and a nontraded good such an environment is rich enough to explain several phenomena that are inexplicable in other models the authors explain why a high saving country may nonetheless borrow from abroad to finance investment they suggest an explanation of why saving and investment may be correlated even with no restrictions on trade in assets the authors also provide an optimizing model of stages in the balance of payments copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the institutions and governance of economic development and reform why are the ambitions of economic development practitioners and reformers so often disappointed one answer is that development policymakers and reformers are congenital optimists another answer is that good plans are regularly defeated by those who occupy strategic positions an intermediate answer is that institutions are important yet are persistently neglected in the planning process the article takes a bottom up microanalytical approach to economic development and reform it examines the governance of contract investment and private ordering through the lens of transaction cost economizing and it assesses the efficacy of the de facto as against the de jure institutional environment with respect to credible commitments in effect institutional economists are cast in the role of archaeologists of economic reform and development with the task of unpacking the lessons of the past to inform choices and programs for the future

inattentive consumers and international business cycles this paper presents and studies the properties of a sticky information exchange rate model where consumers and producers update their information sets infrequently introducing inattentive consumers has important implications through a mechanism resembling the limited participation models exchange rate volatility observed in the data can be addressed for reasonable values of risk aversion the model generates more persistence in output consumption and employment which brings us closer to the data impulse responses to monetary shocks are hump shaped consistent with the empirical evidence forecast errors of inattentive consumers provide a channel to reduce the correlation of relative consumption and real exchange rate the decline in the correlation is quantitatively small for our benchmark model model generates a substantial amount of consumer forecast errors when producers are attentive and productivity shocks are persistent this specification results in a large decline of the correlation of real exchange rate and relative consumption due to consumer inattentiveness when trade elasticity is set to values at the low end of macro estimates or at higher values consistent with sectoral estimates the correlation is in the negative territory with inattentive consumers

political institutions of electricity regulation the case of turkey abstract turkey has been going through a liberalization process in its electricity market over the last decade so far the regulatory content of the market reforms has been in the center of attention in the literature to the negligence of regulatory governance however recent studies which applied the theoretical insights of new institutional economics to utilities regulation have demonstrated that political endowments of the country draw the boundaries to which extent such regulatory content can be effectively implemented in line with these studies this paper adopts an institutional approach and attempts to identify the political endowments of turkey in order to further analyze whether the market reforms succeeded in bringing about sufficient checks to cure the institutional problems in other words the paper takes a picture of the overall regulatory arena the results show that the current regulatory structure especially government regulator relations yet fails to meet good regulatory governance criteria the paper also provides some policy suggestions

what can explain the apparent lack of international consumption risk sharing recent research in international business cycles finds that international consumption comovements do not match the risk sharing predictions of standard complete markets models in this paper i ask whether two different types of explanations can help explain this result 1 nonseparabilities between tradables and nontradable leisure or goods and 2 the effects of capital market restrictions on consumption risk sharing i find that risk sharing cannot be resolved by either explanation alone however when i allow for both nonseparabilities and certain market restrictions risk sharing among unrestricted countries cannot be rejected this evidence suggests that a combination of these two effects may be necessary to explain consumption risk sharing across countries

consumption and real exchange rates in dynamic economies with non traded goods abstract we examine the possibility that non traded goods may account for several striking features of international macroeconomic data large persistent deviations from purchasing power parity small correlations of aggregate consumption fluctuations across countries and substantial international real interest rate differentials a dynamic exchange economy is used to show that non traded goods in principle can account for each of these phenomena in the theory there is a close relation between fluctuations in consumption ratios and those in bilateral real exchange rates but we find little evidence for this relation in time series data for eight oecd countries

demand shocks and open economy puzzles abstract we pose good markets frictions on top of an otherwise standard two country international real business cycle irbc model shopping for goods takes effort which prevents perfect matching between customers and producers an increase in search effort implies increased measured productivity demand shocks increase expenditures and search effort simultaneously increasing output consumption productivity and the trade deficit and appreciating the real exchange rate thus we solve the backus smith puzzle and we show that the cross country correlation of consumption is higher than that of output standard irbc models cannot account for these puzzles along with movements in tfp

deregulating with no regulator is the german electricity transmission regime institutionally correct abstract from 1998 to 2005 the german transmission grid has been put under a self regulated arrangement it seems hard to believe that transmission lines can be opened to third party access only with a negotiated access regime and no regulator supervision it seems contradictory with the notion of ex post contractual hazards promoted by v goldberg and o williamson if a weak institutional arrangement is implemented one might assume that it has to be harmful to network and market access if it is not to be inefficient why and how could it work when looking at rules and prices for accessing the transmission network and the corresponding wholesale markets in germany the club arrangement for transmission opening does not appear so harmful accordingly we have to reconsider the ex ante and ex post institutional mechanism of such a club arrangement ex ante we first reconsider skills and strengths of industrial consumers and german business associations in defining and assessing rules of transmission access we underline that incomplete vertical and horizontal integration of german electricity companies impeded extensive cartel collusion ex post we first look at a strong competition authority backing then we discover that ex ante and ex post dimensions are much more mixed and reinforced in an open cumulative pro competition process framed by the competition authority

sustainable and integrated bioenergy assessment for latin america caribbean and africa sibyl lacaf the path from feasibility to acceptability abstract uncertainties in evaluating bioenergy projects have lead policymakers to adopt a restrictive approach or even refuse to evaluate projects when the available information is limited or a clear perception of its benefits and impact is lacking indeed despite its potential advantages a bioenergy system poses several conceptual and operational challenges for academic as well as practical scrutiny because the inherent relationship and the intersection of areas related to energy production and agricultural activity requires a deeply integrated assessment the aim of this paper is to review the available works in this field and propose an approach for supporting policymakers in the taking decision process of deploying sustainable bioenergy systems the sibyl lacaf framework provides a comprehensive framework for addressing the inherent complexity of the subject and its sustainability and acceptability as part of the evaluation process with this approach different and complementary evaluation methods are reviewed and set in a logical and sequential structure to draw a group of indicators used for assessing a given project with the help of a strengths weaknesses opportunities and threats swot matrix when acceptability is identified as an issue a public consultation and communication pc c scheme can complement this process the suggested application for mozambique indicate that an acceptable outcome is possible even when considering the data requirements and constraints of developing countries thus the potential of this integrated approach outweighs such limitations

a theory of dissimilarity between stochastic discount factors this paper proposes a measure of dissimilarity between stochastic discount factors sdfs in different economies the sdfs are made comparable using the respective bond prices as the numeraire the

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

using asset prices to measure the persistence of the marginal utility of wealth we derive a lower bound for the volatility of the permanent component of investors marginal utility of wealth or more generally asset pricing kernels the bound is based on return properties of long term zero coupon bonds risk free bonds and other risky securities we find the permanent component of the pricing kernel to be very volatile its volatility is about at least as large as the volatility of the stochastic discount factor a related measure for the transitory component suggest it to be considerably less important we also show that for many cases where the pricing kernel is a function of consumption innovations to consumption need to have permanent effects

real interest rates home goods and optimal external borrowing the paper investigates the optimal time path of consumption and external borrowing in the dependent economy model the small country faces given world prices and a given world real interest rate the presence of a home goods sector implies that the relevant real interest rate appropriate to consumption decisions depends on the rate of change of the real price of home goods the paper shows how transitory disturbances in output or in the world real interest rate affect the time profile of consumption and the trade balance in particular it is shown that the presence of a home goods sector dampens the consumption effects of changes in the world interest rate

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

home asset preference and productivity shocks abstract this paper presents sufficient conditions for the domestic investor consumer to hold in equilibrium a disproportionate share of domestic assets the analysis is carried out in a general equilibrium framework of products and assets markets when the source of the uncertainty is productivity shocks in the nontraded goods industries in the asset markets we allow trade in instruments with a payoff which is not necessarily positively correlated with the price of the consumption good as the instruments considered in the existing literature consequently in our analysis in contrast to the existing literature hedging against price uncertainty is neither necessary nor sufficient for home asset preference

adaptability of competitive electricity reforms a modular analysis abstract among the competitive electricity reforms that have been implemented in europe and the us for the last 18 years none has survived over several years without major changes their changing nature raises the question of their adaptability two characteristics of reforms play a key role on their adaptation properties firstly they are modular objects in the sense of baldwin c 2008 where do transactions come from modularity transactions and the boundaries of firms industrial and corporate change 17 1 155 195 secondly they are produced in an institutional process which leads to incomplete rules and designs pistor k xu c 2003 incomplete law international law and politics 35 931 1013 we propose a typology of adaptations based on the framework proposed by williamson o e 1991 comparative economic organization the analysis of discrete structural alternatives administrative science quarterly 36 2 269 296 for contracts 1 in case of small disturbances adaptations are realized quasi automatically by autonomous decisions of the institutions governing the implementation of reforms 2 in case of middle range disturbances adaption is made by coasian bargaining 3 finally in case of strong disturbances or when bargaining is not feasible the adaptation of reforms is in the hands of legislative and executive institutions north d c 2005 le processus du developpement economique editions d organisation these institutions can reform the reforms joskow p l 2006 introduction to electricity sector liberalization lessons learned from cross country studies in sioshansi f p ed electricity market reform an international perspective elsevier amsterdam pp 1 32 hogan w w 2002 electricity market restructuring reforms of reforms journal of regulatory economics 21 103 132 the role of these types of adaptations in each electricity reform is a consequence of the allocation of rights to the regulator to stakeholders and to legislative and executive institutions

beyond arbitrage good deal asset price bounds in incomplete markets one often wants to value a risky payoff by reference to prices of other assets rather than by exploiting full fledged economic models however this approach breaks down if one cannot find a perfect replicating portfolio we impose weak economic restriction to derive usefully tight bounds on asset prices in this situation the bounds assume that investors would want to buy assets with high sharpe ratios good deals as well as pure arbitrage opportunities we show how to calculate the price bounds in one period multiperiod and continuous time contexts we show that the multiperiod problem can be solved recursively as a sequence of one period problems we calculate bounds in option pricing examples including infrequent trading and an option written on a nontraded event and we use the bounds to explore the economic significance of option pricing predictions we find that much variation in s p 500 index option prices over time and across strike prices fits within the bounds

realistic cross country consumption correlations in a two country equilibrium business cycle model abstract a well known feature of one good multi agent arrow debreu economies with edentical additively separable homothetic preferences is that the consumptions of all agents are perfectly correlated such economies are widely used in interpreting business cycles but seem to be inconsistent with observed cross country correlations of aggregate consumption this paper provides an example of a two country real business cycle model in which preferences are not separable between consumption and labor supply the model has a simple closed form solution closed form solution and allows for fluctuations in labor supply in equilibrium moreover it generates correlations between national consumption rates which are close to some of those observed in historical data jel f41

modeling biomass procurement tradeoffs within a cellulosic biofuel cost model abstract we develop a long run cellulosic biofuel cost model that minimizes feedstock procurement and processing costs per gallon the distinguishing feature of the model is that it accounts for the procurement tradeoff between the intensive margin biomass producers participation rate and extensive margin biomass capture region to investigate the extent to which this procurement tradeoff affects processors cost minimizing decisions we apply the model to switchgrass ethanol production in u s crop reporting districts results suggest that location characteristics will determine the extent to which processors can reduce their total procurement costs by offering a higher biomass price to increase participation near the plant and reduce transportation costs

institutions and commitment the thrust of this paper is that to understand the roles institutions play in society a deep analysis of opportunism and its implications is necessary for that purpose a transactions costs cum positive political theory approach is developed with a focus on the role of institutions and their implications for regulatory commitment a major issue is restraining political opportunism countries that have succeeded in developing a healthy private sector are those that have developed institutions that restrain governmental decision making but such restraining is itself a political choice countries with electoral and legislative systems that bring about decentralized government have stronger chances of developing equilibria where government discretion is restrained copyright 1996 by oxford university press