separability functional form and regulatory policy in models of interfuel substitution abstract counter intuitive results such as positive own price elasticities have been found in some studies of interfuel substitution this paper examines three possible reasons for this problem first including energy materials in petroleum and coal aggregates is found to contribute to incorrect signs second the mathematical properties of the translog function contribute to concavity violations in contrast the linear logit model of cost shares is found to provide more sensible estimates of own price elasticities across alternative model specifications finally natural gas curtailment policies and environmental regulations are found to be significant factors influencing us industrial fuel demand although omission of these factors does not directly contribute to curvature violations

an eoq model with stock dependent demand shortage inflation and time discounting abstract this paper develops a finite time horizon deterministic economic order quantity eoq inventory model with shortages where the demand rate at any instant depends on the on hand inventory stock level at that instant the effects of inflation and the time value of money are taken into account considering two separate inflation rates namely the internal company inflation rate and the external general economy inflation rate the results are discussed with a numerical example and particular case of the model is discussed in brief a sensitivity analysis of the optimal solution with respect to the parameters of the system is carried out

how is demand for natural gas determined across european industrial sectors abstract this paper estimates the response of manufacturing sectors natural gas demand to price and output changes the average response to future changes in absolute and relative prices of the manufacturing industry in an oecd country depends on the mix of manufacturing industries particularly with respect to energy intensity and substitution opportunities in production we estimate short and long run demand elasticities using a shrinkage estimator which allows heterogeneous demand responses across industries for each country our results show that price and output elasticities are heterogeneous within the same manufacturing sector across countries furthermore an output contraction due to e g demand shocks will generally have larger negative effects on gas demand than increases in natural gas prices

theory based measurement of the saving investment correlation with an application to norway i introduction the findings of feldstein and horioka 19c 0 have led to numerous theoretical and empirical papers on the close correlation between domestic saving and domestic investment and its supposed implications for international capital mobility feldstein and horioka 1980 317 state that with perfect world capital mobility there should be no relation between domestic saving and domestic investment saving in each country responds to the worldwide opportunities for investment while investment in that country is financed by the worldwide pool of capital however in a cross country regression using period averaged saving and investment figures for sixteen oecd countries they obtain a significant coefficient close to unity and conclude that capital is rather immobile this result constitutes the feldstein horicka puzzle as it contradicts the widely held perception that capital is highly mobile across countries subsequent empirical work confirmed the close correlation though its implication for the degree of capital mobility is a moot point see tesar 1991 this paper contributes to the understanding of the puzzle on both theoretical and empirical counts first we present a theory based econometric specification for estimating saving investment correlations second we discuss the possible usefulness of the estimates for detecting capital mobility third we provide empirical results for the interesting case of norway we argue that feldstein and horioka s basic idea that the saving investment correlation contains information about international capital mobility is correct but that the interpretation of the estimated correlation value must be altered substantially in view of the results derived from modern macroeconomic models our research is motivated by the observation that various regression equations have been used to measure the saving investment correlation but that none of them has a firm theoretical foundation this in turn raises questions about the interpretation and comparability of the existing empirical results we propose an econometric specification that is founded in intertemporal general equilibrium models in which agents optimize under intertemporal budget constraints we show that time series studies have estimated misspecified equations and that cross section studies are seriously flawed because they neglect dynamics as a result the puzzle may turn out to be an artifact caused by measurement errors however the significance of reliable measurement of saving investment correlations goes beyond solving the feldstein horioka puzzle because they represent stylized facts open economy models should explain norway serves as a suitable example to cement our methodological arguments with empirical evidence thanks to its system of capital controls which were phased out during the 1970s and 1980s the oil discoveries and its small size we demonstrate that the failure to take structural breaks into account seriously distorts the picture making a strong case for careful diagnostic testing our main empirical result is that the feldstein horioka puzzle does not exist for norway the paper proceeds as follows in section ii we briefly summarize the state of the discussion regarding feldstein and horioka s findings in section iii we derive our specification from the theory compare it to the previous specifications and discuss how to make inferences about capital mobility in section iv we sketch major developments in the post war norwegian economy notably the abolition of capital controls and the emergence of the important oil sector section v presents the empirical results section vi summarizes and concludes ii the feldstein horioka puzzle many authors have confirmed feldstein and horioka s result of a high and stable correlation of saving and investment for oecd countries both in cross country studies and in time series studies

liberalizing the energy markets of western europe a computable equilibrium model approach using a computable equilibrium model the short run effects of a radical liberalization of the west european natural gas and electricity markets are examined in each model country oil gas coal and electricity are produced traded and consumed there are world markets for oil and coal and well integrated competitive markets for gas and electricity in western europe gas and electricity are transported and traded across markets under the assumption of ideal third party access regimes for transportation and limited capacities in the transportation networks it is found that relative to the data year 1996 radical liberalization reduces the average end user price of natural gas by around 20 and the average end user price of electricity by around 50 the supply of electricity increases by around 20 mainly due to increased coal power production after such liberalization coal power emerges with the largest market share of electricity production in western europe

international capital mobility net versus gross stocks and flows abstract feldstein and horioka 1980 observed that net capital flows have been small in relation to domestic saving and investment flows for oecd countries in the post war period which they interpreted as evidence of low capital mobility this paper argues that the correlation between gross domestic and international financial flows can be a better indicator of capital mobilitythan net capital flows contrary to the conventional wisdom among international economists gross flows have been small in relation to gross domestic asset creation for oecd countries although by this measure the degree of capital mobility increased in the 1980s

ford whitman harris and the economic order quantity model ford whitman harris first presented the familiar economic order quantity eoq model in a paper published in 1913 even though harris s original paper was disseminated widely it apparently was unnoticed for many years before its rediscovery in 1988 during this period much confusion developed over the origin of the eoq model this paper explores the early literature on this model and traces the evolution of the confusion it also sketches the remarkable life of harris who made contributions as an engineer inventor author and patent attorney even though he received no formal education beyond high school harris s original 1913 essay is reprinted following this paper

interfuel competition in the industrial sector of seven oecd countries abstract the purpose of this article is to present an analysis of interfuel substitution in the industrial sector of seven major oecd countries the united states canada japan germany france the united kingdom and italy over the 1960 1993 period translog models are used to provide estimates of price elasticities from annual data for each country results outline the weakness of price elasticities and changes in behaviour over the last 35 years and show evidence of asymmetric effects since the collapse of oil prices in 1986 substitution has stopped industrial energy demand and oil consumption have stagnated interfuel substitution is widely induced by events other than relative price changes energy policy political and institutional constraints changes in economic activity characteristics within individual country sectors

a dynamic analysis of interfuel substitution in u s industrial energy demand using data for 1960 92 to analyze interfuel substitution in the u s industrial sector a dynamic linear logit model is shown to provide superior global properties than a comparable dynamic translog model confirming earlier static results by t j considine 1989 the linear logit model provides a direct unbiased estimate of the rate of dynamic adjustment indicating a median response lag of less than two years excluding fuels used for nonenergy purposes yields larger estimates of the price elasticities for coal and oil and indicates generally greater potential for interfuel substitution than when using aggregate data

the r q inventory policy subject to a compound poisson demand pattern abstract most inventory management models are based upon rather restrictive assumptions e g unit sized demands and the normal distribution for total demand during replenishment time in a majority of inventory management systems circumstances seem to allow these simplifications and inventory policies based upon these assumptions yield satisfying results however in some particular cases these simplifications differ fundamentally from the actual conditions and particle therefore application of the models mentioned above can result in an overinvestment in inventory or in an unacceptable low service level one of the situations in which we cannot rely on these simplified inventory models is studied in this paper we consider an inventory subject to a probabilistic non unit sized demand pattern and we propose an exact and an approximate reorder point calculation method for the r q inventory policy the exact algorithm involves formulas for the discrete distributions of the total demand during replenishment time and the undershoot the approximate method is based on the use of continuous distributions and will be more appropriate when historical data are sparse results of both approaches are compared the algorithms proposed in this study are simple fast and easy to implement in a variety of existing inventory management systems

financial management in inventory problems risk averse vs risk neutral policies abstract in this work we discuss the effect of risk measure selection in the determination of inventory policies we consider an inventory system characterized by the loss function of luciano et al 2003 var as a risk measure for multi period static inventory models international journal of production economics 81 82 375 384 we derive the optimization problems faced by risk neutral quadratic utility mean absolute and cvar decision makers results show that while the global nature of the optimal policy is assured for risk coherent and risk neutral decision makers the convexity of the quadratic utility problem depends on the stochastic properties of demand we investigate the economic and stochastic determinants of the different policies this allows us to establish the conditions under which each type of decision maker is indifferent to imprecision in the distribution families finally we discuss the numerical impact of the choice of the risk measure by means of a multi item inventory the introduction of an approach based on savage scores allows us to offer a quantitative measurement of the similarity discrepancy of policies reflecting different risk attitudes

uncertainty and global sensitivity analysis in the evaluation of investment projects abstract this paper discusses the use of global sensitivity analysis sa techniques in investment decisions global sa complements and improves uncertainty analysis ua providing the analyst decision maker with information on how uncertainty is apportioned by the uncertain factors in this work we introduce global sa in the investment project evaluation realm we then need to deal with two aspects 1 the identification of the appropriate global sa method to be used and 2 the interpretation of the results from the decision maker point of view for task 1 we compare the performance of two family of techniques non parametric and variance decomposition based for task 2 we explore the determination of the cash flow global importance gi for valuation criteria utilized in investment project evaluation for the net present value npv we show that it is possible to derive an analytical expression of the cash flow gi which is the same for all the techniques this knowledge enables us to 1 offer a direct way to compute cash flow gi 2 illustrate the practical impact of global sa on the information collection process for the internal rate of return irr we show that the same conclusions cannot be driven in particular a one has to utilize a numerical approach for the computation of the cash flow influence since an analytical expression cannot be found and b different techniques can produce different ranking these observations are illustrated by means of the application to a model utilized in the energy sector for the evaluation of projects under survival risk the quantitative comparison of cash flow ranking with respect to the npv and irr concludes the paper illustrating that information obtained from the sa of the npv cannot be transferred to the irr

international capital mobility in oecd countries the feldstein horioka puzzle revisited abstract we utilise the most recent time series techniques of dynamic ols and examine international capital mobility across 23 oecd countries we adopt the saving investment approach where the endogeneity problem is confronted our findings show that capital has been remarkably mobile in most countries over the last three decades

solving the feldstein horioka puzzle with financial frictions unlike the prediction of a frictionless open economy model long term average savings and investment rates are highly correlated across countries a puzzle first identified by feldstein and horioka 1980 we quantitatively investigate the impact of two types of financial frictions on this correlation one is limited enforcement w here contracts are enforced by the threat of default penalties the other is limited spanning where the only asset available is noncontingent bonds we find that the calibrated model with both frictions produces a savings investment correlation and a volume of capital flows close to the data to solve the puzzle the limited enforcement friction needs low default penalties under which capital flows are much lower than those in the data and the limited spanning friction needs to exogenously restrict capital flows to the observed level when combined the two frictions interact to endogenously restrict capital flows and thereby solve the feldstein horioka puzzle

estimation of short run and long run elasticities of energy demand from panel data using shrinkage estimators this article discusses the problem of obtaining short run and long run elasticities of energy demand for each of 49 states in the united states using data for 21 years estimation using the time series data by each state gave several wrong signs for the coefficients estimation using pooled data was not valid because the hypothesis of homogeneity of the coefficients was rejected shrinkage estimators gave more reasonable results the article presents in a unified framework the classical empirical bayes and bayes approaches for deriving these estimators

political vs currency premia in international real interest differentials a study of forward rates for 24 countries abstract different approaches to quantifying the degree of capital mobility for a cross section of currencies particularly saving investment correlations and tests of real interest parity have appeared to show a surprisingly low degree of financial integration we use a new data set forward rate data for 24 countries including many small industrialized countries and seven ldcs to decompose the real interest differential into two parts the covered interest differential or political premium and the real forward discount or currency premium the latter in turn can be decomposed into the exchange risk premium and expected real depreciation we find a high degree of capital mobility across political boundaries for most of the g 11 countries plus hong kong and singapore for our sample period of 1982 to 1987 even for most of the other ldcs and smaller industrialized countries for which covered interest parity clearly fails the political premium is not as big a component of the real interest differential as the currency premium france would appear to have higher capital mobility than most by the criterion of real interest differentials but is seen in fact to have low capital mobility by the criterion of covered interest differentials a clear example of the superiority of the latter criterion

stochastic properties of a production inventory process with planned production using transform methodology abstract we consider a stochastic inventory process in which demand is generated by individual events separated by independent stochastic time intervals whereas production takes place in batches of possibly varying sizes at different points in time the resulting processes are analysed using laplace transform methodology expressions for inventory and stockouts are developed applying the theory of residues an example includes poisson distributed demand intervals assuming costs for set ups for carrying inventory and for stockouts conditions are developed for determining the optimal production policy on the one hand when applying the traditional average cost measure on the other when applying the annuity stream principle

global sensitivity analysis in inventory management abstract this paper deals with the sensitivity analysis sa of inventory management models when uncertainty in the input parameters is given full consideration we make use of sobol function and variance decomposition method for determining the most influential parameters on the model output we first illustrate the method by means of an analytical example we provide the expression of the global importance of demand holding costs order costs of the harris economic order quantity eoq formula we then present the global sa of the inventory management model developed by luciano and peccati 1999 capital structure and inventory management the temporary sale problem international journal of production economics 59 169 178 for the economic order quantity estimation in the context of the temporary sale problem we show that by performing global sa in parallel to the modeling process an analyst derives insights not only on the eoq structure when its expression is not analytically known but also on the relevance of modeling choices as the inclusion of financing policies and special orders

modelling oecd industrial energy demand asymmetric price responses and energy saving technical change abstract the industrial sector embodies a multifaceted production process consequently modelling the derived demand for energy is a complex issue made all the more difficult by the need to capture the effect of technical progress of the capital stock this paper is an exercise in econometric modelling of industrial energy demand using panel data for 15 oecd countries over the period 1962 2003 exploring the issue of energy saving technical change and asymmetric price responses although difficult to determine precisely it is tentatively concluded that the preferred specification for oecd industrial energy demand incorporates asymmetric price responses but not exogenous energy saving technical change

evaluation of capital costs in a multi level inventory system by means of the annuity stream principle abstract in this paper some results obtained from applying the annuity stream principle for evaluating capital tied up in inventory and work in progress and presented this principle departs from the cashflows associated with the production inventory processes considered in contrast to traditional procedures by which the inventory value is determined from physical stock evaluated at costs incurred to date in many situations it appears that the traditional procedure will underestimate the amount of capital tied up in production in this paper the two principles are applied to a multi level inventory system and the capital cost expressions and optimal order quantities are compared

differential importance and comparative statics an application to inventory management abstract in this work we deal with the problem of establishing which parameters impact an inventory policy the most a new sensitivity measure is introduced by relating the differential importance d and the comparative statics cs techniques we discuss the properties of the new indicator and show that it shares the additivity property we provide the expression of for optimization models numerical results are offered for the sensitivity analysis of a recently introduced inventory management model

numerical computation of inventory policies based on the eoq σx value for order point systems abstract this paper examines the numerical computation of two control parameters order size and order point in the well known inventory control model an s q system with a safety stock strategy the aim of the paper is to show that the eoq x value is both sufficient for controlling the system and essential for the economic consequences of using approximations in computations of optimal policies in view of the evidence from a number of studies showing that firms use of statistical inventory control lags far behind academic interest in the area this is also an important aspect the determination of optimal values for the control variables even in this very simple inventory control system is a complex task and therefore not suited to practical implementation where one or more of the following issues are neglected the interdependence of order size and order point the difference between stock on hand and net stock and the excess stockout included in the next period we use the determination of optimal values for the control variables as a framework to evaluate the economic consequences of these approximations applied in pratical inventory control

the deterministic eoq and epq with partial backordering at a rate that is linearly dependent on the time to delivery abstract our original models for the eoq and epq with partial backordering assumed that the backordering rate is a constant in this paper we extend those models to allow to increase linearly as the time until delivery decreases we show how those previous models can be adapted to find the optimal decision variable values for this new assumption and develop for each model type a condition that the initial value of must meet for partial backordering to be optimal

domestic savings intra national and intra european union capital flows 1971 1991 abstract this paper examines the relationship between savings and investment for the pre 1995 twelve members of the eu during the period 1971 1991 the results of the statistical analysis suggest that the capital market of the members of the eu resembles that of intra national regions implying a considerable degree of capital market integration this conclusion however is subject to several caveats the relationship between savings and investment in the case of portugal for example is unusual

dynamic translog and linear logit models a factor demand analysis of interfuel substitution in us industrial energy demand abstract we compare and contrast two popular dynamic flexible functional forms for cost functions the translog and the logit j bus econ stat 8 1990 347 353 using data on us industrial energy demand from 1960 to 1992 which has been analysed by previous studies energy econ 11 1989 89 94 appl econ 21 1989 931 945 j bus econ stat 13 1995 459 465 we show the crucial role played by different dynamic formulations of the translog in this analysis of factor demands with respect to rates of dynamic adjustment and substitution possibilities we conclude that the poor performance of the dynamic translog relative to the dynamic logit cannot be explained solely by dynamic model mis specification or the inclusion of price unresponsive non energy fuel use data our most robust empirical result is that coal and oil are substitutes

savings investment and international capital flows abstract the high correlation between national savings and domestic investment rateshas been interpreted as evidence that capital is not internationally mobile this paper surveys the theory and evidence on the relationship between savings and investment in a sample of 23 oecd countries a positive correlation between savings and investment rates is found in both the short and long runs however a wide variety of models generate such co movements in savings and investment in response to exogenous disturbances even under conditions of complete financial markets thus the savings investment correlation provides little evidence on the question of international capital mobility

sensitivity analysis in investment project evaluation abstract this paper discusses the sensitivity analysis of valuation equations used in investment decisions since financial decision are commonly supported via a point value of some criterion of economic relevance net present value economic value added internal rate of return etc we focus on local sensitivity analysis in particular we present the differential importance measure dim and discuss its relation to elasticity and other local sensitivity analysis techniques in the context of discounted cash flow valuation models we present general results of the net present value and internal rate of return sensitivity on changes in the cash flows specific results are obtained for a valuation model of projects under severe survival risk used in the industry sector of power generation

feldstein horioka meets a time trend abstract much of the literature relating to the feldstein horioka puzzle misses two major points it is obvious there should be a home bias and that this bias should be falling through time our empirical analysis is consistent with these points

dynamic energy demand models a comparison abstract this paper compares two second generation dynamic energy demand models a translog tl and a general leontief gl in the study of price elasticities and factor substitutions of nine swedish manufacturing industries food textiles wood paper printing chemicals non metallic minerals base metals and machinery several model specifications are tested with likelihood ratio test there is a disagreement on short run adjustments the tl model accepts putty putty production technology of immediate adjustments implying equal short and long run price elasticities of factors while the gl model rejects immediate adjustments giving out short run elasticities quite different from the long run the two models also disagree in substitutability in many cases

capital structure and inventory management the temporary sale price problem the paper discusses the use of adjusted present value techniques in a problem of inventory management the temporary sale price problem in the presence of equity or debt financing while traditional net present value approaches produce results very similar to those of the average cost approach our consideration of the capital structure of the firm opens the way to theoretically and numerically different inventory policies