does the great recession imply the end of the great moderation international evidence in this paper we examine whether or not the great recession had a temporary or permanent effect on output growth volatility after years of low macroeconomic volatility since the early eighties based on break detection methods applied to a set of advanced countries our empirical results do not give evidence to the end of the great moderation period but rather that the great recession is characterized by a dramatic short lived effect on the output growth but not on its volatility we show that neglecting the breaks both in mean and in variance can have large effects on output volatility modeling based on garch specifications

can asia overcome the imf stigma asian countries still have the imf stigma which originates from the experiences of the asian crisis of 1997 98 the feeling of being unfairly treated grew even stronger afterward the asian countries built large foreign reserves carried out structural reforms and became even stronger than pre crisis period asians are confident in not repeating the same mistake of falling into a crisis with too much external borrowing whether imf can entice asia to new precautionary liquidities facilities remains uncertain asia may choose either to focus on completing a regional safety net or to engage in imf demanding for a greater voice and votes

risk based analysis and policy implications for renewable energy investments in greece significant renewable energy re investments have to be implemented in order to achieve the ambitious re targets set in the eu for 2020 and beyond moreover a great amount of capital has to be leveraged as these projects are followed by high investment and financing costs main aim of this paper is the provision of a comprehensive assessment of the existing risk elements of re investments in relation to the respective policies and the evaluation of their impact on the weighted average cost of capital wacc in greece a consultation procedure with key national energy stakeholders took also place including policy makers project developers investors equity providers bankers and energy analysts in the greek re market in order to provide a validation of the respective results it has been concluded that the policy design risk represents the risk element with the greatest impact on the cost of capital and thus the level of re investments deployment ased on the cost of capital valuation process followed the wacc was estimated to reach approximately 12 for onshore wind and little lower values for solar pv projects in greece

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

optimizing the level of renewable electric r d expenditures using real options analysis abstract one of the primary objectives of the united states federal non hydro renewable electric r d program is to promote the development of technologies that have the potential to provide consumers with stable and secure energy supplies in order to quantify the benefits provided by continued federal renewable electric r d this paper uses real option pricing techniques to estimate the value of renewable electric technologies in the face of uncertain fossil fuel prices within the real options analysis framework the current value of expected future supply from renewable electric technologies net of federal r d expenditures is estimated to be 30 6 billion of this value 86 can be attributed to past federal r d efforts and 14 can be attributed to future federal r d efforts assuming continued federal r d funding at 300 million yr in addition real options analysis shows that the value of renewable electric technologies increases as current and future r d funding levels increase this indicates that the current level of federal renewable electric r d funding is sub optimal

inflation output growth and nominal and real uncertainty empirical evidence for the g7 abstract we use univariate garch models of inflation and output growth and monthly data for the g7 covering the 1957 2000 period to test for the causal effect of real and nominal macroeconomic uncertainty on inflation and output growth and the effect of inflation on inflation uncertainty our evidence supports a number of important conclusions first inflation is a positive determinant of uncertainty about inflation second output growth uncertainty is a positive determinant of the output growth rate third there is mixed evidence regarding the effect of inflation uncertainty on inflation and output growth hence uncertainty about the inflation rate is not necessarily detrimental to economic growth finally there is not much evidence supporting the hypothesis that output uncertainty raises inflation

measuring macroeconomic instability a critical survey illustrated with exports series for at least 40 years the analysis of the causes and consequences of macroeconomic instability has greatly deepened our understanding of the handicaps faced by developing countries this concern on economic instability is evidenced by a broad spectrum of indicators based on the deviation of observed values of a given economic aggregate from its reference or trend value in general the choice of this or that indicator is not discussed advocating that the resulting instability indicators are closely correlated focusing on measurements of instability in export revenue data for 134 countries from 1970 to 2005 this paper finds that this assertion may be true for variancebased indicators measuring the average magnitude of deviations from the trend however great discrepancies may arise between different measures of the asymmetry or of the occurrence of extreme deviations around the trend when different trend computation methods are used our purpose is therefore to invite further discussions regarding the use of these indicators and to highlight the different dimensions of instability which have been so far unheeded by the economic literature

the second moments matter the impact of macroeconomic uncertainty on the allocation of loanable funds abstract this paper investigates how variations in macroeconomic uncertainty distort commercial banks allocation of loanable funds by analyzing the dispersion of banks total loan to asset ratios over a quarter century period

return on capital of brazilian electricity distributors a comparative analysis abstract this paper analyzes the electricity distribution segment in brazil from 1998 to 2005 after the conclusion of privatization process trying to assess whether the return on capital invested was in line with the risk required in the segment it concludes that the return on equity in brazil was systematically negative until 2003 only in 2005 did the distribution segment really begin to recover showing profitability consistent with the estimated cost of equity comparisons with argentine chilean and american companies reveal that firms in the latter two countries generally managed to reward shareholders according to the opportunity cost of capital estimates are that to sustain annual growth of roughly 3 7 for the next decade the entire electricity sector will demand us 7 billion in capital expenditures a year for the next decade 67 for generation 16 for transmission and 17 for distribution in order to stimulate private capital investment it is fundamental for the regulator in the tariff revision processes to consistently assure a rate of return on capital in line with the segment s real opportunity cost and therefore maintain the health of all the three segments without the burden of subsidies

why does the yield curve predict output and inflation the slope of the yield curve has been shown empirically to be a significant predictor of inflation and real economic activity but there is no standard theory as to why the relationship exists this article constructs an analytical rational expectations model to investigate the reasons for the empirical results the model suggests that the relationships are not structural but are instead influenced by the monetary policy regime however the yield curve should have predictive power for output and inflation in most circumstances various implications of the theoretical model are tested and confirmed empirically

the scope of imf conditionality international organizations are governed by two parallel sets of rules formal rules which embody consensual procedures and informal rules which allow exceptional access for powerful countries a new data set drawn from the imf s records of conditionality provides an opportunity to study the bargaining process within an important international organization and answer questions about the institution s autonomy i find evidence of u s influence which operates to constrain condition ality but only in important countries that are vulnerable enough to be willing to draw on their influence with the united states in ordinary countries under ordinary circumstances broad authority is delegated to the imf which adjusts conditionality to accommodate local circumstances and domestic political opposition the imf has refrained from exploiting the vulnerability of particular countries to maximize the scope of conditionality international organizations have become increasingly important actors in inter national politics they have proliferated have expanded in membership have acquired new legal enforcement powers and have extended their reach into the details of domestic political economy in their member states af ew including the international monetary fund imf or simply the fund command significant resources and wield considerable authority some critics have argued that these international organizations are sufficiently autonomous to create a democratic def icit at the international level as they pursue a vision of undemocratic liberal ism 1 other critics have argued that international organizations are nothing more than instruments in the hands of powerful states 2 these critiques of course cannot simultaneously be true and both run into difficulties the puzzle that the rogue agency view cannot explain is why the principals have chosen to delegate so much authority in principal agent terms this view posits that both screening and monitoring have failed the principals are unable to select agents with preferences similar to their own and are unable

an analysis of drawings on the international monetary fund by developing countries the nature of relations between the imf and developing countries has come under close scrutiny in recent years this has partly been the result of the deteriorating economic situation in which a large number of non oil developing countries have found themselves a situation characterised by falling rates of economic growth increasing balance of payments deficits and rising debt service ratios and partly it has resulted from the particular but public experiences of a number of developing countries such as jamaica peru and tanzania in their dealings with the fund

integrating financial theory and methods in electricity resource planning decision makers throughout the world are introducing risk and market forces in the electric power industry to lower costs and improve services incentive based regulation ibr which replaces cost of service ratemaking with an approach that divorces costs from revenues exposes the utility to the risk of profits or losses depending on their performance regulators also are allowing for competition within the industry most notably in the wholesale market and possibly in the retail market two financial approaches that incorporate risk in resource planning are evaluated risk adjusted discount rates radr and options theory ot these two complementary approaches are an improvement over the standard present value revenue requirement pvrr however each method has some important limitations by correctly using radr and ot and understanding their limitations decision makers can improve their ability to value risk properly in power plant projects and integrated resource plans

the imf and precautionary lending an empirical evaluation of the selectivity and effectiveness of the flexible credit line abstract this paper provides an empirical evaluation of the flexible credit line fcl the imf s prime precautionary lending instrument since 2009 to which so far only mexico colombia and poland have subscribed we consider both questions of selectivity and effectiveness first which variables explain the three countries participation in fcl arrangements and second to which extent has the fcl delivered on its promise of boosting market confidence in its respective users based on a probit analysis we show that fcl selectivity can be explained by both demand and supply side factors the probability of participation in the fcl was greater in countries that experienced larger prior exchange market pressures that had lower bond spreads and inflation that accounted for higher shares in us exports and that exhibited a higher propensity of making political concessions to the us using a synthetic control approach we find evidence for some but generally limited beneficial effects on sovereign bond spreads and gross capital inflows into the three fcl countries overall our results suggest that any economic stigma that may prevent eligible countries from entering into an fcl arrangement is unwarranted conversely the apparent link of fcl participation with us interests is not conducive to overcoming political stigma

capital controls in brazil stemming a tide with a signal controls on capital inflows have been experiencing a renaissance since 2008 with several prominent emerging markets implementing them in recent years we focus on brazil which instituted five changes in its capital account regime in 2008 2011 using the synthetic control method we construct counterfactuals i e brazil with no policy change for each of these changes we find no evidence that any tightening of controls was effective in reducing the magnitudes of capital inflows but we observe some modest and short lived success in preventing further declines in inflows when the capital controls were relaxed we hypothesize that price based capital controls only perceptible effect is to be found in the content of the signal they broadcast regarding the government s larger intentions and sensibilities in the case of brazil its left of center government s willingness to remove controls was perceived as a noteworthy indication that the government was not as hostile to the international financial markets as many expected it to be

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

the effect of imf programs on economic growth abstract using a bivariate dynamic version of the heckman selection model we estimate the effect of participation in international monetary fund imf programs on economic growth we find evidence that governments enter into agreements with the imf under the pressures of a foreign reserves crisis but they also bring in the fund to shield themselves from the political costs of adjustment policies program participation lowers growth rates for as long as countries remain under a program once countries leave the program they grow faster than if they had remained but not faster than they would have without participation

macroeconomic uncertainty precautionary saving and the current account abstract the relationship between current account developments and changes in the macroeconomic environment is a key issue in open economy macroeconomics this paper extends the standard intertemporal model of the current account to incorporate the effects of macroeconomic uncertainty on external saving behavior it is shown that the greater the uncertainty in national cash flow defined as output less investment less government consumption the greater will be the incentive for precautionary saving and ceteris paribus the larger the current account surplus empirical support for the model is found using post war quarterly data for the united states japan and the united kingdom as well as a long time series 1919 1990 for the united states

the fischer black hypothesis some time series evidence we estimate an arch m model to analyze the relationship between the conditional standard deviation of real gross national product gnp and its growth rate for the period 1871 1993 we find that variability significantly increases output growth rates in addition impulse response functions show that the effect of variability on growth rates is dynamic these results provide evidence in favor of black s 1987 business cycle hypothesis

the persistence in volatility of the us term premium 1970 1986 abstract this paper examines the persistence of the volatility of the risk premia for excess holding period returns of the term structure using a garch m model of the conditional variance the finding of a high degree of persistence cannot be sustained once allowance is made for a structural break in the unconditional variance caused by a change in the operation of us monetary policy during 1979 1982

the great moderation and the relationship between output growth and its volatility this study examines the effect of the great moderation on the relationship between u s output growth and its volatility over the period 1947 to 2006 first we consider the possible effects of structural change in the volatility process in so doing we employ garch m and arch m specifications of the process describing output growth rate and its volatility with and without a one time structural break in volatility second our data analyses and empirical results suggest no significant relationship between the output growth rate and its volatility favoring the traditional wisdom of dichotomy in macroeconomics moreover the evidence shows that the time varying variance falls sharply or even disappears once we incorporate a one time structural break in the unconditional variance of output starting 1982 or 1984 that is the integrated garch effect proves spurious finally a joint test of a trend change and a one time shift in the volatility process finds that the one time shift dominates

solar feed in tariffs in a post grid parity world the role of risk investor diversity and business models over the past decade feed in tariffs have spurred significant deployment of solar photovoltaics in germany and other countries with recent cost trends several countries are approaching retail grid parity some policymakers conclude that now is the time to remove feed in tariffs as grid parity creates a self sustaining market where economically rational investors will invest even in the absence of government incentives recent experience in key european solar markets however shows that with the advent of grid parity and the reduction of feed in tariffs investment in new solar capacity has decreased rather than increased making it questionable whether low carbon energy policy targets will be reached we conduct a cross case study analysis of three pv markets germany italy and switzerland to investigate the role of feed in tariffs for the near and post grid parity stages of diffusion accounting for investor diversity and distinguishing between implications for revenue based and savings based business models we find that recent market trends are strongly driven by increased levels of risk especially policy risk and exposure to revenue risk we therefore suggest that relatively frugal but stable policy environments may be conducive to further growth of investment in photovoltaics and minimize cost to society

catalysing private capital flows do imf programmes work as commitment devices in this article we examine whether imf programmes influence the ability of developing country issuers to tap international bond markets and if they improve spreads paid on the bonds issued we find that fund programmes do not provide a uniformly favourable signalling effect instead the evidence is most consistent with a positive effect of imf programmes when they are viewed as likely to lead to policy reform and when undertaken before economic fundamentals have deteriorated significantly the size of the fund s programme matters but the credibility of a joint commitment by the country and the imf appears to be critical enhancing its members access to international capital markets is widely regarded as an important objective of the international monetary fund imf or fund though the objective is not an explicitly stated purpose in the fund s articles of agreements the flow of international capital is essential to such stated purposes as the stability of the international monetary system efficient trade and productive resource use and to providing confidence when a member country experiences difficulties with its balance of payments 1 the fund s interest in private international capital flows has moreover increased over the last decade reflecting this evolution the fund s former managing

growth volatility and learning abstract this paper presents a simple stochastic growth model in which productivity improvements are the result of both internal deliberate and external serendipitous learning behaviour the model is used to illustrate how these different mechanisms of endogenous technological change can lead to different implications for the correlation between output growth and output variability

survey of social and economic growth in se europe a new conceptual frame for sustainability metrics the practice so far has indicated that there is a sensitive relationship that exists between social and economic subsystem of sustainable development therefore this research suggests comparison of the states of these two subsystems as a new conceptual frame which is essential for strategic conceptualization of development the research pointed out a rather visible collision between the achieved degree of economic and social development in the countries of south eastern europe in respect to germany and france which were taken into consideration as two of the most developed countries in the european union and in the entire world the indicators which are given in this research point to the necessity of further scientific and practical consideration of strategic conceptualization of relationship between economics and society

a note on cross country growth regressions a large and growing literature searches for the determinants of economic growth employing cross country regression analysis this approach implicitly assumes that countries possess similar structu

modelling uncertainty a recursive var bootstrapping approach abstract this paper develops a recursive var bootstrapping approach to produce time series measures of nominal and real uncertainty the method is applied to us data and results compared to measures based on the survey of professional forecasters

electricity markets volatility estimates regularities and risk management applications the recent deregulation of the market for electric power in many parts of the us and canada has expanded the set of potential tools for managing the types of risks faced by both generators and consumers of electric power in particular manufacturing and other firms whose operations are powered by electricity now face on a continuing basis the engineering management decisions concerning whether they should buy or produce electricity and if they are to buy or sell electricity what types of contracts are optimum these types of risk management decisions typically involve futures forwards options and other financial derivatives the price and volatility of electric power are known to play an essential role in determining which of these instruments should be used however electricity as a commodity possesses certain special features not shared by other commodities and hence its risk properties are not yet well understood in this paper we consider and test certain hypotheses about the properties of electricity price using recent market data we find that electricity prices possess certain volatility and other systematic properties that can be characterized by the type and method of delivery of electricity these properties can be used by firms in formulating their optimal demand and supply schedules of electric power

many happy returns recidivism and the imf abstract imf programs are designed to provide a temporary source of finance for countries with balance of payments disequilibria consequently borrowing from the imf should occur infrequently and be widely distributed among member countries however some countries are recurrent users of fund resources this paper investigates which variables account for multiple borrowings from the imf we use models of count data to examine the impact of the need for financing domestic policies external shocks and structural and institutional factors on borrowings between 1980 and 1996 we find that recidivist borrowers have lower reserve holdings larger current account deficits and capital outflows lower but less volatile terms of trade larger debt service and external debt ratios lower investment rates and per capita income and weak governance

imf conditionality as a screening device a theoretical model is developed in which adoption of an imf programme signals a country s productivity it is assumed that there are two types of country one with a high return on investment and the other with a low return the country s type is known only to itself in the presence of a debt overhang the high productivity country may choose not to undertake the investment despite it being socially efficient to do so in this case the creditor would like to offer the country some debt reduction but the low productivity type will also benefit from the debt reduction this problem can be avoided if the country has sufficient resources to engage in a debt buyback in order to gain the debt relief only the high productivity type would be prepared to sacrifice current resources for the debt reduction and thus a separation of the types is achieved this is similar to an argument found in acharya and diwan 1993 we argue however that it is unlikely that a heavily indebted country will have sufficient resources for a buyback if the country is credit constrained an alternative screening mechanism is to undertake an imf programme in return for debt reduction and possibly an imf loan this mechanism can be the equilibrium outcome even if the programme creates only disutility for the country s policy makers

productivity growth and the structure of the business cycle abstract over the recent years opportunity cost oc models of growth have argued that recessions are times when firms engage in productivity improving activities because of intertemporal substitu tion this paper tests whether this approach is correct the technique used to disentangle the trend from the cycle is semi structural vector autoregression the results are mildly supportive of the oc theory there tends to be a negative impact of demand shocks on productivity both in the short run and in the long run and the short run impact is stronger in those countries where fluctuations are more transitory however there is no significant response of r d to demand shocks

implications of applying solar industry best practice resource estimation on project financing abstract solar resource estimation risk is one of the main solar pv project risks that influences lender s decision in providing financing and in determining the cost of capital more recently a number of measures have emerged to mitigate this risk the study focuses on solar industry s best practice energy resource estimation and assesses its financing implications to the 27 mwp solar pv project study in brunei darussalam the best practice in resource estimation uses multiple data sources through the measure correlate predict mcp technique as compared with the standard practice that rely solely on modelled data source the best practice case generates resource data with lower uncertainty and yields superior high confidence energy production estimate than the standard practice case using project financial parameters in brunei darussalam for project financing and adopting the international debt service coverage ratio dscr benchmark rates the best practice case yields dscrs that surpass the target rates while those of standard practice case stay below the reference rates the best practice case could also accommodate higher debt share and have lower levelized cost of electricity lcoe while the standard practice case would require a lower debt share but having a higher lcoe

discovering the link between inflation rates and inflation uncertainty a new time series model is used to reassess the strength of the link between inflation uncertainty and the level of inflation in the united states the model provides several statistical measures that can be used to examine different aspects of uncertainty the main finding is that uncertainty about the long rather than short term prospects for inflation moved strongly with the rate of inflation since the early 1970s copyright 1991 by ohio state university press

are empirical measures of macroeconomic uncertainty alike there is a plethora of time series measures of uncertainty for inflation and real output growth in empirical studies but little is known whether they are comparable to the uncertainty measure reported by individual forecasters in the survey of professional forecasters are these two measures of uncertainty inherently distinct this paper shows that compared with many uncertainty proxies produced by time series models the use of real time data with fixed sample recursive estimation of an asymmetric bivariate generalized autoregressive conditional heteroskedasticity model yields inflation uncertainty estimates which resemble the survey measure there is however overwhelming evidence that many of the time series measures of growth uncertainty exceed the level of uncertainty obtained from survey measure our results highlight the relative merits of using different methods in modelling macroeconomic uncertainty which are useful for empirical researchers

testing for rate dependence and asymmetry in inflation uncertainty evidence from the g7 economies this paper employs a new test for level effects and asymmetry in inflation volatility higher inflation rates induce greater inflation uncertainty for the u s u k and canada uk and canadian inflation volatility responds asymmetrically to positive and negative inflation shocks c 2006 elsevier b v all rights reserved

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

how well does the is lm model fit postwar u s data postwar u s time series for money interest rates prices and gnp are characterized by a multivariate process driven by four exogenous disturbances those disturbances are identified so that they can be interpreted as the four main sources of fluctuations found in the is lm phillips curve model money supply money demand is and aggregate supply shocks the dynamic properties of the estimated model are analyzed and shown to match most of the stylized predictions of the model the estimated decomposition is also used to measure the relative importance of each shock to interpret some macroeconomic episodes and to study sources of permanent shocks to nominal variables

scaling up finance for off grid renewable energy the role of aggregation and spatial diversification in derisking investments in mini grids for rural electrification in india abstract today about 1 1 billion people lack access to electricity worldwide it is estimated that annual investments of 48 billion usd are required to meet the target of the sustainable development goals of providing universal electricity access by 2030 the need for private investments to meet this target is evident but small scale electrification projects are often unattractive for private investors due to unfavourable risk return profiles and small investment volumes both issues can potentially be addressed by aggregating projects into diversified portfolios an approach commonly used by investors in several contexts but little investigated in the context of rural electrification this paper addresses the question of how spatial diversity in a portfolio can be used to reduce investment risks and increase investment volumes through a mixed method approach involving three steps i identification and classification of investment risks for renewable energy mini grid projects ii qualitative analysis of the correlations between investment risks for different projects through interviews and iii quantitative estimation of the cost of capital and derisking effects of spatial diversification strategies for an experimental portfolio in india we discuss the implications for policymakers in promoting and facilitating the ability of private sector investors to aggregate small scale electrification investments

economic determinants of imf financial arrangements abstract we analyze factors that lead to imf approval of financial arrangements we account for both economic variables that induce a country to seek an imf arrangement demand side factors and macroeconomic policy commitments that the imf considers when deciding whether to approve it supply side factors using a pooled sample of annual observations for 91 developing countries over 1973 1991 we obtain maximum likelihood bivariate and univariate probit estimates of the approval of an imf arrangement for a given country in a given year a number of demand side and supply side variables are statistically significant determinants of the approval of an imf arrangement

on us politics and imf lending abstract the political factors shaping imf lending to developing countries have attracted attention in recent empirical work this goes in particular for the role and influence of the us however scant formal modelling makes interpretation of empirical results difficult in this paper we propose a model in which the us acts as principal within the imf and seeks to maximize its impact on the policy stance of debtor countries we derive an optimal loan allocation mechanism which leads to the testable hypothesis that the probability of an imf loan is increasing in the amount of political concessions countries make a political concession is defined as the distance between a country s bliss point and its actual policy stance measured relative to the us we introduce a bliss point proxy and demonstrate that our hypothesis is strongly supported in the data moreover we show that not accounting for bliss points may lead to endogeneity bias in empirical work

revisiting the techno economic analysis process for building mounted grid connected solar photovoltaic systems part two application part one in this two part paper identified monte carlo analysis as an improved approach over traditional deterministic techno economic methods for solar pv prosumers in deregulated markets in this

imf lending programs participation and impact abstract participation in imf programs has been an option that more and more developing countries have exercised in recent years in this paper a detailed analysis of such participation over the period 1976 1986 provides a number of insights into the motivations for and the macroeconomic effects of such participation participation is driven by a combination of past performance present external influences and sluggish adjustment of developing countries the ability to predict which countries will participate in the imf program is quite good with nearly 90 percent of variation in such choices accounted for by the explanatory variables employed increased participation has as contemporaneous effects a reduction in economic growth and domestic investment and an improvement in the current account lagged effects of increased participation on economic growth and domestic investment are positive and in most estimates quantitatively greater than the contemporaneous effects there is also evidence of significantly lower public investment an increased budget surplus and real depreciation of the exchange rate with increased participation results for domestic credit creation and government current expenditure although they have a sign consistent with more austere policy cannot be shown to be significantly different from those not participating

the effects of expected and unexpected volatility on long run growth evidence from 18 developed economies 1 introductionalthough there is disagreement about the magnitude many economists agree that business cycles have negative consequences for welfare in the short run by causing output to deviate from potential as a result most policymakers regard reducing volatility as a desirable goal however there is disagreement about the long run consequences of business cycles some models suggest that business cycle volatility should reduce long run growth in these models increased volatility increases risk reduces investment and slows the growth rate of output in addition volatility may reduce the diffusion rate of new technology which might reduce the long run growth rate hence business cycles have negative short run consequences by causing output to deviate from the trend and negative long run consequences by slowing the long run growth rate if these models are accurate then the welfare consequences of business cycles are more severe than previously thought an alternative view of the growth volatility relationship suggests that there may be a long run benefit to business cycles in these models increased volatility stimulates inventive activity which increases the long run growth rate reduced volatility will be beneficial in the short run but if reduced volatility decreases the long run growth rate then there are costs to stabilization as a result policymakers would face a trade off between business cycle volatility and long run growth in addition it is possible that the long run costs of stabilization policy might exceed the short run benefits this article sheds new light on the growth volatility relationship first this article focuses on two types of volatility expected volatility and unexpected volatility this allows a more thorough test of the two general hypotheses linking growth to volatility second this article empirically examines the relationship between growth and volatility for 18 industrialized nations over a 110 year period therefore the analysis avoids the problem of short time span of data this article proceeds as follows section 2 clarifies the relationship between the competing hypotheses as well as between expected and unexpected volatility section 3 analyzes the growth volatility relationship without making the distinction between expected and unexpected volatility section 4 uses generalized method of moments gmm and ordinary least squares ols along with panel data to estimate the effects of expected and unexpected volatility on growth section 5 concludes with suggestions for further research 2 the growth volatility relationshipthe view that business cycle volatility reduces the long run growth rate focuses on risk bernanke 1983 ramey and ramey 1991 and pindyck 1991 argue that volatility creates risk about future demand and that firms are unlikely to invest in new plants and equipment if they are unsure about the demand for their product the greater the volatility in output the more uncertain future demand becomes the greater the risk and the less likely firms are to invest this negative relationship between volatility and investment might lead to a negative relationship between growth and volatility increased volatility decreases investment which then slows the growth rates of the capital stock and output the effect would be especially pronounced if new technology is embodied in new capital goods ramey and ramey 1995 and macri and sinha 2000 have found results consistent with this view of the growth volatility relationship using aggregate data this view emphasizes the risks associated with unexpected changes in output when firms cannot accurately forecast the demand for their goods they reduce capital expenditures which reduces growth the view that business cycles might increase long run growth focuses on the opportunity cost of productivity enhancing activities peas bean 1990 and saint paul 1993 view firms as solving an intertemporal profit maximizing problem in which producing goods provides profits today but engaging in peas produces profits only in the distant future

uncertainty and labor contract durations this paper provides an empirical investigation into the relationship between ex ante u s labor contract durations and uncertainty over the period 1970 to 1995 we construct measures of inflation uncertainty as well as aggregate nominal and real uncertainty the results not only corroborate previous findings of an inverse relationship between contract durations and inflation uncertainty but also document that this relationship extends to both measures of aggregate uncertainty we also explore the robustness of this relationship to various measures of inflation uncertainty that have appeared in the literature

quantifying the impact of r d on pv project financing costs abstract energy technology research and development r d typically focuses on advancing the performance and reducing equipment and installation costs however such r d can also have significant indirect impacts on other factors incorporating the impact that r d activities have on financing costs can provide a more complete picture of the consequences of these decisions and may allow policymakers to make better decisions in this paper we discuss some historical examples of r d impacting financing costs in the solar energy sector summarize the areas of r d that can impact financing and describe methodological approaches that can be used to quantify the impact of r d on financing costs and as a result the levelized cost of energy lcoe we estimate that r d driven reductions in financing costs in the solar sector from current levels to low risk levels could reduce lcoe approximately 25 alternatively without the r d advances needed to prevent future risks and complications financing costs in the solar sector could increase by as much as 115

information from financial markets and var measures of monetary policy exogenous measures of monetary policy shocks directly derived from nancial market information are used in close us and open us germany economy var models to evaluate the robustness of the dynamic e ect of monetary policy obtained from traditional identi ed var the empirical analysis con rms the main features of the monetary policy transmission mechanism in us and germany explicitly addressing the issue of simultaneity between the german policy interest rate and the us dollar dmark exchange rate 1999 elsevier science b v all rights reserved jel classixcation e44 e52 f41

evaluating the causes of cost reduction in photovoltaic modules abstract photovoltaic pv module costs have declined rapidly over forty years but the reasons remain elusive here we advance a conceptual framework and quantitative method for quantifying the causes of cost changes in a technology and apply it to pv modules our method begins with a cost model that breaks down cost into variables that changed over time cost change equations are then derived to quantify each variable s contribution we distinguish between changes observed in variables of the cost model which we term low level mechanisms of cost reduction and research and development learning by doing and scale economies which we refer to as high level mechanisms we find that increased module efficiency was the leading low level cause of cost reduction in 1980 2012 contributing almost 25 of the decline government funded and private r d was the most important high level mechanism over this period after 2001 however scale economies became a more significant cause of cost reduction approaching r d in importance policies that stimulate market growth have played a key role in enabling pv s cost reduction through privately funded r d and scale economies and to a lesser extent learning by doing the method presented here can be adapted to retrospectively or prospectively study many technologies and performance metrics besides cost

evaluating energy efficiency investments accounting for risk in the discounting process a prominent feature of the literature regarding the economics of energy conservation is the debate over the existence and nature of the so called efficiency gap a frequent subject of debate is whether consumers apply a reasonable discount rate when evaluating the future benefits of energy efficiency measures a key aspect of the discounting debate is the manner in which consumer attitudes toward risk are accounted for when discounting this paper suggests that an appropriate approach to incorporating risk into the evaluation of energy efficiency projects would yield higher net benefits to such projects than standard evaluation techniques we argue that analysing the purchase of fuel saving capital as though it were a standard investment in a physical asset obscures an important feature of the decision rather than deciding whether or not to invest in an asset with an uncertain future benefit stream the consumer is actually choosing between two future cost streams each of which is uncertain this seemingly minor change in perspective has important implications for how the risk associated with fuel saving capital should be brought into the discounting process an example based on lighting technologies is used to illustrate the principles discussed

exchange market mayhem the antecedents and aftermath of speculative attacks exchange market mayhem the antecedents and aftermath of speculative attacks this paper evaluates the causes and consequences of episodes of turbulence in foreign exchange markets using data from 1959 through 1993 for twenty oecd countries we consider the antecedents and aftermath of devaluations and revaluations flotations fixings and speculative attacks which may not be successful we find that realignments of fixed exchange rates are alike devaluations are preceded by political instability budget and current account deficits and fast growth of money and prices revaluations are mirror images of devaluations speculative attacks resemble devaluations but money growth and inflation are more endemic and there is no last minute attempt to tighten monetary policy in contrast few consistent correlations link regime transitions like flotations or fixings to macroeconomic or political variables transitions between exchange rate regimes are largely idiosyncratic and are neither consistently provoked ex ante by systematic imbalances nor typically justified ex post by subsequent changes in policy we conclude that there are no clear early warning signals of many speculative attacks and no easy solutions for policy makers barry eichengreen andrew k rose and charles wyplosz

global horse trading imf loans for votes in the united nations security council we investigate whether temporary members of the united nations security council receive favorable treatment from the international monetary fund imf using panel data for 197 countries over the period from 1951 to 2004 our results indicate a robust positive relationship between temporary security council membership and participation in imf programs even after accounting for economic political and country specific factors there is also evidence that security council membership reduces the number of conditions included in imf programs imf loans seem to be a mechanism by which the major shareholders of the fund can win favor with voting members of the security council

the effects of real and nominal uncertainty on inflation and output growth some garch m evidence in this paper we use garch m methods to test four hypotheses about the effects of real and nominal uncertainty on average inflation and output growth in the united states from 1948 to 1996 we find no evidence that higher inflation uncertainty or higher output growth uncertainty raises the average inflation rate we also find no support for the idea that more risky output growth is associated with a higher average real growth rate our key result is that in a variety of models and sample periods inflation uncertainty significantly lowers real output growth copyright 2000 john wiley sons ltd

tenure issues in higher education the system of tenure that dominates american higher education has long been a source of controversy the institution of tenure has been attacked for entrenching a lazy professoriate more interested in attending faraway conferences and producing unreadable research than in teaching or developing practical insights while on the other hand it has long been defended as an absolute necessity for the defense of open intellectual inquiry the tenure controversy has been sharpened in recent years by several events the end of mandatory retirement which was abolished by federal law effective january 1 1994 has heightened concerns about the productivity and commitment of professors who received tenure long ago and who no longer have the same incentives to invest in long term reputation there is also ongoing concern over the steadily rising cost of higher education which raises the question of what students as well as the taxpayers who support public institutions of higher education are getting for their money 1 the idea that tenure is a wasteful institution for universities runs up against the puzzling fact that the commitment to tenure is one that academic institutions impose on themselves although the american association of university professors aaup provides a powerful lobby in favor of tenure generally colleges and universities most notably private ones are under no legal requirement to observe tenure constraints although as administrators we certainly feel the weight of those constraints our view is that a tenure system in fact provides important benefits to society and to colleges and universities we argue here that the role of tenure is

estimates of the variance of u s inflation based upon the arch model it is generally agreed that the unpredictability of future inflation is a major component of the welfare loss associated with inflation perfectly predicted inflation might induce some costs through institutional rigidities governmental interference and transaction costs but in the long run these should be rather minimal as these institutions adopt various forms of indexing when inflation is unpredictable risk averse economic agents will incur a loss even if prices and quantities are perfectly flexible in all markets inflation is a measure of the relative price of goods today and goods tomorrow thus uncertainty in tomorrow s price impairs the efficiency of today s allocation decisions friedman in his nobel lecture 8 argues convincingly that higher variability of inflation would lead to decreased output ceteris paribus he then conjectures that higher rates of inflation are generally associated with higher variability of inflation and presumably greater uncertainty about future rates if this is true then higher rates of inflation would also be associated with low levels of output which implies a positively sloped phillips curve this paper uses a new statistical technique arch to estimate the conditional mean and variance of inflation from u s time series data the main finding is that the variance of inflation in the seventies was only slightly greater than in the sixties

monetary instability the predictability of prices and the allocation of investment an empirical investigation using u k panel data it is often argued that monetary instability reduces the informational content of market signals and thereby hinders the efficient allocation of investment in this paper we use a signal extraction framework to give empirical content to this idea in particular we show why this framework predicts that as monetary uncertainty decreases the cross sectional distribution of investment widens we then explore this hypothesis using panel data information for uk companies over twenty years our data generally support the view that monetary instability may affect investment allocation through its effect on the predictability of prices this abstract was borrowed from another version of this item

the effect of recessions on the relationship between output variability and growth this paper investigates the relationship between output volatility and growth using post war real gdp data for the united states we expand on recent research by beaudry and koop 1993 documenting the asymmetric effect of recessions on output growth the results presented in this paper suggest that output volatility is highest when the economy is contracting while we find that the economy expands most rapidly following a recession this expansion is offset by the negative impact of output uncertainty

consensus and uncertainty in economic prediction we define consensus as the degree of agreement among point predictions aimed at the same target by different individuals and uncertainty as the diffuseness of the corresponding probability distributions this distinction is made operational with the aid of the nber asa survey data on matched point and probabilistic forecasts of inflation and the rate of change in gross national product the means of the two sets of forecasts agree closely standard deviations of point forecasts tend to understate uncertainty as measured by standard deviations of the predictive probability distributions however these measures of consensus and uncertainty are on the whole positively correlated there is evidence that expectations of higher inflation generate greater uncertainty about inflation tests also favor the hypothesis that a rise in inflation uncertainty has adverse effects on real growth

a real option based simulation model to evaluate investments in pump storage plants investments in pump storage plants are expected to grow especially due to their ability to store an excess of supply from wind power plants in order to evaluate these investments correctly the peculiarities of pump storage plants and the characteristics of liberalized power markets have to be considered the main characteristics of power markets are the strong power price volatility and the occurrence of prices spikes in this article a valuation model is developed capturing these aspects using power price simulation optimization of unit commitment and capital market theory this valuation model is able to value a future price based unit commitment planning that corresponds to future scope of actions also called real options the resulting real option value for the pump storage plant is compared with the traditional net present value approach because this approach is not able to evaluate scope of actions correctly it results in strongly smaller investment values and forces wrong investment decisions

persistence in variance structural change and the garch model this article examines the persistence of the variance as measured by the generalized autoregressive conditional heteroskedasticity garch model in stock return data in particular we investigate the extent to which persistence in variance may be overstated because of the existence of and failure to take account of deterministic structural shifts in the model both an analysis of daily stock return data and a monte carlo simulation experiment confirm the hypothesis that garch measures of persistence in variance are sensitive to this type of model misspecification

the economic characteristics of imf program countries abstract a logit analysis is utilized to identify the factors that characterized developing nations that entered imf stabilization programs in the early 1980s program countries recorded higher rates of domestic credit growth larger shares of government expenditure more severe current account deficits smaller reserve holdings and lower per capita incomes

inflation and uncertainty tests for temporal ordering for the postwar united states increases in the rate of inflation tend to precede increases in the level of inflation uncertainty the finding suggests that higher inflation uncertainty is part of the welfare cost of inflation possible explanations are 1 a high rate of inflation increases uncertainty about future monetary policy and 2 there is uncertainty about the persistence of inflation copyright 1995 by ohio state university press

evaluating the economic effects of flat tax reforms using synthetic control methods tax reforms are often motivated by their potential to improve economic performance however their actual impacts are difficult to quantify we analyze the impact of flat tax reform on incomes using synthetic control methods we identify the eight eastern and central european countries that adopted flat tax systems between 1994 and 2005 and then compare post reform gdp per capita of treated countries with a convex combination of similar but untreated countries while accounting for the time varying impact of unobservable heterogeneity we find positive impacts in all eight countries with seven out of eight cases significant at the conventional level