bilateral bargaining with externalities this paper provides an analysis of a non cooperative pairwise bargaining game between agents in a network we establish that there exists an equilibrium that generates a coalitional bargaining division of the reduced surplus that arises as a result of externalities between agents that is we provide a non cooperative justification for a cooperative division of a non cooperative surplus the resulting division is related to the myerson shapley value with properties that are particularly useful and tractable in applications we demonstrate this by examining buyer seller networks and vertical foreclosure

simultaneous attainment of energy goals by means of green certificates and emission permits abstract we discuss the analytical effects of introducing emission permits and green certificates and the corresponding quotas as regulatory mechanisms to respectively reduce emissions from electricity production and ensure a certain deployment of renewable energy the different case studies in this paper show that both instruments can be used in order to reach an emission goal or a goal of renewable energy however the combination of these instruments and the way they are used is shown to be important for the price faced by consumers it is shown that the effect on the consumer price is not an unambiguous increase with the introduction of a green quota there is a choice between quotas leading to a lower consumer price and quotas leading to a higher consumer price as a result of this it is shown that it is always optimal to reach a renewable energy deployment goal by the use of green certificates however to reach an emission goal it is sometimes most favourable with respect to consumer prices to use green certificates and sometimes to use emission permits

exclusive contracts and protection of investments we consider the effect of a renegotiable exclusive contract restricting a buyer to purchase from only one seller on the levels of noncontractible investments undertaken in their relationship contrary to some informal claims in the literature we find that exclusivity has no effect when all investments are fully specific to the relationship i e are purely internal exclusivity does matter when investments affect the value of the buyer s trade with other sellers i e have external effects we examine the effects of exclusivity on investments and aggregate welfare and the private incentives of the buyer seller coalition to use it

a model of target changes and the term structure of interest rates abstract we investigate the effects of short term rate targeting by the federal reserve on the term structure of interest rates and make contributions at two levels using a new series of interest rate targets made available by the federal reserve bank of new york we develop a family of models that highlight the implications of discrete changes in interest rate targets for the term structure of interest rates we show that spreads between short term rates and the overnight federal reserve funds rate are mainly driven by expectations of changes in the target not by the transitory dynamics of the overnight rate around the target hence the bias in tests of the expectations hypothesis that we document can be mainly attributed to the erroneous anticipation of future changes in monetary policy our modeling assumptions and newly available data make it possible to extract a series of market expectations of the next target change which are compared with a series of realized target changes

investment options and bargaining power the eurasian supply chain for natural gas we use cooperative game theory to analyze how the architecture of the pipeline network determines the power structure in the supply chain for russian gas if the assessment is narrowly focused on the abilities to obstruct flows in the existing system the main transit countries belarus and ukraine appear to be strong if investment options are accounted for however russia achieves clear dominance we show that options to bypass one of the transit countries are of little strategic importance compared to russia s direct access to its customers through the baltic sea comparing the results of our calibrated model with empirical evidence obtained from transit and import agreements we find that the shapley value explains the power of major transit countries better than the core and the nucleolus

support schemes and vertical integration who skims the cream this paper examines how the effectiveness of feed in tariffs for distributed generators producing renewable electricity depends on industry structure i e vertical integration vs unbundling a stylized analytical model with a monopolist and a competitive fringe distributed generators will be developed to analyze the impact of feed in tariffs on renewable power production the vertically integrated monopolist maximizes profits by setting the electricity price for residual demand and a network access charge incurred by the fringe the fringe receives a fixed feed in tariff per unit of electricity produced under vertical integration a rise in the feed in tariff induces the monopolist to raise access charges for fringe firms and skim part of their additional income this partially offsets the supply increase of the fringe firms stimulated by the feed in tariff however in the case of effective unbundling with an externally set access charge there is no possibility for the monopolist to extract part of the fringe s profit then the feed in tariff fully accrues to the competitive fringe and its supply will further increase this setting will be extended to horizontal expansion when the monopolist also enters the renewable production segment the effects on prices and output will be derived and compared

intra firm bargaining under non binding contracts we present a new methodology for studying the problem of intra firm bargaining based on the notion that contracts cannot commit the firm and its agents to wages and employment we develop and analyse a general non cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party equilibrium firm profits are characterizable as both a weighted average of a neo classical non bargaining firm s profits and a generalization of shapley value for a corresponding cooperative game furthermore the resulting payoffs induce economically significant distortions in the firm s input and organizational design decisions

using option prices to estimate realignment probabilities in the european monetary system the case of sterling mark abstract this paper describes a procedure for estimating the market s perceived probability distribution of future exchange rates from the prices of risk reversals strangles and other currency options and uses the procedure to estimate the risk neutral ex ante probability of a realignment of the pound sterling the procedure for estimating the realignment probabilities relies on the jump diffusion model of exchange rate behavior and the resulting option pricing formula by fitting this model to market option price data i retrieve the unobserved parameters of the jump diffusion process i then use these parameter estimates to estimate the ex ante probability distribution of exchange rates and thus the realignment probabilities

effective use of survey information in estimating the evolution of expected inflation the evolution of the term structure of expected u s inflation is modeled using survey data to provide timely information on structural change not contained in lagged inflation data to capture shifts in subjective perceptions the model is adaptive to long horizon survey expectations however even short horizon survey expectations inform shifting endpoint estimates that capture the lag between inflation and the perceived inflation target which anchors inflation expectations results show movements of the perceived target are an important source of inflation persistence and suggest historical u s monetary policy was not fully credible for much of the postwar sample

european market integration for gas volume flexibility and political risk this is a copy of an article originally published by elsevier in energy economics see http www sciencedirect com science journal 03014215 2002 elsevier science b v

assessing target zone credibility mean reversion and devaluation expectations in the erm 1979 1992 abstract the paper presents estimates of devaluation expectations for six erm currencies relative to the deutsche mark for the period march 1979 april 1992 both the simplest test and the drift adjustment method are used the simplest test adjusts interest rate differentials for the maximum and minimum expected rate of depreciation within the exchange rate band the drift adjustment method adjusts interest rate differentials by the estimated expected rate of depreciation within the band the latter method gives more precise estimates especially for short horizons and allows statistical inference and hypothesis testing expected rates of devaluation have generally fallen during the period still some devaluation expectations relative to the deutsche mark remain in 1992 except for the belgian luxembourg franc and the netherlands guilder expected rates of devaluation have fluctuated more than interest rate differentials

arbitrage based tests of target zone credibility evidence from erm cross rate options this paper introduces two arbitrage based tests of target zone credibility using a new data source exchange rate mechanism cross rate options using daily option prices from september 1991 to august 1994 the authors assess the credibility of the pound mark and mark lira target zones that collapsed in september 1992 and the ongoing mark french franc target zone these tests are based on restrictions that must apply to all option prices within a credible target zone and are free from specification error and estimation error the authors also identify a minimum intensity of realignment an expression indicating the probability weighted average realignment size copyright 1996 by american economic association

nominal interest rates as indicators of inflation expectations forward interest rates have become popular indicators of inflation expectations theusefulness of this indicator depends on the relative volatilty and the correlation of inflation expectations and expected real interest rates this paper studies u s and u k data using a range of different tools and data sets the forward rate rule perfoms reasonably well in spite of significant movements in the expected real interest rate the reason is that the noise that movements in the expected real interest rate add to the inflation expectations is balanced by a tendency for expected real interest rates and inflation expectations to move in opposite directions

basic concepts for designing renewable electricity support aiming at a full scale transition by 2050 abstract renewable electricity supply is a crucial factor in the realization of a low carbon energy economy the understanding is growing that a full turn over of the electricity sectors by 2050 is an elementary condition for avoiding global average temperature increase beyond 2 c this article adopts such full transition as europe s target when designing renewable energy policy an immediate corollary is that phasing in unprecedented energy efficiency and renewable generation must be paralleled by phasing out non sustainable fossil fuel and nuclear power technologies the double phasing programme assigns novel meaning to nearby target settings for renewable power as share of total power consumption it requires organizing in the medium term eu wide markets for green power a highly demanding task in the present context of poorly functional markets in brown power the eu commission s 2007 2008 proposals of expanding tradable certificates markets were not based on solid analysis of past experiences and future necessities the keystone of sound policies on renewable electricity development is a detailed scientific differentiation and qualification of renewable electricity sources and technologies for measuring the huge diversity in the field we provide but structuring concepts about such qualification because implementation requires extensive research resources support for renewable electricity development is organized via feed in prices or premiums and via quota obligations connected to tradable green certificates green certificates are dependent on physical generated renewable power but separable and no joint products contrary to conventional wisdom we argue their separation in cost analysis but firm linking during trade a few graphs illustrate the importance of assigning qualities to different renewable power sources technologies feed in systems based on an acceptable qualification perform generally better than certificate markets imposing uniform approaches on a very diverse reality for a similar reason uniform and undifferentiated taxation of non sustainable energy sources cannot replace renewable energy support schemes capable of differentiation

expected and predicted realignments the ff dm exchange rate during the ems an empirical model of time varying realignment risk in an exchange rate target zone is developed expected rates of devaluation are estimated as the difference between interest rate differentials and estimated expected rates of depreciation within the exchange rate band using french franc deutsche mark data during the european monetary system the behavior of estimated expected rates of depreciation accord well with the theoretical model of bertola svensson 1990 we are also able to predict actial realignments with some success

profits risk and uncertainty in foreign exchange markets this paper examines the properties of nominal profits from speculation in dollar dominated forward contracts using a representative agent cash in advance model modified to allow for heteroscedasticity in the exogenous processes the model is simulated by estimating exogenous processes from the data and the remaining free parameters with a simulated method of moments technique simulated expected profits are variable heteroskedastic and serially correlated but the magnitude of these second moments fall short of those of the predictable component of observed profits on the u s dollar as in the actual data simulated forward rates display biasedness in predicting simulated future spot rates

inflation forecast targeting implementing and monitoring inflation targets abstract inflation targeting is shown to imply inflation forecast targeting the central bank s inflation forecast becomes an explicit intermediate target inflation forecast targeting simplifies both implementation and monitoring of monetary policy the weight on output stabilization determines how quickly the inflation forecast is adjusted towards the inflation target money growth or exchange rate targeting is generally inferior than inflation targeting and leads to higher inflation variability commitment to target rules may be better than commitment to instrument rules

the term structure spread and future changes in long and short rates in the g7 countries abstract according to the expectations hypothesis when the spread between long and short rates widens next quarter s long rate should rise in the united states however long rates decline instead of rising this anomaly is also present in canada the uk germany and japan four of the additional six g7 countries nevertheless in contrast to the us where long rates appear to overreact to expected future developments the anomalous short run movement of long rates in these other g7 countries is caused by an additive white noise error on long rates that does not materially affect the information in their term structure

habit persistence and the nominal term premium puzzle a partial resolution i introduction the consumption based capital asset pricing model ccapm has become the dominant paradigm in asset pricing theory because of its intuitive characterization of asset risk that is unlike expectations based asset pricing theories e g the present value model of stock prices which inherently assume risk neutrality the ccapm is predicated upon risk averse agents attempting to achieve a smooth consumption profile through the trading of assets from this perspective the risk of an asset is captured by the covariance of the asset s return with agents marginal utility of consumption or more broadly agents intertemporal marginal rate of substitution of wealth with this characterization the ccapm extends the results of the standard capm i e the risk of an asset is reflected in the covariance of the asset s return with the market portfolio to a general equilibrium setting however this intuitively appealing theory has not found much empirical support perhaps the most famous demonstration of inconsistency between the theory and data was rajnish mehra and edward prescott s 1985 analysis of the equity premium i e the difference between the average return on equity and that on government bonds using calibration methods rather than a formal statistical approach they showed that a standard ccapm severely underpredicts the size of the risk premium on equity the important implication of this finding is that the basic ccapm incorrectly models the covariance structure between the return on equity and asset holders intertemporal marginal rate of substitution economists response to this empirical rejection has been to either identify new sources of risk e g that implied by a particular monetary environment as in labadie 1989 or define alternative preferences toward risk e g the use of non expected utility theory as presented in weil 1989 and epstein and zin 1989 the potential for this research was illustrated recently by george constantinides s 1990 resolution of the equity premium puzzle in a model that included habit formation in consumption by relaxing the standard ccapm s assumption of time separable preferences constantinides demonstrated that a relatively smooth consumption profile and large risk premium on equity are consistent with equilibrium in a complete markets rational expectations framework 1 i use this insight to study another risk premium puzzle specifically the behavior of the nominal term premium the existence of a nominal term premium puzzle was demonstrated in papers by backus gregory and zin 1989 and salyer 1990 in which the term structure implications within a lucas 1982 type cash in advance cia economy were studied while some equilibrium characteristics of this model were consistent with the data both papers demonstrated that the model predicts the wrong sign of the term premium the theory implies the term premium should be negative while based on quarterly data for yields of three and six month u s treasury bills over the period 1959 1 1989 4 the observed term premium is positive similar to the equity premium puzzle as posed by mehra and prescott 1985 the prediction of a negative average term premium signals a critical discrepancy between the risk associated with nominal bonds as perceived by market participants and as captured by the models moreover this term premium puzzle is in some sense a stronger rejection of the underlying asset pricing model than that embodied by the equity premium puzzle to see this recall that within the consumption based asset pricing model the sign of the risk premium on any asset depends on the sign of the covariance between the marginal utility of consumption and that asset s return applying this reasoning to the case of the equity premium suggests that while the discrepancy in size between the observed equity premium and that generated within the model is troubling the model s prediction of a positive equity premium implies that the basic payout structure of equity within the model is consistent with that in the data e

trade restrictions as facilitating practices abstract the effect of quantitative restrictions in oligopolistic markets is shown to depend on whether imports are substitutes or complements for domestic products in the former case they have profound effects even when set at free trade levels because they impede the ability of the foreign firm to compete in the domestic market thereby acting to facilitate collusion and raise prices and profits for this reason tariffs and quotas are fundamentally non equivalent with substitute goods when goods are complements a voluntary export restriction ver at the free trade level has no effect and tariffs and quotas are equivalent

the crash of ʼ87 was it expected the evidence from options markets transactions prices of s p 500 futures options over 1985 1987 are examined for evidence of expectations prior to october 1987 of an impending stock market crash first it is shown that out of the money puts became unusually expensive during the year preceding the crash second a model is derived for pricing american options on jump diffusion processes with systematic jump risk the jump diffusion parameters implicit in options prices indicate that a crash was expected and that implicit distributions were negatively skewed during october 1986 to august 1987 both approaches indicate no strong crash fears during the 2 months immediately preceding the crash attempts to explain what caused the stock market crashes around the world in october 1987 have suffered from the paucity of major economic developments occurring around that time that could have triggered the crashes shifting expectations regarding monetary policy foreign investors fears of a dollar decline increasing riskiness of assets none of these appeared major enough if present at all to explain the magnitude of the crashes and although portfolio insurance strategies could conceivably magnify the effects of a jump in fundamentals the initiating jump in fundamentals appears to be lacking

arbitrage opportunities in arbitrage free models of bond pricing mathematical models of bond pricing are used by both academics and wall street practitioners with practitioners introducing time dependent parameters to fit arbitrage free models to selected asset prices we show in a simple one factor setting that the ability of such models to reproduce a subset of security prices need not extend to state contingent claims more generally we argue that the additional parameters of arbitrage free models should be complemented by close attention to fundamentals which might include mean reversion multiple factors stochastic volatility and or nonnormal interest rate distributions

recovering an asset s implied pdf from option prices an application to crude oil during the gulf crisis we develop a general method for estimating the implied martingale equivalent probability density function pdf for futures prices from american options prices the early exercise feature of american options precludes expressing the price of the option in terms of the pdf there exist tight bounds for the price of american options in terms of the pdf we demonstrate how these bounds together with observed option prices can be used to estimate the parameters of the pdf we estimate the distribution for crude oil during the persian gulf crisis and find the distribution differs significantly from that recovered using standard techniques

a multi country study of the information in the shorter maturity term structure about future inflation abstract empirical analysis of data from ten oecd countries indicates that except for france the united kingdom and germany the shorter maturity term structure does not contain a great deal of information about the future path of inflation on the other hand except for the united kingdom there is a great deal of information in the term structure of nominal interest rates at shorter maturities about the term structure of real interest rates these results are explained by differences in the relative variability of expected future inflation changes and real term structure slopes for the different countries

harmonization of renewable electricity feed in laws in the european union this paper focuses on the harmonization of feed in laws in the european union as a support mechanism for the promotion of renewable electricity in particular it proposes a methodology for harmonization based on a feed in law with a modular and transparent premium for renewable electricity producers this premium considers technology costs some grid services political incentives and national priorities the proposed approach includes flexibility mechanisms to update and revise premiums to avoid windfall profits for producers and to share technology innovation benefits with electricity consumers while maintaining incentives for innovation our approach is based on the review of the main features of the german and spanish feed in laws and takes into account other necessary considerations for harmonization such as grid access funding definitions and standards ownership of rights derived from renewables and exceptions for small non commercial producers and energy intensive industries

the price of policy risk empirical insights from choice experiments with european photovoltaic project developers managing the transition to a renewable energy future is an important policy priority in many countries solar photovoltaic pv technology is expected to make an important contribution but due to relatively higher cost its growth to date has been largely driven by public policy notably feed in tariffs feed in tariffs have been implemented in various countries however with widely differing outcomes in terms of installed pv capacity previous research indicates that the level of policy risk may be an important driver for differences in renewable energy policy effectiveness more specifically we suggest that investors who take a decision between pv investment opportunities in different countries carefully weigh feed in tariff induced returns against a set of policy risks and choose the country with the most favorable risk return profile we empirically test this model based on a stated preference survey among european pv project developers consisting of 1575 choice decisions by 63 investors the findings of our study demonstrate that risk matters in pv policy design and that a price tag can be attached to specific policy risks such as the duration of administrative processes or uncertainty induced by an approaching capacity cap governments can build on our empirical results to design policies that will be effective in attracting private pv investment while at the same time maintaining efficiency by providing an adequate compensation for policy risk

exchange rate risk premiums abstract a state space model which allows for the covariation of risk premiums and unexpected rates of depreciation is used to study exchange rate risk premiums we find that exchange rate risk premiums have a high degree of persistence and the covariance of risk premiums and unexpected rates of depreciation is negative regressions of the estimated risk premium on its determinants implied by the equilibrium model of lucas 1982 show limited support for the model jel f31

on the denomination of government debt a critique of the portfolio balance approach abstract we show that some classes of sterilized interventions have no effect on equilibrium prices and quantities the proof does not require complete markets ricardian equivalence monetary neutrality or the law of one price moreover regressions of exchange rates or interest differentials on variables measuring debt s currency composition contain no information about the affectiveness of such interventions other interventions require changes in monetary and fiscal policy their effects depend generally on the influence of these changes on the economy and not on the intervention alone in short sterilized intervention is not as the portfolio balance approach indicates an extra policy instrument

new hope for the expectations hypothesis of the term structure of interest rates survey data on interest rate expectations permit separate testing of the two alternative hypotheses in traditional term structure tests that the expectations hypothesis fails and that expected future interest rates are ex post inefficient forecasts we find that the source of the spread s poor predictions of future interest rates varies with maturity at short maturities the expectations hypothesis fails at long maturities however changes in the yield curve reflect changes in expected future rates one for one an implication of the expectations hypothesis this result confirms earlier findings that long rates underreact to short rates but now it cannot be attributed to term premia if the attractiveness of an economic hypothesis is measured by the number of papers which statistically reject it the expectations theory of the term structure is a knockout most tests beginning with macaulay 1938 find no evidence supporting the expectations hypothesis 1 many cannot even reject statistically the alternative hypothesis that the spread between long and short rates contains no information about future interest rate changes 2 to make matters worse in u s postwar data future long rates tend to rise when short rates are above long rates since the expectations hypothesis would predict that long rates tend to fall the theory often does worse than even the naive model that future interest

a multicountry comparison of term structure forecasts at long horizons abstract this paper extends previous work on the information in the u s term structure at longer maturities to britain west germany and switzerland we find strong evidence that the term structure does have significant ability to forecast changes in inflation particularly at long maturities on the other hand the ability of the term structure to forecast changes in one year interest rates is somewhat weaker only at the very longest horizon five years is there significant forecasting ability for interest rate changes

optimal debt structure and the number of creditors within an optimal contracting framework we analyze the optimal number of creditors a company borrows from we also analyze the optimal allocation of security interests among creditors and intercreditor voting rules that govern renegotiation of debt contracts the key to our analysis is the idea that these aspects of the debt structure affect the outcome of debt renegotiation following a default debt structures that lead to inefficient renegotiation are beneficial in that they deter default but they are also costly if default is beyond a manager s control the optimal debt structure balances these effects we characterize how the optimal debt structure depends on firm characteristics such as its technology its credit rating and the market for its assets

vertical integration in the presence of upstream competition we analyse vertical integration when there is upstream competition and compare outcomes to the case where upstream assets are owned by a single agent i e upstream monopoly in so doing we make two contributions to the modelling of strategic vertical integration first we base industry structure namely the ownership of assets firmly within the property rights approach to firm boundaries second we model the potential multilateral negotiations using a fully specified non cooperative bargaining model designed to easily compare outcomes achieved under upstream competition and monopoly given this we demonstrate that vertical integration can alter the joint payoffs of integrating parties in ex post bargaining however this bargaining effect is stronger for firms integrating under upstream competition than upstream monopoly we also consider the potential for integration to internalise competitive externalities in manner that cannot be achieved under non integration we demonstrate that ex post monopolization is more likely to occur when there is an upstream monopoly than when there is upstream competition our general conclusion is that the simple intuition that the presence of upstream competition can mitigate and reduce the incentives for socially undesirable vertical integration is misplaced and depending upon the strength of downstream competition i e product differentiation the opposite could easily be the case journal of economic literature classification number l42

uncovering financial markets beliefs about inflation targets this paper exploits the term structure of interest rates to develop testable economic restrictions on the joint process of long term interest rates and inflation when the latter is subject to a targeting policy by the central bank in an empirical application to the canadian inflation target zone results indicate that financial markets perceive the band to be of approximately the same width as announced but asymmetrically distributed around the official target this finding suggests that in practice the monetary authority might attach different weights to positive and negative inflation deviations from the target copyright 2000 john wiley sons ltd

on the expectations view of the term structure term premia and survey based expectations in this paper uk disaggregate survey data of expected future interest rates are used to test the expectations model of the term structure of interest rates at the short end of the maturity spectrum in the aggregate the expectations model is rejected and both time varying term premia and expected interest rate changes are demonstrated to be important in explaining the slope of the yield curve within the aggregate data however we demonstrate that there are some differences with respect to the views of the term structure held for example for some individuals the pure expectations model cannot be rejected

networks versus vertical integration we construct a theory to compare vertically integrated firms to networks of manufacturers and suppliers vertically integrated firms make their own specialized inputs in networks manufacturers procure specialized inputs from suppliers that in turn sell to several manufacturers the analysis shows that networks can yield greater social welfare when manufacturers experience large idiosyncratic demand shocks individual firms may also have the incentive to form networks despite the lack of long term contracts the analysis is supported by existing evidence and provides predictions as to the shape of different industries

a reconsideration of the uncovered interest parity relationship abstract this paper argues that the uncovered interest parity uip relationship is distinct from and more important than the unbiasedness of forward exchange rates as predictors of future spot rates the standard finding that the slope estimate b is roughly 3 in regressions of s t on t 1 s t 1 implies rejection of unbiasedness but not necessarily uip the hypothesis that monetary authorities manage interest rates so as to smooth their movements while also resisting changes in exchange rates is attractive conceptually and is capable of explaining not only the b 3 finding but also several other notable features of the data

new techniques to extract market expectations from financial instruments this paper is a selective survey of new or recent methods to extract information about market expectations from asset prices for monetary policy purposes traditionally interest rates and forward exchange rates have been used to extract expected means of future interest rates exchange rates and inflation more recently these methods have been refined to rely on implied forward interest rates so as to extract expected future time paths very recently methods have been designed to extract not only the means but the whole risk neutral probability distribution from a set of option prices

the relation between forward prices and futures prices abstract this paper consolidates the results of some recent work on the relation between forward prices and futures prices it develops a number of propositions characterizing the two prices these propositions contain several testable implications about the difference between forward and futures prices many of the propositions show that equilibrium forward and futures prices are equal to the values of particular assets even though they are not in themselves asset prices the paper then illustrates these results in the context of two valuation models and discusses the effects of taxes and other institutional factors

dollar jump fears 1984 1992 distributional abnormalities implicit in currency futures options abstract deutsche mark and yen futures options over 1984 1992 and 1986 1992 respectively are examined for deviations from the lognormal assumption underlying standard option pricing models two methods are used an atheoretic skewness premium and daily estimates of moments using a model for pricing american foreign currency futures options under systematic exchange rate jump risk substantial variation over time is found in all moments including implicit skewness and kurtosis the implicit abnormalities predict future abnormalities in log differenced dm futures prices but not yen the peso problem implications do not explain standard rejections of uncovered interest parity

buyer power in international markets this paper investigates the implications for international markets of the existence of retailers wholesalers with market power two main results are shown first in the presence of buyer power trade liberalization may lead to retail market concentration due to this concentration retail prices may be higher and welfare may be lower in free trade than in autarky thus reversing the standard effects of trade liberalization second the pro competitive effects of trade liberalization are weaker under buyer power than under seller power

the foreign exchange risk premium in a target zone with devaluation risk abstract the foreign exchange risk premium in an exchange rate target zone is derived when the exchange rate is heteroskedastic within the band and there is a separate devaluation risk the risk premium is then the sum of two separate risk premia arising from uncertainty about exchange rate movements within the band and from uncertainty about devaluations both real and nominal risk premia are considered real and nominal risk premia from movements within the band are very small real and nominal risk premia from devaluations are larger but still relatively small proportions of the interest rate differential

trade quotas and buyer power with an application to the e u natural gas market we consider a market in which domestic buyers negotiate contracts with foreign sellers and explore how trade quotas can help to increase the buyers countervailing power we use the shapley value to describe bargaining power and the distribution of the trade surplus in such a bilateral oligopoly by exploiting strategic externalities among the buyers bilateral trade quotas can improve the buyers bargaining positions in contrast aggregate trade restrictions on all buyers trade never improve buyer surplus minimum quotas on imports from fringe suppliers can benefit nonaffected buyers as these enjoy positive externalities we apply these insights to the e u market for natural gas and show that the effects of trade quotas on e u gas importers power can be significant