the impact of uncertainty shocks in emerging economies abstract a recent strand of research proposes that sudden jumps in uncertainty generate rapid drops and recoveries in real macroeconomic variables that drive the business cycle using an empirical model we find substantial heterogeneity in reactions to these shocks across countries in comparison to the u s and other developed countries emerging economies suffer much more severe falls in investment and private consumption following an exogenous uncertainty shock take significantly longer to recover and do not experience a subsequent overshoot in activity we provide evidence that the dynamics of investment and consumption are correlated with the depth of financial markets we control for the potential role of a credit channel and estimate that it can account for up to one half of the increased fall in investment generated by uncertainty shocks among emerging economies with less developed financial markets in this context monetary and fiscal policy actions that alleviate the impact of credit constraints facing firms may reduce the impact of uncertainty shocks in these economies

currency risk factors in a recursive multicountry economy we study a risk sharing model featuring multiple countries with recursive prefer ences defined over bundles of consumption goods whose supply is subject to both global and local short and long run shocks first we quantify the extent of con tagion and insurance possibilities as we vary the number of countries in the econ omy second we introduce persistent heterogeneous exposure to global long run news shocks and analyze the properties of several carry trade strategies in the context of our model lustig et al 2011 hml fx and della corte et al 2013 hml na the average excess returns of these strategies can be rationalized in a recursive risk sharing scheme with long run global shocks to output growth

public prioritisation of energy affordability in the uk much research has focused on the so called energy trilemma i e three leading energy policy issues energy security affordability and climate change mitigation whilst substantial understanding exists of why people support climate friendly energy policies little is known about why they think affordability is important particularly what leads members of the public to identify this policy goal as more important than other objectives here we examine this question via a nationally representative survey of 2441 uk residents and demonstrate that concerns about personal costs explain a small amount of variation in the prioritisation of affordability as an energy policy goal a range of other factors also significantly contribute one such factor is beliefs about who is responsible for energy transitions these findings suggest policy actions to address affordability concerns should go beyond energy prices and include additional considerations such as distributive justice and equality

public values for energy futures framing indeterminacy and policy making in the uk there are strong policy imperatives to transition toward low carbon energy systems but how and in what ways such transitional processes might be realised remains highly uncertain one key area of uncertainty pertains to public attitudes and acceptability though there is wide ranging research relevant to public acceptability very little work has unpacked the multiple questions concerning how policy makers can grapple with and mitigate related uncertainties in efforts to enact energy systems change in this paper public acceptability is identified as an indeterminate form of uncertainty that presents particular challenges for policy making we build on our existing research into public values for energy system change to explore how the outcomes of the project can be applied in thinking through the uncertainties associated with public acceptability notably we illustrate how the public values identified through our research bring into view alternative and quite different problem and solution framings to those currently evident within uk policy we argue that engagement with a wide range of different framings can offer a basis for better understanding and anticipating public responses to energy system change ultimately aiding in managing the complex set of uncertainties associated with public acceptability

measuring global and country specific uncertainty abstract motivated by the literature on the capital asset pricing model we decompose the uncertainty of a typical forecaster into common and idiosyncratic uncertainty using individual survey data from the consensus forecasts over the period of 1989 2014 we develop monthly measures of macroeconomic uncertainty covering 45 countries and construct a measure of global uncertainty as the weighted average of country specific uncertainties our measure captures perceived uncertainty of market participants and derives from two components that are shown to exhibit strikingly different behavior common uncertainty shocks produce the large and persistent negative response in real economic activity whereas the contributions of idiosyncratic uncertainty shocks are negligible

uptake and usage of cost reflective electricity pricing insights from psychology and behavioural economics abstract the australian electricity industry like many other countries globally is currently facing the complex challenge of reforming electricity tariffs momentum is growing for transitioning residential consumers toward more cost reflective pricing that better reflects the true costs of generation and supply and sends a price signal that presumably incentivises reduced consumption during peak periods under such tariffs customers pay more for electricity used during times of peak demand unlike traditional flat rate tariffs where the price remains stable regardless of time or demand pilot trials indicate that cost reflective tariffs might succeed in reducing peak demand but often only for a small minority of customers such that population wide demand response is minimal or insignificant in this paper we apply insights from psychology and behavioural economics to identify how cost reflective pricing can be designed depicted and delivered to enhance customer uptake and optimal usage thereby facilitating appropriate demand response for a larger cross section of the population by carefully considering the likely impact of relevant cognitive biases and psychological factors which routinely shape human decision making and behaviour we are able to propose practical strategies that industry can adopt to maximise the prospect of cost reflective pricing achieving significant population level peak demand reductions while providing shared benefits for customers retailers networks and regulators alike

establishing local government in fragile states experimental evidence from afghanistan international and domestic policy makers often promote elections to establish village government in fragile states however two additional options are available in such countries formalization of self governing village councils and formalization of community development councils cdcs we designed a survey experiment in afghanistan that compares the consequences of elections to establish village councils to each alternative we find that elections and to a lesser extent formalization of cdcs improve support for democracy while formalization of customary councils improves support for reconciliation with the taliban moreover the consequences of transplanting elections are contingent on social norms and institutions supportive of democracy

did the ems reduce the cost of capital we propose a dynamic arbitrage pricing theory apt multi factor model with time varying volatility for currency bond and stock returns for ten european countries over 1977 97 we exploit the cross sectional dimension of the model to construct world portfolios which when added to the original list of assets allow us to develop simple consistent methods of estimation and testing our results reject the implicit asset pricing restrictions and suggest decreases in idiosyncratic exchange rate risk tend to lower the cost of capital although the effect is small we assess the potential gains from increased stock market integration

the political economy of the maoist conflict in india an empirical analysis we study the maoist naxalite conflict in india by constructing a comprehensive district level database combining conflict data from four different terrorism databases to socioeconomic and geography data from myriad sources using data on 360 districts for three time periods we find that land inequality and lower incomes are important factors behind the conflict exploiting the micro structure of the data we show that growth of incomes of scheduled tribes significantly decreases the intensity of the conflict finally we show that historical property rights institutions from colonial times that go back centuries affect present day conflict outcomes

the international effects of global financial uncertainty shocks abstract in this paper we study the impact of sudden rises in global financial uncertainty on small open economies to this end we extract a global factor from the realised volatilities of about 1000 risky asset returns from around the world we then analyse how shocks to this factor affect economic activity in 44 advanced and emerging small open economies by estimating local projections in a panel regression framework we find that shocks increasing global financial uncertainty have adverse consequences on output trade and unemployment while their impact on nominal variables is more heterogeneous across countries furthermore the effects are more severe in countries with a higher degree of trade or financial openness higher levels of vulnerabilities weaker institutions or during economic downturns

ethnic diversity social sanctions and public goods in kenya abstract this paper examines ethnic diversity and local public goods in rural western kenya the identification strategy relies on the stable historically determined patterns of ethnic land settlement ethnic diversity is associated with lower primary school funding and worse school facilities and there is suggestive evidence that it leads to poor water well maintenance the theoretical model illustrates how inability to impose social sanctions in diverse communities leads to collective action failures and we find that school committees in diverse areas do impose fewer sanctions on defaulting parents we relate these results to the literature on social capital and economic development and discuss implications for decentralization in less developed countries

uncertainty shocks as second moment news shocks we provide evidence on the relationship between aggregate uncertainty and the macroeconomy identifying uncertainty shocks using methods from the news shocks literature the analysis finds that innovations in realized stock market volatility are robustly followed by contractions while shocks to forward looking uncertainty have no significant effect on the economy moreover investors have historically paid large premia to hedge shocks to realized but not implied volatility a model in which fundamental shocks are skewed left can match those facts aggregate volatility matters but it is the realization of volatility rather than uncertainty about the future that has been associated with declines

learning asymmetries in real business cycles when a boom ends the downturn is generally sharp and short when growth resumes the boom is more gradual our explanation rests on learning about productivity when agents believe productivity is high they work invest and produce more more production generates higher precision information when the boom ends precise estimates of the slowdown prompt decisive reactions investment and labor fall sharply when growth resumes low production yields noisy estimates of recovery noise impedes learning slows recovery and makes booms more gradual than downturns a calibrated model generates growth rate asymmetry similar to macroeconomic aggregates fluctuations in agents forecast precision match observed countercyclical errors of forecasters

traditional governance citizen engagement and local public goods evidence from mexico summary we study the governance of public good provision in poor communities in oaxaca mexico we estimate the effect of usos y costumbres a form of participatory democracy prevalent in indigenous communities on the provision of local public goods because governance is endogenous we address selection effects by matching on municipal characteristics and long term settlement patterns using a first differences design we show that these municipalities increase access to electricity sewerage and education faster than communities ruled by political parties we also show they are places of vibrant political participation not authoritarian enclaves protecting the political monopoly of local bosses 2013 elsevier ltd all rights reserved

international business cycles world region and country specific factors the paper investigates the common dynamic properties of business cycle fluctuations across countries regions and the world we employ a bayesian dynamic latent factor model to estimate common components in macroeconomic aggregates output consumption and investment in a 60 country sample covering seven regions of the world the results indicate that a common world factor is an important source of volatility for aggregates in most countries providing evidence for a world business cycle we find that region specific factors play only a minor role in explaining fluctuations in economic activity we also document similarities and differences across regions countries and aggregates jel f41 e32 c11 c32

measuring the natural rate of interest international trends and determinants abstract u s estimates of the natural rate of interest the real short term interest rate that would prevail absent transitory disturbances have declined dramatically since the start of the global financial crisis for example estimates using the laubach williams 2003 model indicate the natural rate in the united states fell to close to zero during the crisis and has remained there into 2016 explanations for this decline include shifts in demographics a slowdown in trend productivity growth and global factors affecting real interest rates this paper applies the laubach williams methodology to the united states and three other advanced economies canada the euro area and the united kingdom we find that large declines in trend gdp growth and natural rates of interest have occurred over the past 25 years in all four economies these country by country estimates are found to display a substantial amount of comovement over time suggesting an important role for global factors in shaping trend growth and natural rates of interest

uncertainty financial frictions and nominal rigidities a quantitative investigation are uncertainty shocks a major source of business cycle fluctuations this paper studies the effect of a mean preserving shock to the variance of aggregate total factor productivity macro uncertainty and to the dispersion of entrepreneurs idiosyncratic productivity micro uncertainty in a financial accelerator dynamic stochastic general equilibrium model with sticky prices it explores the different mechanisms through which uncertainty shocks are propagated and amplified the time series properties of macro and micro uncertainty are estimated using u s aggregate and firm level data respectively while surprise increases in micro uncertainty have a larger impact on total output than macro uncertainty these can only account for a small but nontrivial share of output volatility

slow to hire quick to fire employment dynamics with asymmetric responses to news this paper studies models of rms that adjust asymmetrically to private signals and uses census data to assess predictions at the establishment level when rms hiring decisions respond more to bad signals than to good signals both aggregate volatility and the cross sectional dispersion of employment growth are countercyclical responses to measured technology shocks and the time series behavior of skewness are consistent with the mechanism even in the absence of physical adjustment costs and with homoskedastic shocks to fundamentals information processing under knightian uncertainty generates asymmetric adjustment

estimating quadratic variation using realized variance this paper looks at some recent work on estimating quadratic variation using realised variance rv that is sums of m squared returns this econometrics has been motivated by the advent of the common availability of high frequency financial return data when the underlying process is a semimartingale we recall the fundamental result that rv is a consistent as m estimator of quadratic variation qv we express concern that without additional assumptions it seems difficult to give any measure of uncertainty of the rv in this context the position dramatically changes when we work with a rather general sv model which is a special case of the semimartingale model then qv is integrated variance and we can derive the asymptotic distribution of the rv and its rate of convergence these results do not require us to specify a model for either the drift or volatility functions although we have to impose some weak regularity assumptions we illustrate the use of the limit theory on some exchange rate data and some stock data we show that even with large values of m the rv is sometimes a quite noisy estimator of integrated variance

why does bad news increase volatility and decrease leverage a recent literature shows how an increase in volatility reduces leverage however in order to explain pro cyclical leverage it assumes that bad news increases volatility that is it assumes an inverse relationship between first and second moments of asset returns this paper suggests a reason why bad news is more often than not associated with higher future volatility we show that in a model with endogenous leverage and heterogeneous beliefs agents have the incentive to invest mostly in technologies that become more volatile in bad times agents choose these technologies because they can be leveraged more during normal times together with the existing literature this explains pro cyclical leverage the result also gives a rationale to the pattern of volatility smiles observed in stock options since 1987 finally the paper presents for the first time a dynamic model in which an asset is endogenously traded simultaneously at different margin requirements in equilibrium

macroeconomic uncertainty indices based on nowcast and forecast error distributions abstract we propose new indices to measure macroeconomic uncertainty the indices measure how unexpected a realization of a representative macroeconomic variable is relative to the unconditional fo

fluctuations in uncertainty this review article tries to answer four questions i what are the stylized facts about uncertainty over time ii why does uncertainty vary iii do fluctuations in uncertainty matter and iv did higher uncertainty worsen the great recession of 2007 2009 on the first question both macro and micro uncertainty appears to rise sharply in recessions on the second question the types of exogenous shocks like wars financial panics and oil price jumps that cause recessions appear to directly increase uncertainty and uncertainty also appears to endogenously rise further during recessions on the third question the evidence suggests uncertainty is damaging for short run investment and hiring but there is some evidence it may stimulate longer run innovation finally in terms of the great recession the large jump in uncertainty in 2008 potentially accounted for about one third of the drop in gdp

assessing international commonality in macroeconomic uncertainty and its effects this paper uses a large vector autoregression var to measure international macroeconomic uncertainty and its effects on major economies using two datasets one with gdp growth rates for 19 industrialized countries and the other with a larger set of macroeconomic indicators for the u s euro area and u k using basic factor model diagnostics we first provide evidence of significant commonality in international macroeconomic volatility with one common factor accounting for strong comovement across economies and variables we then turn to measuring uncertainty and its effects with a large var in which the error volatilities evolve over time according to a factor structure the volatility of each variable in the system reflects time varying common global components and idiosyncratic components in this model global uncertainty is allowed to contemporaneously affect the macroeconomies of the included nations both the levels and volatilities of the included variables in this setup uncertainty and its effects are estimated in a single step within the same model our estimates yield new measures of international macroeconomic uncertainty and indicate that uncertainty shocks surprise increases lower gdp and many of its components adversely affect labor market conditions lower stock prices and in some economies lead to an easing of monetary policy

the role of values in public beliefs and attitudes towards commercial wind energy mandates for renewable energy lead to siting disputes because meeting the mandates requires the development of renewable energy production facilities proposals for one common form of renewable energy commercial wind farms are frequently met with forceful local opposition dissatisfied with simplistic explanations for this opposition i e nimby social scientists have urged a more nuanced understanding of public attitudes towards wind energy and other renewables based on a survey of residents of coastal michigan this article explores the role of general values and beliefs in shaping attitudes towards the potential development of commercial wind energy projects in or near respondents communities structural equation modeling reveals that support of commercial wind energy depends largely on a belief that wind farms will provide economic benefits to the community underlying values have substantial and important indirect effects on beliefs regarding the likely economic outcomes of wind farm development altruistic values buoy wind energy attitudes while values of traditionalism diminish wind energy support the pivotal role of values in attitudes towards renewables lends support for more participatory development processes

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

precautionary saving in the small and in the large the theory of precautionary saving is shown to be isomorphic to the arrow pratt theory of risk aversion making possible the application of a large body of knowledge about risk aversion to precautionary saving and more generally to the theory of optimal choice under risk in particular a measure of the strength of the precautionary saving motive analogous to the arrow pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving and to give a new interpretation of the dreze modigliani substitution effect copyright 1990 by the econometric society

how projected electricity price and personal values influence support for a 50 renewable energy target in australia abstract this study investigated how projected electricity prices and personal values influence public support for a 50 renewable energy target ret in australia in an online experiment 404 participants rated their support for a 50 ret across eight projected increases in their quarterly power bills multi level modelling indicated that 1 support for the 50 ret fell as the projected price of electricity increased 2 although participants with low self enhancement values and high self transcendent values were most supportive of the 50 ret these value based differences disappeared as projected electricity prices increased implications of these findings for energy policy design are discussed