the bond old bond spread abstract i document the profits on a trade that is long the old 30 year treasury bond and short the new 30 year treasury bond and is rolled over every auction cycle from june 1995 to november 1999 despite the systematic convergence of the spread over the auction cycle the average profits are close to zero the difference in repo market financing rates between the two bonds is a significant cost of carry in this trade i show that variation in the bond old bond spread is driven by the treasury supply of 30 year bonds as well as aggregate factors affecting investors preference for liquid assets

bond liquidity premia recent asset pricing models of limits to arbitrage emphasize the role of funding conditions faced by financial intermediaries in the us the repo market is the key funding market then the premium of on the run u s treasury bonds should share a common component with risk premia in other markets

observable and unobservable determinants of replacement of home appliances despite the dominant role of replacement purchases in many consumer durable categories the research in this area has not been extensive only in the last few years has the economic theory made progress towards a more rigorous analysis of the dynamic nature involved in replacement decisions as a consequence of this applied researchers have switched from conventional discrete choice models to new econometric techniques e g duration analysis that allow for richer relationships between socioeconomic variables characteristics of the durable good and the likelihood of its replacement over time our study focuses on two home appliances taken from the residential energy consumption survey recs based on a duration model that allows for unobserved heterogeneity across households we conclude that household demographics and product features both observable and unobservable in general have statistical power to explain replacement decisions over time

the mispricing of u s treasury bonds a case study this article documents an apparent pricing anomaly involving 94 percent 30 year treasury bonds during the months of may and june 1986 during this period the price of the 94s rose sharply relative to the prices of other long term treasury bonds and created a potential arbitrage opportunity in addition owners of the 94 bonds were able to borrow at a zero interest rate bypledging their bonds detailed examination reveals that this relative pricing anomaly cannot be attributed to changes in the level or term structure of interest rates or to differences between the bonds with respect to liquidity taxation or duration

computational economics and economic theory substitutes or complements abstract this essay examines the idea and potential of a computational approach to theory discusses methodological issues raised by such computational methods and outlines the problems associated with the dissemination of computational methods and the exposition of computational results we argue that the study of a theory need not be confined to proving theorems that current and future computer technologies create new possibilities for theoretical analysis and that by resolving these issues we will create an intellectual atmosphere in which computational methods can make substantial contributions to economic analysis

do oil producers act as oil igopolists in this paper the author analyzes an oligopoly model of exhaustible resource extraction and develop predictions about relative extraction patterns of different producers using the open quote oil close quote igopoly model of loury one can show that producers with large stocks produce a larger amount but a smaller percentage of their stocks than producers with small stocks the authors extend loury s model to cases where extraction costs differ among producers and where costs are a function of cumulative extraction an increase in extraction costs for a producer causes it to produce less relative to its rivals when extraction costs rise with cumulative extraction producers with large reserves tend to have lower extraction costs and a smaller ratio of cumulative production to initial reserves than producers with small reserves the authors test the predictions of the model using oil industry data and find that the empirical results are consistent with the predictions of open quotes oil close quotes igopoly theory producers with larger reserves extract a smaller share of their reserves and have lower production costs than producers with smaller reserves this pattern holds for 73 countries with oil reserves during the time period 1970 1989 and for approximately 400 us oil companies in 1983 and 1984 more the observed pattern of production for both opec and non opec producers is consistent with open quote oil close quote igopoly theory opec producers do not appear to restrain production given their level of reserves relative to non opec producers thus viewing the oil market as containing one dominant firm opec with a competitive fringe may be misleading further the pattern of extraction observed in oil markets is inconsistent with the pattern predicted by competitive theory 29 refs 5 figs 6 tabs less

homeowner satisfaction with low carbon heating technologies abstract positive word of mouth communication resulting from the experiences of early adopters is a crucial factor in the uptake and diffusion of low carbon energy technologies over time hence the goal of this research is to study homeowner satisfaction with respect to residential heating systems rhs based on renewable energies in particular this paper focuses on the role of attributes of the home homeowners socio demographic characteristics rhs related knowledge and adoption motivations for this purpose we apply a linear regression model on a dataset obtained from a survey among homeowners in germany n 2135 that had adopted an rhs shortly before the survey was conducted moreover we investigate differences between groups of homeowners by means of t tests and anova our research shows that the fulfilment of the motivations for adopting an rhs are relevant factors explaining satisfaction with newly adopted rhs in particular the preference to have an rhs that is compatible with daily habits and routines has a strong impact on satisfaction furthermore we find the degree of rhs related knowledge relevant as well socio demographic aspects such as age university degree gender or income are found to be less important we also find differences between groups of adopters specifically adopters of a gas fired condensing boiler with solar thermal support or a heat pump are less satisfied than adopters of a wood pellet fired boiler we conclude that information and education campaigns on clean energy technologies such as rhs based on renewable energies may have a positive impact on homeowner satisfaction resulting in a positive word of mouth recommendation and influenec of others

oligopoly equilibria in nonrenewable resource markets abstract most nash cournot oligopoly models of nonrenewable resources apply open loop equilibrium concepts and are based on physical resource depletion this paper studies feedback equilibria and economic depletion assuming affine quadratic functional forms the existence uniqueness and explicit solutions for the equilibria are derived for duopoly and n player oligopoly with multiple resource stocks for the cases of nonquadratic criteria we develop a numeric solution scheme for the nash feedback equilibrium this scheme is an application of a discrete time discrete state controlled markov chain approximation method originally developed for solving deterministic and stochastic dynamic optimization problems in our nash cournot equilibrium the degree of concentration in supply declines over time whereas the previous models with physical depletion and open loop equilibrium concepts predict that a nash cournot resource market will develop in the direction of monopoly supply

reprint of central bank collateral frameworks abstract this paper seeks to inform about a feature of monetary policy that is largely overlooked yet occupies a central role in modern monetary and financial systems namely central bank collateral frameworks their importance can be understood by the observation that the money at the core of these systems central bank money is injected into the economy on terms not defined in a market but by the collateral frameworks and interest rate policies of central banks using the collateral framework of the eurosystem as a basis of illustration and case study the paper brings to light the functioning reach and impact of collateral frameworks a theme that emerges is that collateral frameworks may have distortive effects on financial markets and the wider economy they can for example bias the private provision of real liquidity and thereby also the allocation of resources in the economy as well as contribute to financial instability evidence is presented that the collateral framework in the euro area promotes risky and illiquid collateral and more generally impairs market forces and discipline the paper also emphasizes the important role of ratings and government guarantees in the eurosystem s collateral framework

repo auctions and the market for liquidity what is the nature of imperfections in the market for liquidity studying bidder level data from european central bank ecb repo auctions we find that this market appears to be informationally efficient in the sense that participants do not have private information about future short term rates however auction allocations affect banks subsequent behavior in a way that is consistent with a degree of allocational and operational inefficiency also large bidders appear to have better access to the interbank market than small ones finally the evidence suggests that the ecb uses collateral haircuts that do not equilibrate opportunity costs

residential bioenergy heating a study of consumer perceptions of improved woodstoves abstract consumers choices play a key role for the development of biomass heating in the residential sector the city of oslo has granted subsidies to households who change to new improved low emission woodstoves the purpose of this study is to expand the knowledge about users experiences and attitudes to residential biomass heating an adapted model of the theory of planned behavior was used to model households inclination to continue using their woodstoves for heating more than 800 questionnaires were collected from households that recently had invested in an improved woodstove the respondents were satisfied with the new woodstoves the respondents also considered themselves competent to use and maintain the stove and few had problems acquiring fuelwood further analyses showed that the intention to continue to use the new woodstove depends on economic benefits heating performance perceived time and effort to operate the stove environmental effects of heating as well as perceived subjective norm the results imply that when marketing a modern technology for bioenergy heating both public authorities and producers should consider issues related to the users perception of subjective norm such as perceived status of using bioenergy or environmental concerns when designing campaigns to promote the use of woodstoves

the environment as a luxury good or too poor to be green abstract this paper discusses the views of different authors on the relations between economic growth and environmental scarcities it lays out the common assumptions behind inglehart s postmaterialist thesis in environmental sociology krutilla s criterion for the valuation of environmental amenities hirsch s notion of the positional economy and pearce s numerical results on weak sustainability the paper shows how different views on the environmental consequences of economic growth imply at the same time different theories about environmental movements in rich countries there is an increasing demand for environmental amenities which cannot be substituted by products of the material economy and there are also environmental movements against the effluents of affluence in poor countries there are environmental movements characterized as the environmentalism of the poor

speculation and the term structure of interest rates we develop and estimate a tractable equilibrium term structure model populated with rational but heterogeneously informed traders that take on speculative positions to exploit what they perceive to be inaccurate market expectations about future bond prices the speculative motive is an important driver of trading volume yield dynamics due to speculation are 1 statistically distinct from classical term structure components due to risk premiums and expectations about future short rates and are orthogonal to public information available to traders in real time and 2 quantitatively important accounting for a substantial fraction of the variation of long maturity u s bond yields received may 12 2014 editorial decision may 10 2016 by editor pietro veronesi

motivational factors influencing the homeowners decisions between residential heating systems an empirical analysis for germany heating demand accounts for a large fraction of the overall energy demand of private households in germany a better understanding of the adoption and diffusion of energy efficient and renewables based residential heating systems rhs is of high policy relevance particularly against the background of climate change security of energy supply and increasing energy prices in this paper we explore the multi dimensionality of the homeowners motivation to decide between competing rhs a questionnaire survey n 2440 conducted in 2010 among homeowners who had recently installed a rhs provides the empirical foundation principal component analysis shows that 25 items capturing different adoption motivations can be grouped around six dimensions 1 cost aspects 2 general attitude towards the rhs 3 government grant 4 reactions to external threats i e environmental or energy supply security considerations 5 comfort considerations and 6 influence of peers moreover a cluster analysis with the identified motivational factors as segmentation variables reveals three adopter types 1 the convenience oriented 2 the consequences aware and 3 the multilaterally motivated rhs adopter finally we show that the influence of the motivational factors on the adoption decision also differs by certain characteristics of the homeowner and features of the home

oil scarcity what have the past three decades revealed oil shortages have been predicted over the past 30 years in fact oil is more plentiful now in an economic sense than in 1973 the reason for such misconceptions lies mainly in reliance on analytical techniques that do not comprehend oil as an economic commodity

special repo rates this article provides the causes and symptoms of special repo rates in a competitive market for repurchase agreements a repo rate is in effect an interest rate on loans collateralized by a specific instrument a special is a repo rate significantly below prevailing market riskless interest rates this article shows that specials can occur when those owning the collateral are inhibited whether from legal or institutional requirements or from frictional costs from supplying collateral into repurchase agreements specialness increases the equilibrium price for the underlying instrument by the present value of savings in borrowing costs associated with the repo specials this article characterizes competitive repurchase or repo markets and the equilibrium relationship between repo rates and the underlying cash market prices repurchase markets are often called financing markets since they are effectively vehicles for collateralized borrowing that are often used to finance the purchase of the underlying collateral this article provides causes and effects of specials meaning specific repo rates significantly below prevailing market interest rates for loans of similar maturity and credit risk the example of united states treasury instruments is emphasized because of the extensive use of the treasury repo market as a means of hedging against or speculating on changes in u s interest rates and because of the high incidence of specials in treasury repo rates numerous specific instru

energy for economic growth industrialization environment and natural resources living with just enough abstract this study investigates the causal relationship between energy consumption i e nuclear energy consumption electricity power consumption and fossil fuels energy consumption and economic growth energy consumption and industrialization i e industrial gdp beverages and cigarettes energy consumption and environmental degradation i e carbon dioxide emissions population density and water resources and finally energy consumption and resource depletion i e mineral depletion energy depletion natural depletion and net forest depletion in pakistan over a period of 1975 2011 the granger causality gc test in the frequency domain using the pierce framework has been employed this gc test in the frequency domain relies on a modified version of the coefficient of coherence which they estimate in a nonparametric fashion and for which they derive the distributional properties the results infer that there exists uni directional causality running from nuclear energy to industrial gdp nuclear energy to water resources and nuclear energy to carbon dioxide emissions but not vice versa similarly electric power consumption granger cause agriculture gdp but not other way around further there is a bi directional causality running between electric power consumption to population density in pakistan fossil fuel granger cause industrial gdp and there is a bidirectional causality running between fossil fuel and population density moreover the findings show that the nature of causality among nuclear energy consumption agriculture nuclear energy consumption population density electric power consumption cigarettes production fossil fuel cigarettes and fossil fuels and agriculture value added are in favour of the neutrality hypothesis in pakistan the conclusion has been strengthen and have a very strong implications in the context of pakistan where we have economic and financial constraints and thus agreeing the bottom line living with the just enough

fuelwood consumption and forest degradation a household model for domestic energy substitution in rural india this paper disusses domestic en ergy supply and demand in rural india links be tween forest scarcity and household fuel collec tion are analyzed in a non separable household model focusing on substitution of non commer cial fuels from the commons and the private do main based on data from villages bordering a protected area a novel maximum entropy ap proach is used for estimation it is found that households respond to forest scarcity and in creased fuelwood collection time by substituting fuels from private sources for forest fuelwood however the magnitude of the response appears insufficient to prevent current fuelwood collection practices from causing serious forest degrada tion jel q24

a theory of oil igopoly cournot equilibrium in exhaustible resource markets with fixed supplies the emergence of an effective and powerful cartel in the international petroleum market has stimulated considerable effort among economists to develop models of pricing and supply behavior for this industry 2 this modeling task poses two basic difficulties first as in the standard oligopoly problem one must characterize the behavior of several sellers in a market aware of each other and of their effect on market price second there is here the added difficulty of treating the explicitly intertemporal nature of suppliers decision wherein a limited stock must be optimally allocated over time this paper studies the implications of the simplest non trivial postulates about these two aspects of the problem it is assumed that suppliers are non cooperative cournot nash players each of whom is imagined to select an optimal supply strategy taking as given the strategies of the others moreover it is hypothesized that the feasible strategies are limited to open loop paths chosen at the initial date to maximize the present value of profits in light of the paths of supply which the others have chosen 3 these basic postulates together with a few technical assumptions concerning the structure of resource demand permit one to demonstrate the existence of at least one non cooperative equilibrium concerning thisequilibrium we show that 1 the average and marginal return on resource stocks is inversely related to the size of a player s initial endowment 2 aggregate production decreases over time until all stocks are exhausted while firms with smaller stocks exhaust their supplies no later than firms with larger stocks do 3 the present value of price net of extraction cost declines over time 4 industry production maximizes a weighted average of intertemporal consumer s surplus and producers profits

norms and economic motivation in the swedish green electricity market abstract the purpose of this paper is to provide an econometric analysis of the most important determinants of swedish households choice to pay a price premium for green electricity we draw on recent developments in the literature on integrating norm motivated behavior into neoclassical consumer theory and assume that individuals have a preference for keeping a self image as a morally responsible person consumer behavior in the green market place will then be heavily determined by how purchases of different goods affect this self image the analysis is based on postal survey responses from 655 swedish households which are analyzed within a binary choice econometric framework the results indicate that the impact of choosing green on the household budget largely influences the choice between green and brown electricity as does the degree of perceived personal responsibility for the issue and the felt ability to affect the outcome in a positive way we find limited support for the notion that perceptions about others behavior in general affect individual moral norms and ultimately expressed behavior but this is also complemented by the influence of explicit social influence the difficulty in observing others purchases makes it however difficult to distinguish between social and moral norms in the case of green electricity

collusion discounting and dynamic games abstract this paper investigates the following claims in a dynamic game i pareto optimal outcomes are sustainable only by patient players and ii the set of equilibrium outcomes expands in the discount factor the intuition for these results although immediate for purely repeated games is shown to be incomplete for dynamic games consequently there is no direct link between patience and the sustainability of pareto optimal outcomes in fact there are dynamic games arbitrarily close to a repeated game in which such collusion is facilitated by impatience however for a class of dynamic games any equilibrium outcome that is sustainable by less patient players is also an equilibrium outcome when players are more patient journal of economic literature classification numbers c73 d90

the fuelwood consumption in a rural area of greece abstract renewable energy sources are called to play an important role as regards the increasing energy demand worldwide in particular the need to address the problems created by the oil crises has distinguished the importance of renewable energy in economic development biomass is recognized as one of the most important renewable energy sources that can contribute decisively to the energy needs of modern society and the environment protection in both industrialized and developing countries a very important source of biomass is wood and especially fuelwood in greece because of the economic crisis there is an increased consumption of fuelwood especially in rural areas in this paper using a questionnaire and descriptive statistics and logistic regression analysis we explore the determinants of fuelwood consumption in a rural area in order to propose appropriate policies for the efficient supply of the market

y2k options and the liquidity premium in treasury markets financial institutions around the world expected the millennium date change y2k to cause an aggregate liquidity shortage responding to the concern the federal reserve bank of new york auctioned y2k options to primary dealers the options gave the dealers the right to borrow from the fed at a predetermined interest rate using the implied volatilities of y2k options and the on off the run spread we demonstrate that the fed s action eased the fears of bond dealers contributing to a drop in the liquidity premium of treasury securities our analysis shows the link between the microstructure of government debt markets and the central bank s provision of liquidity we argue that y2k options and their effects on liquidity premium broadly conform to the economic theory on public provision of private liquidity

learning and price volatility in duopoly models of resource depletion the aim of this paper is to provide a theoretical model that can account for price fluctuations in depletable resource markets we do so by introducing learning into a hotelling style duopoly model of optimal resource depletion before the depletable resource becomes scarce the self confirming equilibrium of the model mirrors noncooperative rational expectations equilibrium in that supply is high and price is low although learning does induce occasional upward price spikes that are followed by a long period of falling price once the depletable resource becomes scarce the dynamics of the market change significantly with the self confirming equilibrium mirroring the cooperative rather than noncooperative rational expectations equilibrium supply is low and price is high price spikes still occur but against a background of increasing prices when scarcity is sufficient then the market is permanently in a self confirming equilibrium that is equivalent to cooperative rational expectations equilibrium

marginal costs and co benefits of energy efficiency investments the case of the swiss residential sector abstract key elements of present investment decision making regarding energy efficiency of new buildings and the refurbishment of existing buildings are the marginal costs of energy efficiency measures and incomplete knowledge of investors and architects about pricing co benefits and new technologies this paper reports on a recently completed empirical study for the swiss residential sector it empirically quantifies the marginal costs of energy efficiency investments i e additional insulation improved window systems ventilation and heating systems and architectural concepts for the private sector first results on the economic valuation of co benefits such as improved comfort of living improved indoor air quality better protection against external noise etc may amount to the same order of magnitude as the energy related benefits are given the cost benefit analysis includes newly developed technologies that show large variations in prices due to pioneer market pricing add on of learning costs and risk components of the installers based on new empirical data on the present cost situation and past techno economic progress the potential of future cost reduction was estimated applying the experience curve concept the paper shows for the first time co benefits and cost dynamics of energy efficiency investments of which decision makers in the real estate sector politics and administrations are scarcely aware

leviathan governments and carbon taxes costs and potential benefits abstract this paper addresses positive aspects of the global warming debate that so far has been concerned by and large with normative issues the paper considers a consumers government that appreciates tax revenues as such leviathan in addition to conventional measures of welfare i e carbon taxes serve the dual purpose of correcting for externalities here global warming or more generally a stock externality from energy use and of raising revenues this government faces either a competitive or a perfectly cartelized supply the major findings are 1 i consumers may benefit from a leviathan government that appropriates some of the monopoly rent by deterring preemption to some extent 2 ii the leviathan motive raises initial taxes and thereby lowers initial emissions but increases the long run stock externality in a play with linear strategies 3 iii there exists a continuum of equilibria in nonlinear markov strategies which are however pareto inefficient compared with the linear strategies 4 iv but in case of a binding resource constraint nonlinear strategies are the only feasible ones

opec unconventional oil and climate change on the importance of the order of extraction we show that opec s market power contributes to climate change by enabling producers of relatively expensive and dirty oil to start producing before opec reserves are depleted we examine the importance of this extraction sequence effect by calibrating and simulating a cartel fringe model of the global oil market while welfare net of climate damage under the cartel fringe equilibrium can be significantly lower than under a first best outcome almost the entire welfare loss is due to the sequence effect of opec s market power in our benchmark calibration the cost of the sequence effect amounts to 15 trillion us which corresponds to 97 percent of the welfare loss moreover we find that an increase in non opec oil reserves decreases global welfare in a counterfactual world without non opec oil global welfare would be 13 trillion us higher 10 trillion us of which is due to lower climate damages

inefficiency of credible strategies in oligopolistic resource markets with uncertainty abstract the implications of different information patterns for firms in oligopolistic resource markets are considered the traditional open loop nash equilibrium with static information sets is one of many possible nash equilibria and is not suitable for stochastic environments when shocks to resource growth are serially uncorrelated there are no gains from conditioning the harvest on past stock levels and the feedback or credible nash equilibrium is the appropriate nash equilibrium concept this credible equilibrium assumes that firms have knowledge of current stocks of reserves which typically leads to more rapid extraction of the resource and possibly extinction since the open loop nash equilibrium is efficient when demand is iso elastic and extraction costs are zero it is clear that an increase in information can be detrimental to firms in the industry

the term structure of interbank risk we infer a term structure of interbank risk from spreads between rates on interest rate swaps indexed to the london interbank offered rate libor and overnight indexed swaps we develop a tractable model of interbank risk to decompose the term structure into default and non default liquidity components from august 2007 to january 2011 the fraction of total interbank risk due to default risk on average increases with maturity at short maturities the non default component is important in the first half of the sample period and is correlated with measures of funding and market liquidity the model also provides a framework for pricing hedging and risk management of interest rate swaps in the presence of significant basis risk

a well based cost function and the economics of exhaustible resources the case of natural gas abstract a cost function for natural gas production is estimated using a pool of data from 29 wells statistically exact tests are performed for parameter stability across locations formations wells and producing firms costs are determined to be inversely related to remaining recoverable reserves and marginal costs of production are decreasing in all cases theoretical implications of these cost characteristics on optimal exhaustible resource extraction are analyzed although marginal cost is decreasing production effects on the resource stock imply that an interior production path may be optimal conditions under which production optimally occurs at the capacity bound are delineated and optimal interior production paths are characterized

central bank collateral frameworks abstract this paper seeks to inform about a feature of monetary policy that is largely overlooked yet occupies a central role in modern monetary and financial systems namely central bank collateral frameworks their importance can be understood by the observation that the money at the core of these systems central bank money is injected into the economy on terms not defined in a market but by the collateral frameworks and interest rate policies of central banks using the collateral framework of the eurosystem as a basis of illustration and case study the paper brings to light the functioning reach and impact of collateral frameworks a theme that emerges is that collateral frameworks may have distortive effects on financial markets and the wider economy they can for example bias the private provision of real liquidity and thereby also the allocation of resources in the economy as well as contribute to financial instability evidence is presented that the collateral framework in the euro area promotes risky and illiquid collateral and more generally impairs market forces and discipline the paper also emphasizes the important role of ratings and government guarantees in the eurosystem s collateral framework

depreciation erodes the coase conjecture if a durable good monopolist produces at constant marginal costs and the good depreciates there exists a family of strong markov perfect equilibrium smpe one member of this family entails instantaneous production of the level of stock produced in a competitive equilibrium this is consistent with the coase conjecture other smpe in the family entail steady state production at a stock level lower than in the competitive equilibrium there may be a jump to these steady states or they may be approached asymptotically monopoly profits are positive in these equilibria and the coase conjecture fails

portfolio disclosures and year end price shifts commercial paper sells at an extra discount if it matures in the next calendar year but treasury bills do not the discount is apparent in downward price shifts before the year end and upward price shifts at the turn of the year that are significantly correlated with the simultaneous returns to small stocks and that cannot reflect tax loss selling cross sectional and time series tests on prices as well as flow of funds evidence on trades by institutional investors indicate that both the debt and equity patterns reflect agency problems related to portfolio disclosures financial research has brought considerable analysis to bear on the turn of the year in the equity market but not the money market extant literature starting with keim and stambaugh 1986 reports similarities between equity market and money market price shifts in january but has not examined time series and cross sections of money market prices at the high resolution common in studies of the equity market repeating tests from the equity literature on money market prices this article finds a more precise and robust characterization of the price shifts this characterization combined with observations of year end shifts in money market holdings supports the view that intermediaries move prices with strategic responses to portfolio disclosures the main empirical result is that commercial paper pays a higher yield if it matures across the end of the year that is it imputes a forward premium for the holding period from the last trading day of one year to the first trading day of the next this premium is even higher for issues with more default risk and longer maturity as measured at the end of the year and has a substantial impact on yield spreads i argue that the forward premium reflects an abnormally high market price for bearing risk across the year end and that this high price reflects the disutility to intermediaries of showing risky portfolios to claimholders or regulators the connection between portfolio disclosures and price shifts was proposed by haugen and lakonishok hl 1988 as an explanation of the equity market january effect as originally documented by keim 1983 with monthly data

bioenergy expansion in the eu cost effective climate change mitigation employment creation and reduced dependency on imported fuels presently the european union eu is promoting bioenergy the aim of this paper is to study the prospects for using domestic biomass resources in europe and specifically to investigate whether different policy objectives underlying the promotion of bioenergy cost effective climate change mitigation employment creation and reduced dependency on imported fuels agree on which bioenergy options that should be used we model bioenergy use from a cost effectiveness perspective with a linear regionalized energy and transport system model and perform supplementary analysis it is found that the different policy objectives do not agree on the order of priority among bioenergy options maximizing climate benefits cost effectively is in conflict with maximizing employment creation the former perspective proposes the use of lignocellulosic biomass in the stationary sector while the latter requires biofuels for transport based on traditional agricultural crops further from a security of supply perspective the appeal of a given bioenergy option depends on how oil and gas import dependencies are weighed relative to each other consequently there are tradeoffs that need to be addressed by policymakers promoting the use of bioenergy also the importance of bioenergy in relation to employment creation and fuel import dependency reduction needs to be further addressed

do consumers discount the future correctly a market based valuation of residential fuel switching abstract dsm and energy efficiency options are generally evaluated using engineering oriented discounted cash flow procedures which value all cost and benefit streams using a single arbitrary discount rate usually the firm s weighted average cost of capital wacc the wacc based approach ignores financial risk and hence leads to unreliable results in a recent paper in this journal hassett and metcalf depart from this tradition they reflect financial risk by simulating the total variability of returns from energy saving investments their findings indicate that dsm projects are potentially risky suggesting that the net benefits must be discounted at significantly higher rates thus lowering their present values this paper presents a market based evaluation of a particular dsm option residential fuel switching using the capital asset pricing model capm under the capm approach a risk adjusted market based discount rate is estimated for each cost stream fuel maintenance and avoided outlays for electricity the market based results which reflect the systematic risk of each cost stream suggest that fuel switching is probably not cost effective because it is considerably more risky than indicated by a wacc based analysis this supports hassett and metcalf s conclusion that consumers who reject dsm projects are not necessarily acting irrationally

the effect of natural resources on a sustainable development policy the approach of non sustainable externalities abstract the debate about the importance of non renewable resources for economic development between optimists and pessimists shows that the extensive depletion of non renewable resources particularly oil along with a higher level of consumption could have a significant impact on the economic development of future generations based on this debate this paper proposes criteria under which the depletion of non renewable resources would create excess costs for future generations therefore this paper aims to answer the question what will be the impact of the depletion of non renewable resources on sustainable economic development accordingly a sustainable development policy appears feasible by minimizing non sustainable externalities which derive from future externalities that weigh the benefits from a previous employment of natural resources the research based on qualitative analysis clarifies the reasons for and the extents of taking sustainability into account as well as points to difficulties of implementing policies to time the transition towards a sustainable economic development finally the research shows the implications of this approach for environmental degradation the depletion of non renewable resources and energy production

substitution between biofuels and fossil fuels is there a green paradox we show that i subsidies for renewable energy policies with the intention of encouraging substitution away from fossil fuels may accentuate climate change damages by hastening fossil fuel extraction and that ii the opposite result holds under some specified conditions we focus on the case of subsidies for renewable resources produced under increasing marginal costs and assume that both the renewable resources and the fossil fuels are currently in use such subsidies have a direct effect and an indirect effect working in opposite directions the direct effect is the reduction in demand for fossil fuels at any given price the indirect effect is the reduction in the current equilibrium price for fossil fuels which tends to increase the amount of fossil fuels demanded whether the sum of the two effects will actually result in an earlier or later date of exhaustion of the stock of fossil fuels depends on the curvature of the demand curve for energy and of the supply curve for the renewable substitute

special repo rates an empirical analysis duffie 1996 examines the theoretical impact of repo specials on the prices of treasury securities and concludes that all else the same an issue on special will carry a higher price than an otherwise identical issue we examine this hypothesis and find strong evidence in support of it we also examine whether the liquidity premium associated with on the run issues is due to repo specialness and find evidence of a distinct effect finally we investigate whether auction tightness and percentage awarded to dealers are related to subsequent specialness and find that both variables are generally significant underlying the cash market for u s treasury securities is the financing or repo market at any given time the repo rate for most treasury issues the general collateral rate is the same but a few issues are typically on special an issue on special has associated with it a repo rate that is less than the prevailing general collateral rate as a result the owner of a security that is on special is able to obtain below market financing rates via a repurchase agreement duffie 1996 examines the theoretical causes of repo specials and their impact on the prices of treasury securities in the context of a general equilibrium model his primary conclusion is that specialness will be priced in the cash market meaning that all else the same an issue on special or likely to go on special will carry a higher price than an otherwise identical issue we investigate this hypothesis using data on repo specials and find clear evidence in support of it we conclude that specialness is priced and that the magnitude of the cash market premium reflects both the future duration and magnitude of repo specialness we also examine whether the liquidity premium associated with on therun issues is due to repo specialness and find evidence of a distinct effect finally as a test of duffie s model we investigate whether auction tightness and percentage awarded to nonbank primary dealers are related to subsequent specialness the evidence is consistent with predictions with both variables generally significant

capacity investment preemption and commitment in an infinite horizon model the commitment value of capacity is analyzed in an infinite horizon duopoly model the paper focuses on the role of alternative behavioral assumptions about the ability of firms to commit to investment paths each firm s investment strategy in a feedback nash equilibrium is shown to be a decreasing function of its rival s current capacity this creates an incentive for a firm to expand its capacity to preempt subsequent rival investment in a precommitment equilibrium there are no incentives to invest preemptively as a consequence steady state capacity levels are greater in a feedback nash equilibrium than in a precommitment equilibrium copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

margin based asset pricing and deviations from the law of one price in a model with heterogeneous risk aversion agents facing margin constraints we show how securities required returns increase in both their betas and their margin requirements negative shocks to fundamentals make margin constraints bind lowering risk free rates and raising sharpe ratios of risky securities especially for high margin securities such a funding liquidity crisis gives rise to bases that is price gaps between securities with identical cash flows but different margins in the time series bases depend on the shadow cost of capital which can be captured through the interest rate spread between collateralized and uncollateralized loans and in the cross section they depend on relative margins we test the model empirically using the credit default swap bond bases and other deviations from the law of one price and use it to evaluate central banks lending facilities jel g01 g12 g13 e44 e50 the paramount role of funding constraints becomes particularly salient during liquidity crises with the one that started in 2007 being an excellent case in point banks unable to fund their operations closed down and the funding problems spread to other investors such as hedge funds that relied on bank funding therefore traditional liquidity providers became forced sellers interest rate spreads increased dramatically treasury rates dropped sharply and central banks stretched their balance sheets to facilitate funding these funding problems had significant asset pricing effects the most extreme example being the failure of the law of one price loop securities with nearly

analysis of nash equilibria in a class of capital accumulation games in a simple capital accumulation game we study existence and dynamic properties of the cooperative solution two kinds of markov perfect equilibria mpe and a trigger strategy equilibrium in the cooperative solution the stock always converges towards a steady state this property is shared by our first mpe whereas the second type of mpe may result in complicated dynamics a pareto comparison of both mpe depends on the parameter specifications but can turn out either way finally we show how the players can achieve the efficient payoffs of the cooperative solution as an equilibrium outcome by using trigger strategies

dynamic oligopoly with capacity adjustment costs abstract the literature on strategic investment emphasized the case of completely irreversible investment this paper considers an oligopoly model in which investment is reversible and capacity is subject to adjustment costs an n player linear quadratic differential game is analyzed existence and characterization results for perfect equilibrium feedback strategies are provided feedback strategies provide incentives for each player to invest strategically so as to preempt subsequent expansion by rivals a larger set of perfect equilibria is constructed by using memory dependent trigger strategies equilibria of this type are shown to support joint value maximization for some initial states and asymmetric steady states

trade with polluting nonrenewable resources abstract the paper considers nonrenewable resource extraction in a situation where the resource buyers have formed a government which applies emission taxation for slowing pollution accumulation and the sellers are competitive or a resource cartel the noncompetitive situation is studied as a stackelberg differential game which the cartel leads it is first assumed that extraction costs do not depend on the resource stock level and that the pollution stock does not decay in the time consistent and markov perfect equilibrium the sellers monopoly power vanishes asymptotically the sellers market power reduces the buyers emission tax at each point in time in the stackelberg equilibrium the emission tax is below the marginal present value of pollution damage if pollution decays and extraction costs depend on the resource stock level buyers have monopsony power and the ability of sellers to receive emission tax revenues is weakened when the rate of pollution decay is high the producer price falls below the pareto optimal level

the liquidity coverage ratio and security prices abstract what is the added value of a security which qualifies as a high quality liquid asset hqla under the basel iii liquidity coverage ratio lcr in this paper we quantify the added value in terms of yield changes and as suggested by stein 2013 call it hqla premium to do so we exploit the introduction of the lcr in switzerland as a unique quasi natural experiment and we find evidence for the existence of an hqla premium in the order of 4 basis points guided by theoretical considerations we claim that the hqla premium is state dependent and argue that our estimate is a lower bound measure furthermore we discuss the implications of an economically significant hqla premium thereby we contribute to a better understanding of the lcr and its implications for financial markets

cyclical and noncyclical redistributive taxation consider the optimal time path of a tax on capital income the proceeds of which are transferred to labor in a lump sum it is known from earlier open loop formulations that if the optimal rate of tax converges to a point it converges to zero implying that in the long run a tax on capital income can do nothing for social welfare it is now shown that the optimal rate of tax need not converge to zero and in the case of feedback formulations that it may converge to a positive or negative number or to a limit cycle copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

precious metals the case for treating metals as irreplaceable abstract non renewable resources including metals minerals and fossil fuels are being consumed at ever increasing rates only a small proportion of this consumption of natural capital is being converted to other forms of durable human capital the majority especially of fuels is being consumed unrecoverably worse is the fact that the majority of the benefits from this consumption accrue inequitably not only between the developed and developing world but also within these worlds where income disparity is increasing dramatically one solution to the problem of non renewable resource depletion is to change the valuation of these materials such that their prices reflect fully internalized costs plus the cost of replacement given that non renewable resources are irreplaceable this latter cost should be set high enough to encourage extensive conservation through recycling and reuse a place to start in revaluing non renewable resources such as metals is through royalty rates on mined product currently royalty rates are very low and are often charged only on profits i propose that minimum royalty rates on revenues should be set by international agreement and that these rates should be slowly increased over several years to allow markets time to adjust in this way consumers would be made directly aware of the irreplaceable value of minerals and metals leading to a change in usage patterns and the benefits of resource extraction would be more equitably distributed to producer nations ensuring that these new revenues are actually invested back into society as sustainable development requires a commitment to quality governance

diffusion of renewable heating technologies in households experiences from the norwegian household subsidy programme abstract a sample of 896 norwegian households participating in a subsidy programme was surveyed in order to evaluate the success of the programme the programme subsidised investments in new heating technologies including heat pumps and pellet stoves the success of the programme was measured by the degree of overall satisfaction with the investment by the sampled households theories on diffusion of innovations and planned behaviour motivate the empirical modelling of the investment satisfaction the economic return on the investment varied substantially both within and between the two heating technologies with heat pumps outperforming pellet stoves in this respect still the economic return showed no explanatory power toward the investment satisfaction of the household among the economic variables only the electricity price had any influence on investment satisfaction technical quality indoor climate and heat comfort and the availability of the supplier of the heating equipment were the most important explanatory variables

collateral values by asset class evidence from primary securities dealers using data on repurchase agreements by primary securities dealers we show that three classes of securities treasury securities securities issued by government sponsored agencies and mortgage backed securities can be formally ranked in terms of their collateral values in the general collateral gc market we then show that gc repurchase agreement repo spreads across asset classes display jumps and significant temporal variation especially at times of predictable liquidity needs consistent with the safe haven properties of treasury securities these jumps are driven almost entirely by the behavior of the gc repo rates of treasury securities estimating the collateral rents earned by owners of these securities we find such rents to be sizable for treasury securities and nearly zero for agency and mortgage backed securities finally we link collateral values to asset prices in a simple no arbitrage framework and show that variations in collateral values explain a significant fraction of changes in short term yield spreads but not those of longer term spreads our results point to securities role as collateral as a promising direction of research to improve understanding of the pricing of money market securities and their spreads jel g12 g23