petrol prices oil price rises and oil price falls some evidence for the uk since 1972 this paper examines the relationship between retail petrol prices excise duties and crude oil prices in the uk over the period 1973 1988 the existence of a stable relationship between the petrol price level of excise duty and spot oil price is confirmed through use of the cointegration approach although the speed of reaction of petrol prices to changes in the crude price depends on whether crude prices are rising or falling any asymmetry in the pricing response is virtually absent after an adjustment period of only four months

referenda under oath herein we explore whether a solemn oath can eliminate hypothetical bias in a voting referenda a popular elicitation mechanism promoted in non market valuation exercises for its incentive compatibility properties first we reject the null hypothesis that a hypothetical bias does not exist second we observe that people who sign an oath are significantly less likely to vote for the public good in a hypothetical referenda we complement this evidence with a self reported measure of honesty which confirms that the oath increases truthfulness in answers this result opens interesting avenues for improving the elicitation of preferences in the lab and beyond

the influence of collective action on the demand for voluntary climate change mitigation in hypothetical and real situations in this experiment we investigate determinants of the individual demand for voluntary climate change mitigation subjects decide between a cash prize and an allowance from the eu emissions trading scheme for one ton of co2 that will be deleted afterwards we vary the incentives of the decision situation in which we distinguish between real monetary incentives and a hypothetical decision situation with and without a cheap talk script furthermore decisions were implemented either as purely individual or as a collective action using majority voting we observe a significant hypothetical bias in the demand for voluntary climate change mitigation in case of the individual decision situation this bias is caused solely by subjects with low income collective decision making affects demand positively in the hypothetical decision situation only

oil and the macroeconomy a markov state switching approach this paper analyzes the relationship between oil price shocks and postwar u s business cycle fluctuations the authors develop a generalized markov switching model of output that includes a measure of net real oil price increases and examine the capabilities of this variable to generate shifts in the mean of gdp growth and to predict transitions between dichotomous growth phases the results indicate that while the behavior of oil prices has been a contributing factor to the mean of low growth phases of output movements in oil prices generally have not been a principal determinant in the historical evidence of these phases copyright 1997 by ohio state university press

oil price shocks and the macroeconomy this paper examines the impact of oil price shocks and attempts to explain why the rise in oil prices up to 2008 had little impact on the world economy it makes three main arguments first that oil prices have never been as important as is popularly thought second that the most important route through which oil prices affect output is monetary policy when oil prices pass through to core inflation monetary authorities raise interest rates slowing growth based on the second argument the third argument is that high oil prices have not reduced growth in recent years because they no longer pass through to core inflation so the monetary tightening previously seen in response to high oil prices is absent it also argues that oil prices had little impact on the global recession of 20089

the long term impact of matching and rebate subsidies when public goods are impure field experimental evidence from the carbon offsetting market in this paper we investigate both short and long term impacts of financial stimuli on public goods provision when contributions are tied to individual harm related behavior we conduct a large scale field experiment to examine voluntary contributions to a carbon offsetting program during the online purchase of a bus ticket we systematically vary the individual payoff structure by introducing different price rebates 25 50 75 and corresponding matching grants 1 3 1 1 1 3 1 using data on returning customers we investigate the long term effects of the different stimuli both while treatments were in place as well as their persistence for the time after treatment removal in the first bookings our results show that all price rebate schemes increase the participation rate in the offsetting program while we find weaker effects for matching grants when bookers are treated repeatedly only the equal 1 1 matching scheme continues to lead to higher participation rates even after removing the subsidies we report higher participation rates for customers previously facing a 1 1 matching scheme this treatment is also the only one increasing net contributions of customers compared to the control group

behavioral economics for environmental policy abstract the predictions of widely prescribed global and country level environmental policies at present are based mainly on mainstream economic models which treat individual actors to be unboundedly rational in their decision making in recent years however behavioral and experimental economists have found that the individual actors in many circumstances act within a bounded rationality framework suggesting that predictions based on the unbounded rationality models would be less valid while some of mainstream economists have already started adopting the bounded rationality based models in their academic discourse many environmental economists seem to be reluctant to use these alternative models of rationality in their research and policy prescriptions this paper highlights the implications of using bounded rationality models in environmental research in general and policymaking in particular

does opec influence crude oil prices testing for co movements and causality between regional crude oil prices using high frequency data the co movements among crude oil prices are analysed in order to address the question of regionalization of the world crude oil market time series econometrics in the form of error correction modelling is applied for daily crude oil price data covering the time period 1988 to 2004 and in this framework topics like weak and strong exogeneity among three major oil prices represented by brent opec and texas wti are addressed the empirical results are that causality is most likely bi directional among these crude oil prices and hence rejecting a regionalization hypothesis of the global oil market and also an influence from the opec oil price towards bent and wti which are usually claimed to have a benchmark role

is consumption insufficiently sensitive to innovations in income deaton 1986 has noted that if income is a first order autoregressive process in first differences then a simple version of friedman s permanent income hypothesis spih implies that measured u s consumption is insufficiently sensitive to innovations in income this paper argues that this implication of the spih is a consequence of the fact that it ignores the role of the substitution effect in the consumption decision using a parametric version of the standard model of economic growth the paper shows that very small movements in interest rates are sufficient to induce an empirically plausible amount of consumption smoothing since an overall evaluation of the model s explanation for the observed smoothness of consumption requires examining its implications for other aspects of the data the paper also explores some of these

the role of energy in real business cycle models abstract this paper modifies hansen s 1985 analysis of a real business cycle mode with indivisible labor by explicitly including energy as a productive input and modelling the relative price of energy as an exogenous random process one goal is to determine the extent to which the introduction of energy price shocks reduces the reliance of the real business cycle model on unobserved technology shocks the other goal following christiano and eichenbaum 1991 is to compare the correlation between real wages and hours predicted by the energy inclusive model to that predicted by hansen s model

modeling structural breaks in economic relationships using large shocks abstract this paper introduces a new model of structural breaks in the coefficients of economic relationships which allows them to be driven by large past economic shocks the breaks generated by these shocks can be taken to reflect stochastic changes in agents decisions or beliefs triggered by extraordinary economic events our model specifies that both the timing and size of breaks are stochastic the last property of it enables us to investigate qualitative effects that large shocks can have on economic relationships as an empirical application of our model the paper investigates the stability the oil economy relationship since the early sixties from the six large oil shocks identified by our data the paper shows that only the first oil shock at the end of 1973 has caused a major long term adverse effect on economic activity all the large oil price shocks that have happened since then did not have any significant negative effects on the slope of the oil economy relationship

oil price shocks and real gdp growth empirical evidence for some oecd countries this study assesses empirically the effects of oil price shocks on the real economic activity of the main industrialized countries multivariate var analysis is carried out using both linear and non linear models the latter category includes three approaches employed in the literature namely the asymmetric scaled and net specifications evidence of a non linear impact of oil prices on real gdp is found in particular oil price increases are found to have an impact on gdp growth of a larger magnitude than that of oil price declines with the latter being statistically insignificant in most cases among oil importing countries oil price increases are found to have a negative impact on economic activity in all cases but japan moreover the effect of oil shocks on gdp growth differs between the two oil exporting countries in the sample with the uk being negatively affected by an oil price increase and norway benefiting from it

the short run and long run effects of behavioral interventions experimental evidence from energy conservation we document three remarkable features of the opower program in which social comparison based home energy reports are repeatedly mailed to more than six million households nationwide first initial reports cause high frequency action and backsliding but these cycles attenuate over time second if reports are discontinued after two years effects are relatively persistent decaying at 10 20 percent per year third consumers are slow to habituate they continue to respond to repeated treatment even after two years we show that the previous conservative assumptions about post intervention persistence had dramatically understated cost effectiveness and illustrate how empirical estimates can optimize program design jel d12 d83 l94 q41

on the self interested use of equity in international climate negotiations abstract we discuss self interested uses of equity arguments in international climate negotiations using unique data from a world wide survey of agents involved in international climate policy we show that the perceived support of different equity rules by regions may be explained by the ranking of their economic costs despite being self interested equity arguments may be perceived as being used for different reasons for example out of fairness considerations or in order to facilitate negotiations consistent with experimental and behavioral studies on fairness perceptions we find that individuals are more likely to state reasons with positive attributes if they evaluate their own region or regions that support the individual s personally preferred equity rule negotiators perceive the use of equity by regions as less influenced by pressure from interest groups

on the dynamic effects of oil price shocks a study using industry level data abstract this paper analyzes the effects of oil price shocks on demand and supply in various industries the impulse responses of identified var models indicate that for industries that have a large cost share of oil such as petroleum refinery and industrial chemicals oil price shocks mainly reduce supply in contrast for many other industries with the automobile industry being a particularly important example oil price shocks mainly reduce demand the paper suggests that oil price shocks influence economic activities beyond that explained by direct input cost effects possibly by delaying purchasing decisions of durable goods

the effects of income tax rate uncertainty in a dynamic setting most discussion of income tax policy focuses on the expected efficiency or equity gains that could result from alterations in income tax codes often overlooked is the uncertainty that is generated when taxpayers anticipate a change in the tax laws for example over the last decade the income tax codes in the u s have undergone three significant revisions and while each of these revisions was accompanied by extensive debate concerning the effects of changes in particular statutory provisions the uncertainty generated by such rapid changes in the tax codes received little attention it is likely that the timing of these revisions as well as the revisions themselves were difficult to predict and consequently contributed to the uncertainty facing taxpayers while income tax codes may be subject to a wide variety of changes arguably the most consequential is a change in tax rates given a fixed tax base with a fixed tax base changes in statutory tax rates translate into changes in effective tax rates because changes in effective rates have such a pervasive influence on decision making it seems reasonable to expect that uncertainty regarding future effective tax rates may have serious consequences we explore the impact of this particular form of tax code uncertainty on an individual s saving and portfolio decision making in a dynamic setting throughout our analysis the tax base is unchanging so that we do not bother to distinguish between effective and statutory tax rates in this setting we assume that the timing of tax rate changes is uncertain and that if a change occurs the new tax rate is unpredictable we find that more less risk averse taxpayers will respond to an increase in the likelihood of a change in the tax code or an increase in the variability of future tax rates by increasing decreasing saving we are also able to characterize those situations in which an increase in the likelihood of a change in the tax code or an increase in the variability of future tax rates will depress risk taking there is a growing literature that examines the effects of income tax uncertainty for example auerbach and poterba 3 and bernheim 4 have dealt with uncertainty that alters a firm s taxable income and consequently the effective tax rate faced by the firm auerbach and hines 2 have analyzed corporate investment behavior in the u s by taking into account the possibility that investors anticipate future changes in tax laws models that examine the welfare consequences of uncertain tax rates have been developed by weiss 9 in a static setting and by bizer and judd 5 in a dynamic setting estimates of the welfare costs associated with statutory tax uncertainty in

tax rate uncertainty and the sensitivity of consumption to income in an overlapping generations model abstract a well documented feature of u s data is that the aggregate consumption is a smoother process than income an overlapping generations model with a time nonseparable utility function is developed to characterize the effect of income tax uncertainty on the degree of consumption smoothness the model predicts that an increased tax uncertainty combined with tax financed production externality makes the aggregate consumption smoother for a plausible range of intertemporal substitution in consumption a calibration experiment indicates that the observed long term smoothness of aggregate consumption is consistent with the model s predicted consumption process

optimal emissions tax rates under habit formation and social comparisons abstract the existing climate models ignore the behavioral anomalies of households and conclude that the optimal environmental tax rate should comove with business cycles however this assumption has received extensive criticism recently to this end this paper studies the optimal emissions tax rate when households are bounded rational in particular we calculate the optimal climate policy in a dynamic stochastic general equilibrium dsge model that features households with habit formation internal habits and social comparisons external habits compared to the benchmark model without consumption externality the social comparisons model amplifies consumption volatility but produces a similar response of pollutant emissions in the presence of the three types of economic shocks considered in contrast the habit formation model decreases the volatility of both consumption and pollutant emissions in contrast to the previous result that the optimal emissions tax rate should be procyclical we find that the social comparisons model largely mitigates the procyclicality of optimal emissions tax rates and the optimal emissions tax rates under the habit formation model remain constant in response to all the economic shocks considered

environmental protection and the private provision of international public goods final version received 11 september 2008 international environmental protection like the combat of global warming exhibits properties of publicgoods in the international arena no coercive authority exists that can enforce measures to overcome free rider incentives therefore decentralized negotiations between individual regions serve as an approach topursue ef cient international environmental protection we propose a scheme which is based on the ideasof coasean negotiations and pigouvian taxes the negotiating entities offer side payments to counterpartsin order to in uence their taxation of polluting consumption side payments in turn are self nanced bymeans of externality correcting taxes as we show a pareto ef cient outcome can be attained

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

crude oil and the macroeconomy tests of some popular notions a note perhaps no other economic events in the post world war ii era have generated as much attention as the series of crude oil price shocks that have jolted the world economy since the opec boycott of 1973 a tremendous amount of space in the popular and professional literature has been devoted to analyzing the impacts of these shocks on the developed economies and the adjustments these shocks have induced one residual of this literature has been a general impression that since 1973 the functional relationship between crude oil prices and the developed macroeconomies has been dramatically and fundamentally altered yet to our knowledge no one has formally tested this impression recent evidence of hamilton 1983 suggests that crude oil prices had a strong impact on the u s business cycle well before 1973 further while textbook treatments of oil price shocks tend to highlight cost push inflationary effects the research of berndt and wood 1975 1979 and wilcox 1983 indicates the net complementarity between energy and capital in the u s economy is quite strong both before and after 1973 thus oil price shocks may have stronger real effects than generally believed in this paper we formally test three popular notions associated with the so called

economic growth inflation and oil shocks are the 1970s coming back this article analyses the relationship between oil price shocks and the macroeconomic evolution of the group of seven g7 countries using the qu and perron 2007 methodology we endogenously identify three breaks in the nonlinear relationship across our 1970 to 2008 sample we compute long term multipliers and find that the response of output and inflation to oil price shocks is greatest in the 1970s and progressively disappears until the late 1990s in contrast to the previous literature we observe that both effects reappear in the 2000s especially on inflation nevertheless the transmission of oil price shocks to the economy is weaker than in the 1970s which means that oil price shocks have lost some of their explanatory power precisely identifying these effects is crucial for the design of adequate economic measures to control or smoothen them

imperfect competition and the effects of energy price increases on economic activity the authors show that modifying the standard neoclassical growth model by assuming that competition is imperfect makes it easier to explain the size of the declines in output and real wages that follow increases in the price of oil plausibly parameterized models of this type are able to mimic the response of output and real wages in the united states the responses are particularly consistent with a model of implicit collusion where markups depend positively on the ratio of the expected present value of future profits to the current level of output copyright 1996 by ohio state university press

oil and stock market volatility a multivariate stochastic volatility perspective abstract this paper models the volatility of stock and oil futures markets using the multivariate stochastic volatility structure in an attempt to extract information intertwined in both markets for risk prediction it offers four major findings first the stock and oil futures prices are inter related their correlation follows a time varying dynamic process and tends to increase when the markets are more volatile second conditioned on the past information the volatility in each market is very persistent i e it varies in a predictable manner third there is inter market dependence in volatility innovations that hit either market can affect the volatility in the other market in other words conditioned on the persistence and the past volatility in their respective markets the past volatility of the stock oil futures market also has predictive power over the future volatility of the oil futures stock market finally the model produces more accurate value at risk estimates than other benchmarks commonly used in the financial industry

a comparison of the effects of exogenous oil supply shocks on output and inflation in the g7 countries a comparison of the effects of exogenous shocks to global crude oil production on seven major industrialized economies suggests a fair degree of similarity in the real growth responses an exogenous oil supply disruption typically causes a temporary reduction in real gdp growth that is concentrated in the second year after the shock inflation responses are more varied the median cpi inflation response peaks after three to four quarters exogenous oil supply disruptions need not generate sustained inflation or stagflation typical responses include a fall in the real wage higher short term interest rates and a depreciating currency with respect to the dollar despite many qualitative similarities there is strong statistical evidence that the responses to exogenous oil supply disruptions differ across g7 countries for suitable subsets of countries homogeneity cannot be ruled out a counterfactual historical exercise suggests that the evolution of cpi inflation in the g7 countries would have been similar overall to the actual path even in the absence of exogenous shocks to oil production consistent with a monetary explanation of the inflation of the 1970s there is no evidence that the 1973 1974 and 2002 2003 oil supply shocks had a substantial impact on real growth in any g7 country whereas the 1978 1979 1980 and 1990 1991 shocks contributed to lower growth in at least some g7 countries jel e31 e32 q43

international evidence on the historical properties of business cycles we contrast properties of real quantities with those of price levels and stocks of money for ten countries over the last century although the magnitude of output fluctuations has varied across countries and periods relations among real quantities have been remarkably uniform properties of price levels however exhibit striking differences between periods inflation rates are more persistent after world war ii than before and price level fluctuations are typically procyclical before world war ii and countercyclical afterward fluctuations in money are less highly correlated with output in the postwar period but are no more persistent than in earlier periods jel e32 e31

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

behavioral environmental economics promises and challenges environmental issues provide a rich ground for identifying the existence and consequences of human limitations in this paper we present a growing literature lying at the interface between behavioral and environmental economics this literature identifies alternative solutions to traditional economic instruments in environmental domains that often work imperfectly but it also faces a set of challenges including the difficulty of computing welfare effects and the identification of a robust environmental policy based on context dependent socio psychological effects we illustrate our critical discussion with two behavioral schemes that have been widely implemented green nudges and corporate environmental responsibility

oil shocks and monetary policy rules in emerging economies we examine the effects of shocks in the oil market on key macroeconomic variables in small open economies using a dynamic stochastic general equilibrium model with sticky prices and imperfect competition under different monetary policy rules the numerical solutions show that the types of exchange rate regimes and monetary policies could partly explain the trends in macroeconomic volatilities considering negative shocks to oil supply hamilton 1983 and positive shocks to oil demand kilian 2009 these findings are confirmed in vector autoregressive responses for chile and israel with inflation targeting under flexible exchange regimes and hong kong with fixed regime

imperfect competition and business cycles an empirical investigation imperfect competition and business cycles an empirical investigation does imperfect competition increase the magnitude of business cycles if so the variability of an industry s employment and output should be positively related to the market power of firms in that industry this paper demonstrates that the opposite is true u s manufacturing industries with high price cost margins display less employment variability than do low markup industries these high markup industries display less price variability as well highly concentrated industries however do display more employment variability to some degree markups may reflect labor hoarding rather than market power this may account for part but not all of the negative correlation between markups and variability i introduction recent research has investigated whether deviations from perfect competition either in goods or labor markets help explain the existence and magnitude of business cycles in particular both theoretical and empirical evidence suggests that imperfectly competitive firms hold prices more rigid in the face of demand shocks than do more competitive firms 1 this finding raises the question of whether imperfectly competitive industries also exhibit larger fluctuations in output and employment this paper examines employment and output data for 446 u s manufacturing industries over the years 1958 to 1984 if employment and output fluctuations have been smaller in more competitive industries this would suggest that imperfect competition may indeed lead to larger business cycle fluctuations in fact my results suggest the opposite industries with larger price marginal cost margins display less variability in employment and output although the output results are not robust the finding for employment is remarkably robust to a wide range of specifications in particular it holds for two different methods of estimating the price marginal cost margin in contrast i find that highly concentrated industries as opposed to those with high price marginal cost margins do display more variability in output and employment than do less concentrated industries in addition i confirm the finding of previous studies that industries with high price cost margins display less price variability thus it appears that imperfect competition may reduce variability in both prices and quantities the paper proceeds as follows section ii outlines the theoretical literature and surveys previous empirical work in this area section iii describes the methodology of the paper and section iv describes the estimation of the price marginal cost margin section v presents the results and section vi discusses possible explanations section vii concludes ii theoretical literature and previous work many theoretical models suggest that imperfectly competitive industries ought to display more cyclical variability of output than perfectly competitive industries the common thread in all these theories is real price rigidity 2 some reason is offered why an imperfectly competitive firm does not adjust its relative price in response to a demand shock as much as would a perfectly competitive firm the less prices adjust the more output and employment must adjust therefore the argument goes imperfect competition may exacerbate the size of business cycle fluctuations 3 this basic argument dates back to means 1935 prices may be relatively acyclical or even countercyclical in industries with market power for one of two reasons either marginal cost is relatively flat or markups are relatively countercyclical the following theories of real price rigidity may be classified as falling into one of these two categories firms with market power are assumed to maintain excess capacity perhaps as a barrier to entry by new firms

oil price shocks and the dispersion hypothesis recent research by david lilien shows that a significant fraction of aggregate unemployment can be explained by the dispersion of employment growth across industries this paper presents two new results in this area first it is shown that a significant fraction of the variation in lilien s dispersion index is due to the differential impact of oil shocks across industries second and more important it is shown that once the dispersion in employment growth due to oil shocks is accounted for the residual dispersion has no explanatory power for unemployment

critical survey endogenous growth theory a critical assessment a critical assessment is made of endogenous growth theory from the perspective of recent developments within economics as a discipline these include its increasing mathematical formalisation its focus upon microfoundations the casual use of econometrics to test models and the incorporation of factors that have traditionally been outside mainstream economics it is found that the theory focuses upon market imperfections and technological progress in a variety of ways and reconstructs their impact upon the macroeconomy as a growth rather than as a level effect whilst the growth rate is endogenised this leads to the problem of multiple equilibria and extremely complex dynamics the generalisation from exogenous growth theory is however associated with even more extreme assumptions and analytical distance from the socioeconomic processes of growth itself copyright 2000 by oxford university press

are oil shocks inflationary asymmetric and nonlinear specifications versus changes in regime this paper identifies a structural break in core u s inflation phillips curves such that oil prices contributed substantially before 1981 but since that time pass through has been negligible this characterization is robust to a variety of re specifications and fits the data better than asymmetric and nonlinear oil price alternatives evidence does not support the hypotheses that declining energy intensity or deregulation of energy producing and consuming industries played an important role monetary policy did not itself become less accommodative of oil shocks but may have helped create a regime where inflation is less sensitive to price shocks more generally

nonconvex costs and the behavior of inventories this paper explores one possible explanation for the apparent excess volatility of production relative to sales nonconvexities in the technology facing firms it is shown that if firms operate in a region of declining marginal costs then small shifts in demand can cause production to jump substantially estimates for six production to stock industries as well as the automobile industry suggest that all these industries behave as if they were operating in the region of nonconvex costs the results have important implications not only for inventory investment but also for the cyclical behavior of productivity and prices

paying for mitigation a multiple country study a contingent valuation study conducted in china sweden and the united states was used to investigate citizens willingness to pay wtp for reducing co2 emissions we find that a majority of the respondents in all three countries believe that the mean global temperature has increased over the last 100 years and that humans are responsible for the increase the share of americans that believes these statements is smaller and a relatively larger share of americans also believes that nothing can be done to stop climate change sweden has the highest wtp while china has the lowest jel q51 q54

permanent income in general equilibrium abstract this paper reviews recent tests of the permanent income hypothesis this literature suggests that consumption is too sensitive to current income relative to the predictions of the usual partial equilibrium model it is then argued that in general equilibrium attempts to move along a consumption possibilities frontier exhibiting diminishing returns would naturally give rise to endogenous changes in interest rates creating a link between consumption and current income a fully specified general equilibrium example is introduced which does indeed exhibit the same excess sensitivity reported in the literature for precisely this reason

dynamic cyclical comovements between oil prices and us gdp a wavelet perspective abstract in this paper we use wavelet analysis to investigate the cyclical comovements between crude oil prices and us gdp taking into account the decline in the volatility of us gdp growth that has occurred since the mid 1980s our main findings suggest that before 1984 q1 the crude oil prices were leading the us gdp cycle by 3 quarters and granger cause us gdp in contrast after 1984 q1 the crude oil prices were lagging the us business cycle and a reverse causality is found to run from us gdp to oil prices the multiscale granger causality tests globally corroborate theses results

realized volatility transmission between crude oil and equity futures markets a multivariate har approach this paper differs from extant literature because it studies volatility co movements with a multivariate orthogonalized har model a flexible specification for the time series of realized volatility which is able to identify short mid and long term spillover effects we examine volatility transmission mechanisms using high frequency data of the stock index futures on s p 500 nikkei 225 ftse 100 and the futures on the west texas intermediate crude oil during the period from september 2002 to september 2012 considering the full sample the short term volatility of the equity futures contains information about future oil volatility incremental to the information inherent in the time series of oil volatility on the other hand weekly and monthly volatilities do not exhibit a significant spillover effect breaking the whole sample into three subsamples no significant granger causalities are observed in the pre crisis period while in the crisis time and its aftermath we document that the us and uk equity market volatilities to granger cause the oil futures volatility which itself leads the japanese market in terms of magnitude we observe an increase in the short term volatility spillover over time studying the residuals of the har transmission models within a ccc dcc garch framework reveals increasing instantaneous correlation between the energy and equity volatilities in the course of time

successful leadership in global public good provision incorporating behavioural approaches in the standard model of voluntary public good provision and other game theoretic models climate friendly leadership of a country is not successful a unilateral increase of this country s greenhouse gas abatement measures i e contributions to the global public good of climate protection will not lead to a positive reaction by the other countries but instead trigger a reduction of their abatement efforts and thus a crowding out effect in this paper it is shown how this undesired consequence need no longer occur when elements of behavioral economics are incorporated in the otherwise standard model of public good provision in particular strategic complementarities between the public good contribution of the leading country and those of the follower may result either if the follower has specific non egoistic or other regarding preferences or if the leader s contribution positively affects the follower s beliefs i e his conjectural variations about the leader s behaviour

input price shocks and the slowdown in economic growth the case of u k manufacturing this paper provides a theoretical and empirical analysis of the effects of input price shocks on economic growth with a focus on united kingdom manufacturing in the 1970s the theoretical model predicts a discrete decline in output and productivity after an input price rise and a longer run slowdown in productivity growth real wage growth and capital accumulation these features characterize the united kingdom and most other oecd economies after 1973 the empirical results confirm the important role of input prices in recent u k adjustment but also point to an important role for other supply and demand factors two types of explanations have been offered for the sharp deterioration in u k economic performance in the past decade focusing respectively on demand and supply factors a standard keynesian view holds that macroeconomic demand management has been either too expansionary or too contractionary and that rising unemployment and falling output reflect the burden of anti inflationary policies an alternative view holds that various supply shocks are the main source of the poor output performance in this interpretation higher raw material prices particularly oil competition from the newly industrializing countries nics and perhaps an independent decline in productivity growth all have lowered output growth and raised unemployment

oil price shocks and stock markets in the u s and 13 european countries abstract oil price shocks have a statistically significant impact on real stock returns contemporaneously and or within the following month in the u s and 13 european countries over 1986 1 2005 12 norway as an oil exporter shows a statistically significantly positive response of real stock returns to an oil price increase the median result from variance decomposition analysis is that oil price shocks account for a statistically significant 6 of the volatility in real stock returns for many european countries but not for the u s increased volatility of oil prices significantly depresses real stock returns the contribution of oil price shocks to variability in real stock returns in the u s and most other countries is greater than that of interest rate an increase in real oil price is associated with a significant increase in the short term interest rate in the u s and eight out of 13 european countries within one or two months counter to findings for the u s and for norway there is little evidence of asymmetric effects on real stock returns of positive and negative oil price shocks for oil importing european countries

a neoclassical model of unemployment and the business cycle this paper investigates a general equilibrium model of unemployment and the business cycle in which specialization of labor plays a key role a rational expectations equilibrium with fully flexible wages and prices can exhibit unemployment in which the marginal product of employed workers exceeds the reservation wage of those who are without jobs workers are unemployed either because they are in the process of relocating for a better job or because they are waiting for conditions in the depressed sector to improve moreover seemingly small disruptions in the supplies of primary commodities such as energy could be the source of fluctuations in aggregate employment and can exert surprisingly large effects on real output

what happened to the oil price macroeconomy relationship abstract strong evidence is found that oil prices no longer granger cause many u s macroeconomic indicator variables in data after 1973 a number of potential explanations are explored that sample stability issues are responsible that oil prices are now endogenous and that linear and symmetric specifications misrepresent the form of the oil price interaction none of these hypotheses are supported by the data the opec price increases do appear to have had significant impacts while the effects of the price declines of the 1980s are smaller and harder to characterize these results have potentially important implications for the large body of research which utilizes oil prices as an instrumental or explanatory variable

the behavioural economics of climate change this paper attempts to bring some central insights from behavioural economics into the economics of climate change in particular it discusses i implications of prospect theory the equity premium puzzle and time inconsistent preferences in the choice of discount rate used in climate change cost assessments and ii the implications of various kinds of social preferences for the outcome of climate negotiations several reasons are presented for why it appears advisable to choose a substantially lower social discount rate than the average return on investments it also seems likely that taking social preferences into account increases the possibilities of obtaining international agreements compared to the standard model however there are also effects going in the opposite direction and the importance of sanctions is emphasized

oil and the macroeconomy since the 1970s economists have long been intrigued by empirical evidence that suggests that oil price shocks may be closely related to macroeconomic performance this interest dates back to the 1970s the 1970s were a period of growing dependence on imported oil unprecedented disruptions in the global oil market and poor macroeconomic performance in the united states thus it was natural to suspect a causal relationship from oil prices to u s macroeconomic aggregates since then a large body of work has accumulated that purports to establish this link on theoretical grounds and to provide empirical evidence in its support we do not attempt a comprehensive survey of this literature but rather provide an idiosyncratic synthesis of what we view as the key issues in this debate and the insights gained over the last 30 years the timing seems right for such an account although the experience of the 1970s continues to play an important role in discussions of the link between oil and the macroeconomy there have been a number of new oil price shocks since the 1970s notably the 1986 collapse of oil prices and the 2000 boom in oil prices as well as the oil price increases associated with the 1990 1991 gulf war and the 2003 iraq war given this richer case history we are arguably in a better position than two decades ago to distinguish the idiosyncratic features of each oil crisis from the systematic effects increases in oil prices have been held responsible for recessions periods of excessive inflation reduced productivity and lower economic growth in this paper we review the arguments supporting such views first we highlight some of the conceptual difficulties in assigning a central role to oil price shocks in explaining

aggregative environmental games this paper expounds a new approach to the analysis of public good and open access resource models developed in a series of recent papers by cornes and hartley and considers the applicability of this approach to modeling current environmental problems i look at a number of possible extensions of the framework survey recent applications to environmental problems and suggest further possible lines of enquiry

oil price movements and macroeconomic performance evidence from twenty six oecd countries abstract this study investigates the relationship between oil price movements and macroeconomic aggregates such as gross domestic product gdp consumer prices cpi and unemployment for oecd countries to do this second generation econometric methods have been employed to panel data including panel unit root tests panel cointegration tests and panel long run models panel unit root tests suggest that oil prices plus selected macroeconomic aggregates in oecd countries are non stationary at levels but become stationary at first differences in the existence of multiple structural breaks five structural break points have successfully been investigated in the series of this study during panel unit root and panel cointegration tests durbin h panel co integration tests confirm that there is a long term relationship between oil prices and those macroeconomic aggregates on the other hand results of this study reveal that the price of oil exerts statistically and negatively significant impacts on gdp cpi and unemployment in the case of oecd countries in general

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

international environmental agreements and strategic voting two anonymous referees have provided very valuable comments and suggestions we have also benefited from discussions at seminars at the universities of bonn dortmund and dresden and at the conferences of euresco the european economic association and the verein fur socialpolitik this paper was partly written while haupt was visiting the economics department at the university of colorado at boulder he is very grateful to the members of the department particularly to eckhard janeba for their hospitality and for stimulating discussions and to the fritz thyssen stiftung for funding his research visit we also thank the deutsche forschungsgemeinschaft dfg for financial support

how sensitive are consumer expenditures to retail energy prices abstract there is growing evidence that the primary effect of energy price shocks on the u s economy involves a reduction in consumer spending we quantify the direct effect on real consumption of unanticipated changes in discretionary income shifts in precautionary savings and changes in the operating cost of energy using durables the possibility of asymmetries in the response of real consumption to energy price shocks is also considered we demonstrate that linear models are consistent with the symmetric behavior of real consumption in 1979 when energy prices increased sharply and in 1986 when they fell sharply it is shown that historically energy price shocks have been an important factor in explaining u s real consumption growth but by no means the dominant factor

the sensitivity of consumption to transitory income estimates from panel data on households we investigate the stochastic relation between income and consumption specifically consumption of food within a panel of about 2 000 households our major findings are 1 consumption responds much more strongly to permanent than to transitory movements of income 2 the response to transitory income is nonetheless clearly positive 3 a simple test independent of our model of consumption rejects a central implication of the pure life cycle permanent income hypothesis the observed covariation of income and consumption is compatible with pure life cycle permanent income behavior on the part of80 percent of families and simple proportionality of consumption and income among the remaining 20 percent as a general matter our findings support the view that families respond differently to different sources of income variations in particular temporary income tax policies have smaller effects on consumption than do other more permanent changes in income of the same magnitude this abstract was borrowed from another version of this item

viewpoint on the generalizability of lab behaviour to the field abstract we can think of no question more fundamental to experimental economics than understanding whether and under what circumstances laboratory results generalize to naturally occurring environments in this paper we extend levitt and list 2006 to the class of games in which financial payoffs and doing the right thing are not necessarily in conflict we argue that behaviour is crucially linked to not only the preferences of people but also the properties of the situation by doing so we are able to provide a road map of the psychological and economic properties of people and situations that might interfere with generalizability of laboratory result from a broad class of games

exogenous oil supply shocks how big are they and how much do they matter for the u s economy abstract the paper proposes a new measure of exogenous oil supply shocks the timing the magnitude and the sign of this measure may differ greatly from current state of the art estimates it is shown that only a small fraction of the observed oil price increases during oil crisis periods can be attributed to exogenous oil production disruptions exogenous oil supply shocks cause a sharp drop of u s real gdp growth after five quarters rather than an immediate and sustained reduction in economic growth and a spike in cpi inflation after three quarters overall exogenous oil supply shocks made remarkably little difference for the evolution of the u s economy since the 1970s although they did matter for some historical episodes

rationality of self and others in an economic system in this paper i want to disentangle some of the senses in which the hypothesis of rationality is used in economic theory in particular i want to stress that rationality is not a property of the individual alone although it is usually presented that way rather it gathers not only its force but also its very meaning from the social context in which it is embedded it is most plausible under very ideal conditions when these conditions cease to hold the rationality assumptions become strained and possibly even self contradictory they certainly imply an ability at information processing and calculation that is far beyond the feasible and that cannot well be justified as the result of learning and adaptation let me dismiss a point of view that is perhaps not always articulated but seems implicit in many writings it seems to be asserted that a theory of the economy must be based on rationality as a matter of principle otherwise there can be no theory this position has even been maintained by some who accept that economic behavior is not completely rational john stuart mill 1909 bk 2 ch 4 argued that custom not competition governs much of the economic world but he adds that the only possible theory is that standard economic doctrine makes assumptions of rationality that have very strong implications for the complexity of individuals decision processes the most complete assumptions of competitive general equilibrium theory require that all future and contingent prices exist and be known in fact of course not all these markets exist the incompleteness of markets has several side consequences for rationality for one thing each decision maker has to have a model that predicts the future spot prices this is an informational burden of an entirely different magnitude than simply optimizing at known prices it involves all the complexity of rational analysis of data and contradicts the much praised informational economy of the price system it is also the case that equilibria become much less well defined similar problems occur with imperfect competition this research was supported by the office of naval research grant onr n00014 79 c 0685 at the center for research in organizational efficiency institute for mathematical studies in the social sciences stanford university stanford california

impact of oil price shocks on output inflation and the real exchange rate evidence from selected asean countries this article analyses the impact of oil price shocks on real output inflation and the real exchange rate in thailand malaysia singapore the philippines and indonesia asean 5 using a structural var model the cointegration tests indicate that the macroeconomic variables of these countries are cointegrated and share common trends in the long run the impulse response functions reveal that oil price fluctuations do not impact the asean 5 economies in the long run and much of its effect is absorbed within five to six quarters the variance decomposition results further assert that with a few exceptions oil price shocks do not explain a significant variation in any of the variables under consideration we also identify a very unique pattern of response to oil price fluctuations between malaysia and singapore and between the philippines and thailand the pairs exhibit a high degree of similarity in their responses they do not share any commonalities across the group

the dynamic causality between commodity prices inflation and output in china a bootstrap rolling window approach in this article we empirically study the time varying bilateral causality between commodity prices inflation and output in china we first perform a series of parameter stability tests and find s

the persistence of treatment effects with norm based policy instruments evidence from a randomized environmental policy experiment during a 1977 fireside chat president jimmy carter famously appealed to american hom eowners to set their thermostats at 65 degrees to help conserve supplies of natural gas and fuel oil norm based strategies are commonly used to influence a range of private behaviors with public consequences including alcohol and drug use gambling and resource consump tion in the last decade these strategies increas ingly emphasize the use of social comparisons to motivate behavioral changes efforts to use such comparisons build upon leon festinger s 1954 social comparison theory which posits that individuals validate the appropriateness of an action or thought through comparison to others a subsequent literature in social psychol ogy argues that strategies based on this theory provide an effective means to promote environ mental conservation see e g tim kurz ngaire donaghue and ian walker 2005 p wesley schultz et al 2007 noah j goldstein robert b cialdini and vladas griskevicius 2008 jessica m nolan et al 2008 in this literature the work by schultz et al 2007 has proven most influential and forms the basis of opower s well cited social comparison approach for

the economic effects of energy price shocks large fluctuations in energy prices have been a distinguishing characteristic of the u s economy since the 1970s turmoil in the middle east rising energy prices in the u s and evidence of global warming recently have reignited interest in the link between energy prices and economic performance this paper addresses a number of the key issues in this debate what are energy price shocks and where do they come from how responsive is energy demand to changes in energy prices how do consumers expenditure patterns evolve in response to energy price shocks how do energy price shocks affect u s real output inflation and stock prices why do energy price increases seem to cause recessions but energy price decreases do not seem to cause expansions why has there been a surge in the price of oil in recent years why has this new energy price shock not caused a recession so far have the effects of energy price shocks waned since the 1980s and if so why as the paper demonstrates it is critical to account for the endogeneity of energy prices and to differentiate between the effects of demand and supply shocks in energy markets when answering these questions

two cheers and a qualm for behavioral environmental economics behavioral economics can gain more in roads into environmental economics if we better understand why exchange institutions fail more effectively reduce health risks and environmental conflicts encourage more coordination and cooperation design better incentive systems more accurately estimate economic measures of value and promote more protection at less cost behavioral economics deserves two cheers for advancing ideas of context dependence and social preferences which we illustrate with two examples of recent research

trade reform policy uncertainty and the current account a non expected utility approach rapid and comprehensive reduction in barriers to international trade has often been followed by a sharp deterioration in the current account the macroeconomic counterpart of the deterioration has typically been a decline in private savings no clear response pattern has been observed for private investment this article observes anticipated policy reversal may explain a decline in private savings for the same reason gradual tariff reduction causes private savings to go up temporarily low tariffs lower the relative price of current goods in terms of future goods and thus tend to depress private savings an anticipated future tariff increase will increase current consumption if the intertemporal substitution elasticity is larger than 1 if consumers internalize the impact of future tariff revenues on their after tax income the savings impact will always be negative even for an intertemporal substitution elasticity below 1 in the standard expected utility approach risk aversion is low when intertemporal substitution is high because the relevant elasticities are each other s inverse

behavioral economics and public policy a pragmatic perspective the debate about behavioral economics the incorporation of insights from psychology into economics is often framed as a question about the foundational assumptions of economic models this paper presents a more pragmatic perspective on behavioral economics that focuses on its value for improving empirical predictions and policy decisions i discuss three ways in which behavioral economics can contribute to public policy by oering new policy tools improving predictions about the eects

attitudes toward catastrophe in light of climate change and other global threats policy commentators sometimes urge that society should be more concerned about catastrophes this paper reflects on what society s attitude toward low probability high impact events is or should be we first argue that catastrophe risk can be conceived of as a spread in the distribution of losses based on this conception we review studies from decision sciences psychology and behavioral economics that explore people s attitudes toward various social risks contray to popular belief we find more evidence against than in favor of catastrophe aversion the preference for a mean preserving contraction of the loss distribution and discuss a number of possible behavioral explanations next we turn to social choice theory and examine how various social welfare functions handle catastrophe risk we explain why catastrophe aversion may be in conflict with equity concerns and other regarding preferences finally we discuss current approaches to evaluate and regulate catastrophe risk

the 2014 oil bust causes and consequences abstract this article suggests that the 2014 oil price collapse was possibly triggered by the falling euro versus the us dollar specifically the usd eur exchange rate likely adjusted to the sudden economic growth outlook divergence between the us and the eu as evident by the relative short term interest rate spread measures and triggered a strong dollar trade which is negative for the crude oil prices thus in our view the 2014 oil price bust is another episode of oil price inefficiency similar to the 2008 oil bubble the key argument presented in this article is that as long as there are temporary economic growth divergences between the us and the eu the resulting exchange rate volatility is likely to create the pricing inefficiencies in crude oil which in fact are mean reverting as the economic growth divergences eventually dissipate

taxation and uncertainty while taxes may be certain u s tax policy has certainly not been furthermore intrinsic economic risk makes investment decisions risky therefore a serious examination of the effects of tax policy on dynamic economic behavior should consider both sources of uncertainty this paper presents a simple theoretical and computational model that can analyze both intrinsic risk and uncertain taxation furthermore it will be clear that these techniques will be useful for examining general problems of taxation and risk when studying the impact of past and or proposed tax changes one of two extreme assumptions are usually made either agents are perfectly aware of future tax policy a perfect foresight assumption or they always believe that no change will ever occur a myopic foresight assumption these two assumptions yield substantially different views of recent tax experience as alan auerbach and james hines 1987 demonstrate in a partial equilibrium context both are clearly wrong the myopic specification assumes that individuals believe at each point in time that the current tax law will surely continue forever even after they have been hit repeatedly with tax changes on the other hand it is absurd to think that in say 1977 a significant number of individuals perfectly knew the various tax changes that would occur during the following decade this paper analyzes a dynamic general equilibrium model wherein taxpayers understand the uncertainty in tax policy when making their deci

do extrinsic incentives undermine social norms evidence from a field experiment in energy conservation policymakers use both extrinsic and intrinsic incentives to induce consumers to change behavior this paper investigates whether the use of extrinsic financial incentives is complementary to intrinsic incentives or whether financial incentives undermine the effect of intrinsic incentives we conduct a randomized controlled trial that uses information interventions to residential electricity customers to test this question we find that adding economic incentives to normative messages not only does not strengthen the effect of the latter but may reduce it these results are consistent with recent theoretical work that suggests a tension between intrinsic motivation and extrinsic incentives

oil and the macroeconomy when prices go up and down an extension of hamilton s results in an important paper hamilton 1983 demonstrated a strong correlation between oil price changes and gross national product growth in u s data however his study pertained to a period in which all the large oil price movements were upward and thus it left unanswered the question whether the correlation persists in periods of price decline moreover the price variable he used was somewhat distorted by price controls in the 1970s this note investigates whether hamilton s results continue to hold when the sample is extended to include the recent oil market collapse and the oil price variable is corrected for the effects of price controls particular attention is given to the possibility of asymmetric responses to oil price increases and decreases as suggested in the structural employment literature loungani 1986 davis 1987 hamilton 1988 like hamilton i based my investigation on the gnp equation in sims s 1 980b six variable quarterly vector autoregressive model

oil shocks and aggregate macroeconomic behavior the role of monetary policy a recent paper by bernanke gertler and watson 1997 suggests that monetary policy could be used to eliminate any recessionary consequences of an oil price shock this paper challenges this conclusion on two grounds first we question whether the federal reserve actually has the power to implement such a policy for example we consider it unlikely that additional money creation would have succeeded in reducing the fed funds rate by 900 basis points relative to the values seen in 1974 second we point out that the size of the effect that bernanke gertler and watson attribute to oil shocks is substantially smaller than that reported by other researchers primarily due to their choice of a shorter lag length than that used by other researchers we offer evidence in favor of the longer lag length employed by previous research and show that under this specification even the aggressive federal reserve policies proposed would not have succeeded in averting a downturn