Structural reforms,fiscal consolidation and external rebalancing in monetary union: A model-based analysis

The paper analyses the impact of structural reforms on external positions in monetary union in a 3-region version of QUEST III. Wage cost moderation and fiscal consolidation improve the current account balance in the medium term, but positive income effects tend to offset the initial increase in the long term. The general pattern is robust across alternative levels of initial foreign indebtedness. While lasting imbalance correction requires a contraction of debt-financed domestic demand, supply-side reform can mitigate the associated output contraction. A scenario is given as illustration that would reverse the 20% competitiveness loss in the EMU periphery during the 2000s and reduce foreign and government debt by 30% and 50% of GDP within ten years.     

What do we know about real exchange rate nonlinearities?

Nonlinear modeling of adjustments to purchasing power parity has recently gained much attention. However, a huge body of the empirical literature applies ESTAR models and neglects the existence of other competing nonlinear models. Among these, the Markov Switching AR model has a strong substantiation in international finance. Our contribution to the literature is fivefold: First, ESTAR and MSAR models from a unit root perspective are compared. To this end, a new unit root test against MSAR is proposed as the second contribution. Thirdly, the case of misspecified alternatives in a Monte Carlo setup with real world parameter constellations is studied. The ESTAR unit root test is not indicative, while the MSAR unit test is robust. Fourthly, the case of correctly specified alternatives is considered and low power of the ESTAR but not for the MSAR unit root test is observed. Fifthly, an empirical application to real exchange rates suggests that they may indeed be explained by Markov Switching dynamics rather than ESTAR.     

Induced innovation and spillover effects of US and Canadian research expenditures in Canadian agriculture

This study examines the induced innovation hypothesis (IIH) from 1958 to 2015 for two Canadian agriculture regions: Central Canada (the provinces of Ontario and Quebec) and Western Canada (the provinces of Alberta, Saskatchewan and Manitoba). There is broadly consistent support for the IIH for Canadian agriculture, especially for Western Canadian agriculture. In addition, there is support for the notion that US, as well as Canadian, research expenditures are important to explain changes in the input ratio in Canadian agriculture in the long run. This indicates the existence of spillover effects from US agricultural research expenditures to Canadian agriculture.     

Managerial expertise,learning potential and dynamic incentives: get more for less?

In this paper the impact of ability and learning potential on incentive contracts is analyzed. A central feature of the model is that the true ability will not be revealed. The learning potential of an agent is modeled as the magnitude of impact on the agent's expected ability that learning‐by‐doing has in a given task. Absent a managerial labor market, depending on an agent's learning potential, a monotone or non‐monotone pay structure may be optimal. The second important result is that using agents' ability distributions as inputs to information systems, higher learning potentials lead to less costly information systems, i.e. actions can be implemented at lower costs. Additionally, it is proven that the criteria cost minimization and value maximization are equivalent in the model's context. Copyright © 2007 John Wiley & Sons, Ltd.     

Vorschau 1 |2012

Vorschau

Vorschau 1 |2012     

Exchange rate management in emerging markets: Intervention via an electronic limit order book

This paper describes and analyzes the implementation of a crawling exchange rate band on an electronic trading platform. The placement of limit orders at the central bank's target rate serves as a credible policy statement that may coordinate beliefs of market participants. We find for our sample that intervention increases exchange rate volatility (and spread) for the next minutes but that intervention days show a lower degree of volatility (and spread) than non-intervention days. We also show for intraday data that the price impact of interbank order flow is smaller on intervention days than on non-intervention days. These stabilizing effects, however, rely on the conditions of large currency reserves and the existence of capital controls; an electronic market seems to support this goal.     

Die Bewertung von Handelsrisiken eines Übertragungsnetzbetreibers anhand einer Monte-Carlo-Simulation

EnBW Transportnetze AG (TNG) is the transmission system operator (TSO) of Energie Baden-Württemberg AG. Due to the Renewable Energy Sources Act, the TSOs are obliged to take-up the (fluctuating) complete amount of electricity made of renewable resources. The TSOs have to transform this feeding into a constant output. Therefore, TNG has started trading on the European Power Exchange. The amount of electricity needed to be bought and sold respectively in order to create a constant output involves risks because of price volatility. As a result of the merit-order-effect, these risks increase. Due to this effect, procurement costs generally exceed sales revenues despite of well-balanced quantitative electricity tradings. For evaluating the procurement and merchandise risk at the intraday market, a Monte-Carlo-Simulation is executed on the basis of historical turnover data.