Threshold models for trended time series

This paper presents the theoretical development of a new threshold autoregressive model based on trended time series. The theoretical arguments underlying the model are outlined and a nonlinear economic model is used to derive the specification of the empirical econometric model. Estimation and testing issues are considered and analysed. Additionally we apply the model to the empirical investigation of U.S. GDP.This paper is the result of work carried out for the author's Ph.D. thesis. I would like to thank Hashem Pesaran for his help, encouragement and insights during the preparation of this paper. I also thank Gary Koop and Sean Holly for helpful comments. Financial assistance from the Economic and Social Research Council is gratefully acknowledged.     

Post OPA-90 Vessel Oil Transfer Spill Prevention: The Effectiveness of Coast Guard Enforcement

Although oil spills from tanker accidents receive the most publicity, most vessel spills are not the result of accidents but of oil transfer activities. We investigate determinants of the size of vessel oil transfer spills as well as the effectiveness of Coast Guard enforcement activities in reducing their size. Vessel out-of-water and in-water oil transfer spillage functions are estimated utilizing tobit regression and detailed data on individual vessel oil transfer spills as well as Coast Guard safety/environmental enforcement activity data for the 1991–1995 period. Our estimation results suggest that Coast Guard hull but not machinery inspections are effective in reducing both out-of-water and in-water spills; patrols by air, but not by boat, are effective in reducing out-of-water spills; but neither is effective in reducing in-water spills. The results also show that the type of vessel (oil- and non-oil-cargo), vessel characteristics, vessel operations, weather/visibility conditions, and waterway type are determinants of post OPA-90 vessel oil transfer spills.     

Bargaining Outcomes with Double-Offer Arbitration

Increasingly, arbitration is becoming used to resolve bargaining disputes in a variety of settings. Reducing dispute rates is often listed as a main goal in designing arbitration mechanisms. Conventional arbitration and final-offer arbitration are two commonly used procedures, but theoretical examinations of these arbitration procedures show that disputants’ final bargaining positions do not converge and disagreement is likely. This article contains results from a set of experiments designed to compare bargaining outcomes under the two commonly used arbitration procedures with outcomes under an innovative procedure called “double-offer” arbitration (Zeng et al., 1996). This procedure requires that disputants make two final offers at impasse: a primary and a secondary offer. The arbitrator evaluates the pairs of offers using a linear criterion function, and theory suggests the secondary offers converge to the median of the arbitrator’s preferred settlement distribution. Because the procedure’s rules are that convergence of offers generates a settlement at those offers, this theoretical convergence result implies that arbitration is not needed in the end. Experimental results indicate that dispute rates in double-offer arbitration are, on average, about the same as dispute rates in conventional arbitration. However, other results show reason to favor double-offer arbitration. Specifically, in repeated bargaining, there is concern over whether use of an arbitration procedure becomes addictive and makes bargainers more likely to use the procedure in the future-a “narcotic effect.” The data show that double-offer arbitration is non-addictive, whereas both conventional and final-offer arbitration are.     

Vetoes Overridable by Simple Majorities

Conventional wisdom has it that the absolute (purely negative) veto is ineffective when overridable by a simple majority. That is flatly false. The examples that prove this surprising fact are themselves surprisingly ordinary yet oddly resistant to direct observation. They reveal virtues of a neglected institutional design.JEL classification: D71, D72     

Convenient estimators for the panel probit model: Further results

Bertschek and Lechner (1998) propose several variants of a GMM estimator based on the period specific regression functions for the panel probit model. The analysis is motivated by the complexity of maximum likelihood estimation and the possibly excessive amount of time involved in maximum simulated likelihood estimation. But, for applications of the size considered in their study, full likelihood estimation is actually straightforward, and resort to GMM estimation for convenience is unnecessary. In this note, we reconsider maximum likelihood based estimation of their panel probit model then examine some extensions which can exploit the heterogeneity contained in their panel data set. Empirical results are obtained using the data set employed in the earlier study. Helpful comments and suggestions by Irene Bertschek and Michael Lechner are gratefully acknowledged. This paper has also benefited from comments by two anonymous referees and from seminar participants at the Center for Health Economics at the University of York. Any remaining errors are the responsibility of the author.     

Noisy chaotic dynamics in commodity markets

The nonlinear testing and modeling of economic and financial time series has increased substantially in recent years, enabling us to better understand market and price behavior, risk and the formation of expectations. Such tests have also been applied to commodity market behavior, providing evidence of heteroskedasticity, chaos, long memory, cyclicity, etc. The present evaluation of futures price behavior confirms that the resulting price movements can be random, suggesting noisy chaotic behavior. Prices could thus follow a mean process that is dynamic chaotic, coupled with a variance that follows a GARCH process. Our conclusion is that models of this type could be constructed to assist in forecasting prices in the short run but not over long run time periods.First version received: June 2001/Final version received: March 2003     

The nature of the steady state in models of optimal growth under uncertainty

Summary. We study a one-sector stochastic optimal growth model with a representative agent. Utility is logarithmic and the production function is of the Cobb-Douglas form with capital exponent . Production is affected by a multiplicative shock taking one of two values with positive probabilities p and 1-p. It is well known that for this economy, optimal paths converge to a unique steady state, which is an invariant distribution. We are concerned with properties of this distribution. By using the theory of Iterated Function Systems, we are able to characterize such a distribution in terms of singularity versus absolute continuity as parameters and p change. We establish mutual singularity of the invariant distributions as p varies between 0 and 1 whenever . More delicate is the case . Singularity with respect to Lebesgue measure also appears for values such that . For and Peres and Solomyak (1998) have shown that the distribution is a.e. absolutely continuous. Characterization of the invariant distribution in the remaining cases is still an open question. The entire analysis is summarized through a bifurcation diagram, drawn in terms of pairs .Received: 9 April 2002, Revised: 29 October 2002, JEL Classification Numbers: C61, O41.Correspondence to: Tapan MitraThis research was partially supported by CNR (Italy) under the "Short-term mobility" program and by M.U.R.S.T. (Italy) National Group on "Nonlinear Dynamics and Stochastic Models in Economics and Finance" . We are indebted to Rabi Bhattacharya for providing us with the reference to Solomyak's (1995) paper. The present version has benefitted from comments by Mukul Majumdar and two anonymous referees.     

Trade and Renewable Resources in a Second Best World: An Overview

We provide an overview and introduction to the emerging field of trade and renewable resources, and discuss the potential impact of trade liberalization on welfare and resource conservation. A key factor determining the effect of trade reform is the institutional context or property rights regime, and our survey is organized such that it loosely follows the development of new insights with respect to institutions in this literature. This implies a transition from the benevolent planners model to the polar opposite benchmark of open access in the 1990s. Currently the pendulum is swinging back towards management and regulation, but institutions are treated as endogenous. We discuss and compare various key models in some detail and search for common ground between protagonists and antagonists of free trade. Paper based on Keynote address by Erwin Bulte, 12th Annual Conference of the European Association of Environmental and Resource Economists, Bilbao (Spain), June 28–30, 2003.     

Long memory in volatilities of German stock returns

We show that there is strong evidence of long-range dependence in the volatilities of several German stock returns. This will be done by applying a method using the difference of the classical log-periodogram regression estimator for the memory parameter and of the tapered periodogram based estimator. Both estimators give similar values for the memory parameter for each series and this indicates long memory. To support our findings we apply also a methodology using the sample variance and a wavelet based estimator to the data. Also these two methods show clear evidence of long-range dependence in the volatilities of German stock returns.First version received: December 2001/Final version received: March 2003The computational assistance of Eleni Mitropoulou and Björn Stollenwerck as well as the helpful comments of two unknown referees are gratefully acknowledged. Research supported by Deutsche Forschungsgemeinschaft under SFB 475. Stock returns were obtained from Deutsche Finanzdatenbank (DFDB), Karlsruhe.     

Reinterpreting the performance of immigrant wages from panel data

Immigrants differ from the native born in terms of unobserved factors, such as motivation, and observed factors, including those related to the interruption of labour market activity and earning capacity, which may bias estimates of immigrant integration. Using panel data from the Survey of Labour and Income Dynamics, we show that using potential experience, rather than actual experience, exaggerates estimates of the disruption and recovery caused by immigration. More importantly, we find support for omitted variables bias, arising from unobserved fixed effects. Instrumental variable estimates for both pooled and separate samples of immigrant and native born men demonstrate a wage disadvantage for immigrants upon entry that persists through their lifetime. Standard estimates of a modest wage advantage for the children of immigrants also suffer from omitted variables bias arising from unobservables. Contrary to most of the literature to date, our instrumental variable estimates which allow for unobservable fixed effects suggest that immigrants never catch up to otherwise comparable native born workers, but their children do just as well. We would like to thank Statistics Canada for permitting access to the data and solving associated technical problems, the Prairier Centre for Research on Immigration and Integration for financial assistance, and Peter Schnabl for excellent research assistance. An earlier version of this paper was presented to the 10th International Conference on Panel Data in Berlin, July 5–6, 2002. The authors take sole responsibility for errors, omissions and interpretation of the data.