A Johansen model for regional analysis

A ‘bottoms-up’ regional model of the Johansen class allowing for price substitution, flexibility in classifying and reclassifying variables into exogenous or endogenous categories, and ease of computation, is constructed to demonstrate the attractiveness of Johansen type models for regional analysis. These models have been used extensively by international trade theorists with success, but surprisingly they have not caught the attention of regional economists.     

Non-linearities in Real Interest Rate Parity: Evidence from OECD and Asian Developing Economies

Abstract

This paper investigates the validity real interest rate parity (RIP) for a sample of 19 OECD and Asian developing economies. The distinction of this paper is that we exploit both linearity and non-linear unit root tests as advocated by Dufrénot et al. (Applied Economics, 38, pp. 203–229, 2006) to validate the parity. The major finding are: (i) the alignments from real interest rate differentials (RIDs) are corrected in a non-linear fashion and that the adjustments is asymmetric in both size and speed; (ii) that RIP holds for the developed and developing countries; and (iii) the empirical results are invariant with respect to the US, Japan or Germany as the centre country.     

The impact of trust on innovativeness and supply chain performance

Trust is identified as a significant predictor of positive performance in business relationships. On the premise that the effects of trust have not been given the deserved scholarly attention in the supply chain context, this paper investigates the effects of trust on innovativeness and supply chain performance. The hypothesised model is operationalised with survey data and analysed using structural equation modelling. The findings add credence to the positive effects of trust and identify trust and innovativeness as antecedents to higher performance in the supply chain.     

The inadequacy of linear autoregressive model for real exchange rates: empirical evidence from Asian economies

Utilizing the formal linearity test of Luukkonen, Saikkonen and Teräsvirta (Biometrika, 75, 491-499, 1998) as diagnostic tool, the empirical finding suggests that the linear autoregressive (AR) model is inadequate in describing the real exchange rates behaviour of 11 Asian economies. It is noted that the conventional battery of diagnostic tests is capable of identifying the inadequacy of the linear model in only three of these series. Moreover, the linearity nature of this behaviour has been formally rejected in favour of the non-linear smooth transition autoregressive (STAR) model. The finding of non-linearity in the data generating process of these real exchange rates warrants that the use of linear framework in empirical modelling and statistical testing procedures in the field of exchange rates may lead to an inappropriate policy conclusions.     

Making Reservations Online: The Impact of Consumer-Written and System-Aggregated User-Generated Content (UGC) in Travel Booking Websites on Consumers’ Behavioral Intentions

This study examines how consumer-written and system-aggregated user-generated content (UGC) on travel booking websites jointly influence consumer behavior. The purpose of this research is to test the effects of different types of UGC on various consumer behavior outcomes. Experiment 1 found a significant interaction effect between UGC type (consumer-written versus system-aggregated) and valence (positive versus negative) on product evaluation, perceived information value, and satisfaction. Experiment 2 found a significant interaction between consumer-written and system-aggregated UGC valences. When consumer-written UGC was negative, consumers demonstrated more negative product evaluation and lower buying intention, regardless of system-aggregated UGC valence. When consumer-written and system-aggregated UGC valences matched, consumers indicated greater perceived information value, satisfaction, and future behavioral intention. Trustworthiness partially mediated the effect of the fit between consumer-written and system-aggregated UGC on consumer satisfaction.     

On the application of the rank tests for nonlinear cointegration to PPP: The case of Papua New Guinea

Much interest has been paid recently to the nonlinear cointegrating relations existing among economic variables. Various testing procedures are already available to test for the existence of nonlinear cointegration. For example, Breitung (2001) proposes rank tests and his testing procedure has been broadly applied. In this study, we warn against a blind application of the rank cointegration tests, particularly to economic variables that evidence certain behavior. As an illustration, we employ the nominal exchange rates and relative prices of Papua New Guinea against her major trading partners with the objective of testing the validity of purchasing power parity for the country. Our simulation results also confirm our warnings. Additionally, we provide some simple solutions to the problem we encounter herein.     

THE REAL INTEREST RATE DIFFERENTIAL: INTERNATIONAL EVIDENCE BASED ON NON-LINEAR UNIT ROOT TESTS

This paper aims at testing international parity conditions by using non-linear unit root tests advocated by Kapetanios et al . (2003, KSS). Results from the KSS tests based on 17 countries (G7 and 10 Asian countries) overwhelmingly show that the adjustment of real interest rates towards real interest rate parity (RIP) follows a non-linear process except for the Taiwan, Hong Kong and Philippines relationships with both the USA and Japan. Overall, the empirical results are in favour of RIP using the USA and Japan as the centre countries but only if non-linearities are accounted for in the data-generating process. Our findings confirm that interest rate differentials, like the real exchange rates reported in recent literature, display a non-linear mean reversion process.     

Managed commodity funds

The performance of managed commodity fund investments during the years l982 through 1996 is examined, both as stand-alone investments and as assets in diversified stock and bond portfolios. Nine stylized commodity fund investments are examined: randomly-selected, single-CTAs, pool, and fund portfolios; equally weighted market portfolios (EWMPs) of CTAs, pools, and funds; and value-weighted portfolios (VWMP) of CTAs, pools, and funds. Further, two subperiods are examined: 1982–1988 and 1989–1996. Based on an analysis using Sharpe ratios as the performance criterion, several types of managed commodity funds make both good stand-alone investments and good portfolio assets; an EWMP of CTAs and a VWMP of pools receive the highest ranking among the alternative commodity fund investments. It is also shown that commodity indexes are not a substitute for a managed commodity fund investment. A number of issues warrant further study: Can investors still earn consistently attractive risk-adjusted returns on managed commodity fund investments if they do not hold diversified portfolios of CTAs and pools? Also: How can such high speculative returns be earned in efficient commodity markets? And: Are CTA and pool returns high because commodity fund managers have superior trading skill? An important issue for future research is to determine whether in fact CTAs do possess such skill. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 377–411, 1999     

Cohort versus patient level simulation for the economic evaluation of single versus combination immuno-oncology therapies in metastatic melanoma

Abstract

Background: Model structure, despite being a key source of uncertainty in economic evaluations, is often not treated as a priority for model development. In oncology, partitioned survival models (PSMs) and Markov models, both types of cohort model, are commonly used, but patient responses to newer immuno-oncology (I-O) agents suggest that more innovative model frameworks should be explored.

Objective: A discussion of the theoretical pros and cons of cohort level vs patient level simulation (PLS) models provides the background for an illustrative comparison of I-O therapies, namely nivolumab/ipilimumab combination and ipilimumab alone using patient level data from the CheckMate 067 trial in metastatic melanoma. PSM, Markov, and PLS models were compared on the basis of coherence with short-term clinical trial endpoints and long-term cost per QALY outcomes reported.

Methods: The PSM was based on Kaplan-Meier curves from CheckMate 067 with 3-year data on progression free survival (PFS) and overall survival (OS). The Markov model used time independent transition probabilities based on the average trajectory of PFS and OS over the trial period. The PLS model was developed based on baseline characteristics hypothesized to be associated with disease as well as significant mortality and disease progression risk factors identified through a proportional hazards model.

Results: The short-term Markov model outputs matched the 1–3?year clinical trial results approximately as well as the PSMs for OS but not PFS. The fixed (average) cohort PLS results corresponded as well as the PSMs for OS in the combination therapy arm and PFS in the monotherapy arm. Over the lifetime horizon, the PLS produced an additional 5.95 quality adjusted life years (QALYs) associated with combination therapy relative to ipilimumab alone, resulting in an incremental cost-effectiveness ratio (ICER) of £6,474 per QALY, compared with £14,194 for the PSMs which gave an incremental benefit of between 2.2 and 2.4 QALYs. The Markov model was an outlier (～ £49,000 per QALY in the base case).

Conclusions: The 4- and 5-state versions of the PSM cohort model estimated in this study deviate from the standard 3-state approach to better capture I-O response patterns. Markov and PLS approaches, by modeling state transitions explicitly, could be more informative in understanding I-O immune response, the PLS particularly so by reflecting heterogeneity in treatment response. However, both require a number of assumptions to capture the immune response effectively. Better I-O representation with surrogate endpoints in future clinical trials could yield greater model validity across all models.