Seasonal fluctuations and equilibrium models of exchange rate

Most of the evidence on dynamic equilibrium exchange rate models is based on seasonally adjusted consumption data. Equilibrium models have not worked well in explaining the actual exchange rate. However, the use of seasonally adjusted data might be responsible for the spurious rejection of the model. This article presents a new equilibrium model for the exchange rates that incorporates seasonal preferences. The fit of the model to the data is evaluated for five industrialized countries using seasonally unadjusted data. Our findings indicate that a model with seasonal preferences can generate monthly time series of the exchange rate without seasonality even when the variables that theoretically determine the exchange rate show clear seasonal behaviours. Further, the model can generate theoretical exchange rates with the same order of integration than actual exchange rates, and in some cases, with the same stochastic trend.     

MONEY,WHO NEEDS IT? NATURAL RESOURCE DAMAGE ASSESSMENT

A new natural resource damage assessment paradigm has been suggested that emphasizes direct analysis of compensatory restoration rather than analysis of compensating variation for damages. This article considers whether money can be avoided in damage assessment. The analysis of compensatory restoration leads to the conclusion that money should be considered when measuring preferences. Failure to consider money leaves trustees unable to judge the adequacy of compensatory restoration. The problem stems from heterogeneity over restoration scale.     

Demand Revelation,Hypothetical Bias,and Threshold Public Goods Provision

We examine the issues of hypothetical bias, demand revelation, and gender differences in a threshold public goods experiment with heterogeneous induced-values. First, we find no evidence of hypothetical bias in our threshold provision public goods experiments, despite the fact this is an open-ended type mechanism. Our results support recent experimental findings that use induced-values to investigate hypothetical bias. Second, we investigate the demand revealing performance of real and hypothetical payments and find no evidence that real payment performs better than hypothetical payment in our experiments. Third, we examine whether payments, real and hypothetical, are positively related to induced-values. Our results suggest there is statistical evidence that payments are positively related to true values. Finally, we examine the effect of gender on real and hypothetical payments in our experiment. The results show that gender matters for contributions through both real and hypothetical payments, after controlling for true values as well as socio-economic variables. Results also indicate that females are more likely to truthfully reveal their value than males through hypothetical payments, but gender is not significant for truthfully revealing their value through real payments.     

Finite sample evidence of IV estimators under weak instruments

We present finite sample evidence on different IV estimators available for linear models under weak instruments; explore the application of the bootstrap as a bias reduction technique to attenuate their finite sample bias; and employ three empirical applications to illustrate and provide insights into the relative performance of the estimators in practice. Our evidence indicates that the random‐effects quasi‐maximum likelihood estimator outperforms alternative estimators in terms of median point estimates and coverage rates, followed by the bootstrap bias‐corrected version of LIML and LIML. However, our results also confirm the difficulty of obtaining reliable point estimates in models with weak identification and moderate‐size samples. Copyright © 2007 John Wiley & Sons, Ltd.     

Corruption and term limits: An investment approach

In many developing countries, there seems to be more corruption. In this paper, an explanation is proposed. It is argued that term limitations give presidents the incentives to increase their personal income in the present period by diverting resources that could be used for the production of public goods. Under a term limitation, such an opportunity will not appear again.     

Reliability of individual valuations of public and private goods: Choice consistency, response time, and preference refinement

We examined the reliability of a large set of paired comparison value judgments involving public goods, private goods, and sums of money. As respondents progressed through a random sequence of paired choices they were each given, their response time decreased and they became more consistent, apparently fine-tuning their responses, suggesting that respondents tend to begin a hypothetical value exercise with relatively imprecise preferences and that experience in expressing preference helps reduce that imprecision. Reliability was greater for private than for public good choices, and greater for choices between a good and a monetary amount than for choices between two goods. However, the reliability for public good choices was only slightly lower than for the private goods.     

Operational Risk Measurement in Banking Institutions and Investment Firms: New European Evidences

The banking/investment sector must deal with a new variable, Operational Risk, for explaining various recent crises and bankruptcies. Operational Risk, which can be defined briefly as the risk generated by possible failures of a entity's Information Systems (IS), must be measured, covered, mitigated and managed by applying a series of methodologies, each of which assumes that the IS of the bank operates at a certain Stage of Sophistication. The present study proposes a scheme of evolution that details the stages of enhancement in the sophistication of their IS that banking entities may implement, so as to be capable of capturing, mitigating and managing Operational Risk. Using econometric methods, we create a proxy variable to capture the IS Sophistication of each entity. Then, the factor of entity size has been analyzed, and the country effect is explored. Additionally, the importance of intangible assets is weighted, among others entity aspects. The entity size has been revealed as the variable with most influence on the plans formulated in this respect by European entities, against other variables also considered in the present study, such as the country effect or the importance of intangible assets. The work shows how IS decisions referring to Operational Risk management are very influenced by size. It could introduce competition differences in the European banking system.     

The use of an expert system in the M3 competition

The Expert System that one of the authors had developed during his dissertation was tried on the data set of the M3 Competition. The expert system was originally designed to forecast monthly demand for industrial products in a distribution environment and was modified to run the data. The results of the application of the system were mixed as in some of the time series the results were statistically undistinguishable with the exception of the monthly series. In general, the intervention did not improve the accuracy and the effort required to do it was substantial.     

Use of the sign test to supplement the percentage better statistic

The utilization of an accuracy measure such as Percentage Better can be made more meaningful if it is supplemented with a statistical test of the significance of the results. For the Percentage Better, the Sign Test can be useful. In this paper, some of the results of the Makridakis competition are re-analyzed to illustrate this point. The results make for a clearer interpretation and easier use to identify the best forecasting method in a pairwise fashion     

The associations between early life circumstances and later life health and employment in Europe

We use data from the Survey of Health, Aging, and Retirement in Europe to estimate for thirteen European countries the associations of early life circumstances—measured by childhood health and socioeconomic status (SES)—with educational attainment, and later life health and employment (at ages 50–64). In all countries and for men and women, favorable early life circumstances, and in particular a higher childhood SES, are associated with a higher level of education. In most countries and in particular for women, favorable early life circumstances are associated with better later life health, also when education is controlled for. The significant associations of favorable early life circumstances with a higher incidence of later life employment are mostly transmitted through education and later life health.