Exchange-rate adjustments in small market and centrally planned economies

In a centrally planned economy (CPE) that has eliminated detailed central planning of output and foreign trade and introduced some domestic price flexibility and organic linkages to world-market prices, the exchange rate can take on more than an accounting function. This paper contrasts the effects of exchange-rate adjustment in such a “modified” CPE (or MCPE) with those in a market economy. There are a number of reasons why MCPE authorities might eschew devaluation as a policy instrument, despite the possibility that it would be more effective in some cases in improving the trade balance than in a market economy.     

The Law of One Price—A Case Study

We use retail transaction prices for a multinational retailer to examine the extent and permanence of violations of the law of one price. For identical products, we find typical deviations of 20–50 percent, with some evidence for convergence over time. Such differences might be due to differences in local costs. If so, relative prices of similar products (round versus square mirrors) should be equal across countries. In fact, relative prices vary significantly across very similar goods within a product group. The finding suggests that differences in local distribution costs, local taxes, and probably tariffs do not explain the price pattern, leaving strategic pricing or other factors resulting in varying markups as alternative explanations.
JEL classification : F 41; L 11     

Sofa: A simulation program for predicting and evaluating the policy effects of grants-in-aid

This paper motivates and describes a computer simulation program to predict the general equilibrium effects of grants-in-aid to local governments on the tax and spending decisions of these governments. The SOFA (Simulation of Fiscal Assistance) program explicitly incorporates the effects of family relocation (the “Tiebout” adjustment process) and the availability of competitive private market providers (e.g. private schools, hospitals, recreation facilities) on the levels and distribution of local public services. SOFA can simulate the effects of the four main forms of grants-in-aid: (1) lump-sum transfers, (2) matching aid, (3) base equalizing aid, and (4) tax relief aid. In addition to the individual city predictions on taxes and spending SOFA provides the following summary statistics: (1) mean level of spending, (2) coefficient of variation of spending, (3) values for a utilitarian, Rawlsian, and egalitarian objective functions, (4) the central government tax rate needed to finance aid, and (5) the percent of families in the region who prefer the private provision of the “public” service. A copy of the program and a program users manual containing a detailed derivation of the model as well as user's instructions are available from the authors upon request.     

Do core-selecting Combinatorial Clock Auctions always lead to high efficiency? An experimental analysis of spectrum auction designs

For many years the Simultaneous Multi-Round Auction (SMRA) has been the primary auction design for spectrum sales worldwide. Recently, the core-selecting Combinatorial Clock Auction (CCA) has been used as an alternative to the SMRA in a number of countries promising strong incentives for truthful bidding and high efficiency as a result. We analyze the efficiency and auctioneer revenue of the CCA in comparison to SMRA and examine bidding behavior in both formats. The experiments are based on two value models, which resemble single- and multiband spectrum sales in the field. Such applications often allow for thousands of possible bundles. Bidders in the CCA submitted bids for only a fraction of all bundles with a positive valuation. Bundles were selected based on synergies and payoff after the primary bid rounds. As a consequence, we found efficiency of the CCA to be significantly lower than that of SMRA in the multi-band value model and auctioneer revenue of the CCA to be lower in both value models. In addition, we characterize several properties of the auction format, which result from the two-stage design and the payment and activity rules.     

Forward-Looking Tail Risk Exposures at U.S. Bank Holding Companies

This paper develops a simple method for quantifying banks’ exposures to large (negative) shocks in a forward-looking manner. The method is based on estimating banks’ share prices sensitivities to (market) put options and does not require the actual observation of tail risk events. We find that estimated (excess) tail risk exposures for U.S. Bank Holding Companies are negatively correlated with their share price beta, suggesting that banks which appear safer in normal periods are actually more crisis prone than their beta would suggest. We also study the determinants of banks’ tail risk exposures and find that their key drivers are uninsured deposits and non-traditional activities that leave assets on banks’ balance sheets.     

Smart Homes as a Means to Sustainable Energy Consumption: A Study of Consumer Perceptions

European and national policies are aimed at reducing greenhouse gases and increasing energy efficiency—also in the household sector. For this purpose, new solutions for private homes based on information and communication technologies (ICT) are being developed and tested. However, up to now, hardly anyone has seen, experienced or lived in an environment that offers the full range of ICT-based energy management solutions. In this study, consumer reactions to a fully furnished and equipped smart home are analysed using focus groups (four groups with a total of 29 participants). The analysis looks at consumer perceptions of and reactions to an energy management system which optimizes electricity consumption based on different ICT solutions. The topics that were demonstrated in practice and then discussed with the participants included variable tariffs, smart metering, smart appliances, and home automation. In general, there were positive group reactions to the smart home environment. Consumers saw many advantages for themselves; especially the chance to save money. However, giving up high levels of flexibility and adapting everyday routines to fit in with electricity tariffs were regarded as difficult. Smart appliances and smart meters were therefore considered to be necessary elements by most participants. Concerns regarding data privacy played a major role in one of the groups.     

Neue Anforderungen an optimierende Energiesystemmodelle für die Kraftwerkseinsatz- und Zubauplanung bei begrenzten Netzkapazitäten

Recent changes in energy economic frameworks conditions lead to new requirements for energy systems models. Particularly in Germany, structural and locational changes in the power plant sector can be observed. Above all, this is due to the liberalisation process entailing the legal unbundling of system operators and generation companies as well as to the ambitious aims for the extension of wind energy. Consequently, modelling energy systems as single node systems, in which network constraints are neglected, can lead to suboptimal results. Most energy systems models offer the possibility to limit interregional energy exchange capacities. However, these so-called transhipment models normally neglect the actual load flows. Yet, there are several possibilities to adequately consider the characteristics of power transmission. In this paper, the most popular approaches, which are used in particular technical applications, such as the AC- (Alternating Current), the DC- (Direct Current) and the PTDF- (Power Transfer Distribution Factors) approach are introduced and discussed with respect to their application in energy systems models. In addition, first experiences with their implementations are presented.     

Is Globalisation in Danger?

This paper compares the globalisation experience of the late 19^th century with that of the post world war period. It notes the enormous changes in the world economy arising from the increasing participation of the developing countries in the world goods, labour and capital markets and the reduction in the cost of communications that has underlined these changes. More importantly globalisation was made by a consensus on trade, debt and macroeconomics which has led to policy reforms in developing countries including China whose entry into the WTO provides a high watermark in globalisation of the latter period. The paper notes that globalisation is not in danger of reversal given that the forces that led to this outcome in the earlier period have become weak. Ideas, interests, international relations and stability achieved in the post World War period gives ground for qualified optimism about the continuation of globalisation.     

Do‐It‐Yourself Projects as Path toward Female Empowerment in a Gendered Market Place

The role of women as homeowners and heads of households are changing the dynamics in which women engage in do‐it‐yourself (DIY) behavior. Because there is limited extant theory associated with female involvement in DIY behavior, a qualitative study using in‐depth interviews was conducted. Through grounded theory analysis several themes emerged during the coding process, and the themes of empowerment were especially relevant to the informants in this study. Five dimensions of empowerment were identified: empowerment through project initiation, production mastery, adding economic value to goods and services, unleashing creative potential, and empowerment through ownership. The findings show women's involvement in DIY behavior and the consumption of DIY‐related goods is closely tied to the concept of female empowerment.