Obtaining a hub position: A New Economic Geography analysis of industry location and trade network structures

We present a linear New Economic Geography model with three regions, one remote region and two regions that entertain a trade agreement with low bilateral trade costs. Only one of these two integrated regions has the outside option to conclude an additional trade agreement with the remote region and to obtain a hub position. We show that the new trade agreement has a substantial impact on industry location and trade patterns and that the effects strongly depend upon level of integration between the initial two regions. It is not always the region with the outside option that profits from using it. Finally, we also show that higher firm mobility may lead to complex dynamics.     

A piecewise linear model of credit traps and credit cycles: a complete characterization

We reconsider a regime-switching model of credit frictions which has been proposed in a general framework by Matsuyama for the case of Cobb–Douglas production functions. This results in a piecewise linear map with two discontinuity points and all three branches having the same slope. We offer a complete characterization of the bifurcation structure in the parameter space, as well as of the attracting sets and related basins of attraction in the phase space. We also discuss parameter regions associated with overshooting, leapfrogging, poverty traps, reversal of fortune and growth miracle, as well as cycles with any kind of switching between the expansionary and contractionary phases.     

Analysis of the social policy parameters by forecasting indicators of social sector financing

The paper continues the publication started in our journal (2007, no. 1) of the forecasts made in the integrated system “Population, Incomes, Consumption” developed by the Central Economics and Mathematics Institute of the Russian Academy of Sciences. The forecasts cover indicators of social sector financing at different level: macro-level, by population groups, and by family type. The paper shows that expansion of the statistical base and its updating after the population census in 2002 have lead toserious changes in the forecast of the major social policy parameters. Their detailed analysis and conclusions are presented.     

Impact of macro-economic surprises on carry trade activity

Can official news and policy announcements affect foreign exchange speculation? A widespread speculative strategy in foreign exchange markets is carry trade. This paper explores the links between macro-economic news and foreign exchange options to identify macro-economic fundamentals most relevant to the pricing of downside risk – measured by risk reversals options contracts – to carry trade activity. Focusing primarily on the Japanese yen carry trade, we identify a significant impact of macro-economic surprises on dollar/yen risk reversals. The effect is sizeable, with news related to bilateral trade balance of particular concern. Moreover, there is a close link between risk reversals and speculative futures positions in Japanese yen. This allows us to quantify a substantial effect of macro-economic news on carry trade activity, with the cost of hedging as the transmission mechanism.     

Jumps in foreign exchange rates and stochastic unwinding of carry trades

Tails in the distribution of JPY/USD exchange rate returns are well approximated by an exponentially dampened power-law. Distribution parameter estimates indicate that yen appreciation jumps belong to a Levy process with unbounded variation, suggesting that same mechanism may be responsible for fluctuations in normal times as well as rare crashes. In contrast, yen depreciation jumps have a well defined second moment suggesting a Gaussian regime. In addition, extreme episodes of yen appreciation are larger and more persistent than episodes of yen depreciation. The asymmetry is magnified and power-law tails are more elongated during times of higher interest rate differential between U.S. and Japan and higher level of VIX indicating that carry trade may be the driver. We propose a model of strategic carry trader behavior that in equilibrium generates exponentially dampened power-law distribution of jumps in foreign exchange along with “up by the stairs down by the elevator” dynamics arising from the assymetries between negative and positive jumps.     

Growing through chaotic intervals

We consider a growth model proposed by Matsuyama [K. Matsuyama, Growing through cycles, Econometrica 67 (2) (1999) 335-347] in which two sources of economic growth are present: the mechanism of capital accumulation (Solow regime) and the process of technical change and innovations (Romer regime). We will shown that no stable cycle can exist, except for a fixed point and a cycle of period two. The Necessary and Sufficient conditions for regular or chaotic regimes are formulated. The bifurcation structure of the two-dimensional parameter plane is completely explained. It is shown how the border-collision bifurcation leads from the stable fixed point to pure chaotic regime (which consists either in 4-cyclical chaotic intervals, 2-cyclical chaotic intervals or in one chaotic interval).     

From the Great Moderation to the Global Crisis: Exchange Market Pressure in the 2000s

We study exchange market pressures (EMP) and using international reserves by emerging markets (EMs) during the 2000s. We find that financial considerations dominated trade factors. The impact of gross short-term external debt quintuples during the crisis. Capital outflows and deleveraging was the force behind EMP rise during the global financial crisis. Greater FDI (greater portfolio debt) inflows prior to the crisis were associated with a lower (higher) crisis EMP, respectively. The severity of the financial shock was exacerbated by financial ties to the U.S., while the trade shock was more severe in EMs with a larger commodity export share.     

Survey of the combined dynamics of prices for pulp and timber

The results of a survey of the combined dynamics of prices for timber and pulp at Russian timber enterprises, which is mainly of an asynchronous nature, have been given in the article. The need to create vertically integrated structures that combine the mechanical and chemical wood processing has been substantiated in order to provide stability of wood and paper cooperation. Since, in this case, with a drop in the price of, e.g., timber, the pulp will act as a driver of growth and, with a reduction in pulp prices, it will be possible to support the level of production efficiency due to the higher timber prices.     

Dynamics of a business cycle model with two types of governmental expenditures: the role of border collision bifurcations

Decisions in Economics and Finance - We reconsider the multiplier–accelerator model of business cycles, first introduced by Samuelson and then modified by many authors. The original simple...