Voting requirements, concessions, international side payments and the European Monetary Union

This paper addresses the question of criteria for selection of EMU members. We identify two factors in the decision process: (1) The costs and benefits which the individual countries attribute to alternative EMU arrangements (`hard-core', medium-sized, all EU members), and (2) the binding institutional restrictions, i.e., the distribution of votes in the European Council and the minimum vote requirements. Within this framework the EU countries are assigned to different groups according to their degree of convergence. Based on stability concessions and side payments these groups decide on the final EMU composition. We show that minimum vote requirements can lead to a suboptimal size of the EMU and can threaten the feasibility of a multi-speed monetary union.     

The Monday effect revisited: An alternative testing approach

This paper questions traditional approaches for testing the Monday effect of stock returns. We propose an alternative, multiple hypothesis testing approach based on the closure test principle which controls the multiple type I error. We consider the US, the UK and the German stock markets and test Monday related pairwise comparisons of daily expected stock returns, while the probability of committing any type I error is always kept smaller than a prespecified level α, for each combination of true null hypotheses. Overall, the new testing approach supports previous findings of a Monday effect for the 1970s and 1980s, in particular for the US and Germany, while it suggests that the Monday effect has vanished in the 1990s and 2000s in all three markets. The comparison of the closure test procedure, the traditional multiple t-test and the Bonferroni test, a classical multiple test procedure, shows that traditional testing may result in spurious significance while the Bonferroni test may sometimes be too conservative.     

On the efficiency of environmental instruments in a spatial economy

This paper develops an efficiency criterion to evaluate environmental policy instruments in a spatial economy. We call an environmental policy regime at the regional level efficient if it guarantees not only an efficient distribution of emission permits within a region, but also an efficient locational pattern of mobile firms across the regions of a federation. Using marketable pollution rights or emission taxes, efficiency in this broad sense can only be achieved if revenues of regional environmental agencies are not transferred to regional firms. Direct controls neither support an efficient allocation of emission rights within a region nor locational efficiency of firms.     

Residential energy demand analysis: An empirical application of the closure test principle

In this paper a set of ten different single-equation models of residential energy demand is being analyzed, derived by the imposition of linear parameter restrictions on a fairly general autoregressive distributed lag (ADL) model. Residential energy consumption is assumed to be explainable by households' real disposable income, movements in the real price of energy, and the temperature variable ‘heating degree days’. In the empirical application, Austrian annual data for the period 1970 to 1992 are used. The main focus of the paper is on the control of the overall significance level of the tests based on the application of the closure test principle, introduced by Marcus, Peritz, and Gabriel (1976). The application illustrates nicely how one can, by defining a closed system of hypotheses, control the significance level α in supporting the search for a suitable specific model. The wide range of estimated elasticities, however, indicates that the estimation results depend strongly on the choice of the model specification.     

An invariance property of the Slutsky symmetry test statistic

The test statistic for Slutsky symmetry of a demand system is usually computed after one equation of the system is deleted. A simple direct proof is given of the proposition that the value of the statistic is not affected when a different equation is deleted.     

Household tenure choice and migration

A model of the joint tenure choice and migration decision is estimated. Unlike previous work that has considered each decision separately or examined the premigration tenure status choice jointly with the migration decision, this analysis addresses change in tenure status as well. The empirical findings indicate that variables often thought to affect either or both tenure status of the residence location change decision have offsetting or augmenting effects on their joint probabilities which are masked if the decisions are examined independently.     

International consequences of US trade policy

Data on the US economy and the political climate in the USA make it probable that the trend towards trade restrictions in the United States will further intensify. What would be the consequences of an escalation of trade conflicts among the western economies? How might an internationally co-ordinated strategy to avoid such a development look?