Real Exchange Rate Misalignments in the Euro Area

Open Economies Review - Building upon a Behavioural Equilibrium Exchange Rate model, estimated at a quarterly frequency since 1999 on a broad sample of 57 countries, this paper assesses both the...     

Uncertainty in the Austrian Theory of Capital

This paper is based on the traditional Austrian Theory of Capital which deals with expected values of future returns of investments over various periods of time. The longer the time period that elapses between the beginning of a production process and its end, the higher the (expected) productivity must be due to positive time preferences of individuals. This paper focuses on the uncertainty of future returns and on uncertainty preferences, instead. Based on the Hayekian idea of the dispersion of knowledge in society, it will be shown that there is a systematic relationship between the structure of capital and uncertainty. This result will be derived for a production process characterized by complete vertical integration and one which is not completely vertically integrated. The distinction between these two settings is crucial, if one accepts the distinction between an individual and a social period of production and the planning horizon which are introduced in this paper.     

WHERE'S THE CAT GOING? SOME OBSERVATIONS ON CATASTROPHE BONDS

This article provides an assessment of the current state of the market for catastrophe (or "Cat") bonds. Given the changes in insurance markets since September 11th, the demand for Cat bonds is likely to increase. For issuers, Cat bonds have the effect of transferring risks to the capital markets that would normally be underwritten by insurance or reinsurance companies. And as a substitute for insurance, Cat bonds have the potential to help issuers address problems such as lack of capacity and real risk transfer, cyclicality, and credit risk that are commonly associated with insurance and reinsurance markets. Investors value Cat bonds in part because of their low correlations with stocks and conventional bonds. Notable trends in the structuring of the products involve higher levels of risk transfer, longer-term contracts, and linkage to a portfolio of catastrophic risks.     

Load profiles and flexibility in operation of washing machines and dishwashers in Europe

While the energy generation system is changing towards the use of more renewable energies, the problem of how to deal with fluctuating energy supply is increasing. Smart appliances in households are often referenced as one possible solution, as their operation may be shifted in time and, thus, used to balance an unstable energy supply. The potential of such appliances has been studied to date mainly in pilot installations with a very limited number of participants or by making assumptions on what might be possible. With this work, a semi‐representative approach for 12 European countries was used to assess actual consumer habits for the use of washing machines and dishwashers which then could be used to calculate average load profiles for those appliances depending on the time of the day. Using these profiles, it is strait forward to calculate how much load may be shifted by those appliances in a demand response application. This allows aggregators or energy utilities to assign clear financial benefits to the shifting potential of those appliances. Consumers use the shifting of appliance operation already today for various reasons. Investigating these reasons allows to learn already a lot about the flexibility of consumers.     

CORPORATE SOCIAL RESPONSIBILITY: A MICROECONOMIC REVIEW OF THE LITERATURE

This paper provides a review of the theoretical and empirical literature on Corporate Social Responsibility (CSR). Depending on whether an individual can be considered as selfish, or whether she has also social preferences, motives for CSR, can be explained in different ways. Furthermore, we explicitly highlight the influence of different Corporate Governance System on CSR as well as the relationship between firms' size and social commitment. Because it is difficult to distinguish between different theories in empirical studies, we argue that an experimental approach might be suitable to test theories of CSR.     

Impact of the 2014 Suspension Agreement on sugar between the United States and Mexico

In December 2014, the U.S. and Mexico agreed to a suspension agreement that set a $22.25/cwt import price floor on U.S. sugar imports from Mexico. A partial equilibrium trade model was developed to estimate the economic impact the agreement would have had if it had been in effect from 2008 to 2014. In years when the price floor would have been binding, on average, U.S. producers would have gained $138 million and Mexican producers would have lost $218 million. However, total Mexican welfare would have actually increased by $11.5 million. Furthermore, the average price floor that would have maximized total Mexican welfare over that period is $22.76/cwt. Also, under certain supply and demand elasticity conditions, the average price floor that would have maximized joint U.S. and Mexican producer welfare over that period is $21.91/cwt. The latter two estimates are both close to the actual price floor agreed to in the 2014 Suspension Agreement.     

Alternative Approaches to Compensation and Producer Rights

When policies are changed, it is not uncommon for losers to be compensated. Economic theory and quantitative analysis are useful in determining the efficiency gains/losses associated with a policy change, but are little help in deciding what the approach to compensation should be. The amount of compensation varies, depending on, in part, the political clout of the parties being negatively affected by a policy change—compensation is what politicians and the sector demanding compensation can agree on. We formulate four approaches to producer compensation within the context of the Ontario Tobacco Transition Program, where producers would have suffered losses in the absence of compensation. The approaches range from providing zero compensation to providing compensation based on the entire value of the tobacco quota. The Canadian government chose the latter and compensated producers for the termination of the tobacco quota program based on an approach that far exceeded other possible compensation approaches.     

Reanalyzing Zero Returns to Education in Germany

Pischke and von Wachter (Review of Economics and Statistics 2008; 90 (3): 592–598) find zero earnings returns to compulsory schooling in the basic school track in Germany. We reanalyze their study using a different dataset. In an extension, we use additional instruments which allow estimation of heterogeneous effects for different groups of compliers. We can confirm the previous result and also find zero returns for other compliers in higher track schools. Moreover, we do not find a causal effect of schooling on cognitive skills. This is in line with a potential reason Pischke & von Wachter (2008) give for their result, namely that basic skills are learned earlier in Germany and additional years of schooling are no longer effective. Copyright © 2015 John Wiley & Sons, Ltd.