Democratization and Real Exchange Rates,

In this article, we combine two so far separate strands of the economic literature and argue that democratization leads to a real exchange rate appreciation. We test this hypothesis empirically for a sample of countries observed from 1980 to 2007 by combining a difference‐in‐difference approach with propensity score matching estimators. Our empirical results reveal a strong and significant finding: democratization causes real exchange rates to appreciate. Consequently, the ongoing process of democratization observed in many parts of the world is likely to reduce exchange rate distortions.     

Globalisation and Corruption,Revisited

This paper presents new empirical evidence on the determinants of corruption, focussing on the role of globalisation and inequality. The estimates for a panel of 102 countries over the period 1995–2005 point to three main results: (i) Detection technologies, reflected in a high level of development, human capital and political rights reduce corruption, whereas natural resource rents increase corruption; (ii) Globalisation (in terms of both trade and financial openness) has a negative effect on corruption, which is more pronounced in developing countries; (iii) Inequality increases corruption, and once the role of inequality is accounted for, the impact of globalisation on corruption is halved. In line with recent theory, this suggests that globalisation – besides reducing corruption through enhanced competition – affects corruption also by reducing inequality.     

Setting prices in mixed logit model designs

We investigate different procedures to set prices in designs for choice-based conjoint analysis using the mixed logit model which captures latent consumer heterogeneity. Besides discrete attributes, we include a linear price term in the deterministic utility function thereby treating price as continuous variable. We consider two different price intervals and several price sets which contain either two or three prices. We compare these alternatives to set prices by simulating choices for different constellations on the basis of the mixed logit model. Furthermore, we generate ten designs simultaneously instead of just one. Using these simulated choices, we estimate the parameters of the mixed logit model in the next step. To reduce the needed sample size and computation time caused by accounting for latent consumer heterogeneity, we apply Halton draws and set a minimum potential design for prior draws. ANOVA with root mean squared error between estimated and true price coefficient values of individual consumers as dependent variable shows that using more extreme prices as interval bounds and one intermediate price positioned to the right of the interval performs best.     

Cost-effectiveness analysis of rivaroxaban for treatment and secondary prevention of venous thromboembolism in the Netherlands

Background: Until recently, standard treatment of venous thromboembolism (VTE) concerned a combination of short-term low-molecular-weight heparin (LMWH) and long-term vitamin-K antagonist (VKA). Risk of bleeding and the requirement for regular anticoagulation monitoring are, however, limiting their use. Rivaroxaban is a novel oral anticoagulant associated with a significantly lower risk of major bleeds (hazard ratio?=?0.54, 95% confidence interval?=?0.37–0.79) compared to LMWH/VKA therapy, and does not require regular anticoagulation monitoring.

Aims: To evaluate the health economic consequences of treating acute VTE patients with rivaroxaban compared to treatment with LMWH/VKA, viewed from the Dutch societal perspective.

Methods: A life-time Markov model was populated with the findings of the EINSTEIN phase III clinical trial to analyze cost-effectiveness of rivaroxaban therapy in treatment and prevention of VTE from a Dutch societal perspective. Primary model outcomes were total and incremental quality-adjusted life years (QALYs), as well as life expectancy and costs.

Results: Over a patient’s lifetime, rivaroxaban was shown to be dominant, with health gains of 0.047 QALYs and cost savings of €304 compared to LMWH/VKA therapy. Dominance was robustly present in all sensitivity analyses. Major drivers of the differences between the two treatment arms were related to anticoagulation monitoring (medical costs, travel costs, and loss of productivity) and the occurrence of major bleeds.

Conclusion: Rivaroxaban treatment of patients with venous thromboembolism results in health gains and cost savings compared to LMWH/VKA therapy. This conclusion holds for the Dutch setting, both for the societal perspective, as well as the healthcare perspective.     

Supply Disruptions and Regional Price Effects in a Spatial Oligopoly—An Application to the Global Gas Market

Supply shocks in the global gas market may affect countries differently, as the market is regionally interlinked but not perfectly integrated. Additionally, high supply‐side concentration may expose countries to market power in different ways. To evaluate the strategic position of importing countries with regard to gas supplies, we disentangle the import price into different components and characterize each component as price increasing or price decreasing. Because of the complexity of the interrelations in the global gas market, we use an equilibrium model programmed as a mixed complementarity problem (MCP) and simulate the blockage of liquefied natural gas (LNG) flows through the Strait of Hormuz. This enables us to account for the oligopolistic nature and the asymmetry of the gas supply. We find that Japan faces the most severe price increases, as the Japanese gas demand completely relies on LNG supply. In contrast, European countries such as the UK benefit from good interconnection to the continental pipeline system and domestic price taking production, both of which help to mitigate an increase in physical costs of supply as well as in the exercise of market power.     

The WTO Compatibility of the Economic Partnership Agreements between the EU and the ACP Countries

The economic partnership agreements (EPAs) to be negotiated between the European Union and six different ACP regions under the Cotonou Agreement are intended to be in conformity with WTO rules, i.e. satisfy GATT Article XXIV and GATS Article V. To what extent is this realistic? What would be the effects on the ACP countries?

---

---

This article summarises the following study: A. Borrmann, H. Gro?mann, and G. Koopmann: The WTO Compatibility of the Economic Partnership Agreement between the EU and the ACP States, Study on behalf of the Federal Ministry of Economic Cooperation and Development and the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH, Eschborn 2005, http://www.gtz.de/de/dokumente/enwto-epa-acp-2005.pdf.     

Default and Recovery Risk Dependencies in a Simple Credit Risk Model

This paper provides evidence for the relationship between credit quality, recovery rate, and correlation. The paper finds that rating grade, rating shift, and macroeconomic factors provide a highly significant explanation for default risk and recovery risk of US bond issues. The empirical data suggest that default and recovery processes are highly correlated. Therefore, a joint approach is required for estimating time‐varying default probabilities and recovery rates that are conditional on default. This paper develops and applies such a model.     

The North American trade region

The North American Free Trade Agreement (NAFTA) that is to take effect at the beginning of 1994 will create a free trade area between three economies which differ substantially in terms of size and stage of development. What were the reasons that led the unequal partners, the USA, Canada and Mexico, to enter into closer trade integration? What will be the economic consequences for the countries involved and for world trade?